Unprecedented Home Price Drop in Canada early 2023
Average home prices across the country could fall by 20% to 25% from the peak of the housing boom at the end of the first quarter of 2022 to the expected end of the downturn in the first quarter of 2023.An “unprecedented decline” at least from the 1980s, when data collection began but still be higher than pre-pandemic.The forecasted decline will only rewind 46% of the home price escalation experienced over the last 2.5 years of pandemic influence.So far, home prices have fallen by the most in Ontario and British Columbia.Condominium prices have so far faired better than single-detached homes, which saw most of the skyrocketing price creep during the pandemic.Remote work and the desire for larger living spaces prompted buyers to bypass larger urban centres for nearby suburbs or exurbs. Some chose to locate even further away..But the entire housing downturn through early 2023 is expected to only amount to a “recalibration” of Canada’s housing market.The pace of the housing market’s unwinding will slow as the Bank of Canada’s interest rate hikes are expected to come to a trickle in the fourth quarter, compared to the large consecutive hikes over the last few months.Unlike previous major downturns, the economy is still performing strongly, with personal income on the rise, and the labour market still extremely tight. Canadians have also accumulated major savings during the earlier periods of the pandemic, which gives them more capacity to finance existing mortgages and down payments.Moreover, inventory in both the new and resale markets remain low.Strong population growth is also fuelling housing demand, especially with the federal government’s elevated immigration targets. Over the next two years, the immigration targets are even higher than 2022, with a goal of 450,000 new permanent residents in each of 2023 and 2024.