Oil sector strain exacerbates COVID-19 housing market uncertainty, CMHC says

CMHC says housing prices won’t have fully recovered by end of 2022

Canada's resilient housing market appears to have finally met its match in the Covid-19 pandemic.

A report from the Canada Mortgage and Housing Corporation (CMHC) projects market declines will continue through the rest of 2020, but they should begin to improve by the middle of 2021. "Sales and prices are still likely to remain below their pre-Covid-19 levels by the end of 2022". The high end of the forecast depicts a more optimistic scenario while the low end shows a more significant and protracted downturn in the economy and housing market. Millions of Canadians have lost their jobs, resulting in lower household incomes that will have a spillover effect on demand for homes. "We think this is a pretty good assessment of the evolution of housing markets and the economy in the next couple of years". Average prices climbed almost 70% over the past decade, with the resulting wealth effect helping power relentless consumer spending.

House prices could fall by as much as 9% to 18% from their Q1 2020 levels before beginning to recover in 2021.

Before the coronavirus pandemic, the average house price was approximately $540,000, now however, the average could drop to anywhere between $493,000 and $518,000. Prices aren't expected to start climbing again until the first half of next year. "The precise timing and speed of the recovery is highly uncertain because the virus's future path is not yet known", he continued.

Further, housing starts, sales and prices are likely to stay below their pre-pandemic levels into 2022.

Reduced construction activity means housing starts could drop from 51 to 75 per cent, with the CMHC predicting housing starts will bottom out this summer before gradually recovering.

Realtors have criticized the CMHC's forecast as too pessimistic given the resilience of the housing sector during the pandemic so far.

Earlier this month, the agency said it's consider scaling back mortgage underwriting practices to limit excessive borrowing.



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