The Canadian Real Estate Association has lowered its forecast for home sales and prices this year due to weakness in Ontario and B.C., as it now expects a nearly 10 per cent drop in the number of residential properties to trade hands compared with 2022.
In the association's quarterly forecast update released Friday, it said it expects some 449,614 residential property sales via Canadian MLS systems in 2023, down 9.8 per cent from last year.
Meanwhile, the national average home price is forecast to fall 3.3 per cent on an annual basis to $680,686 in 2023.
The updated forecast compared with expectations in July for a 6.8 per cent decline in the number of sales this year and a 0.2 per cent drop in the average price.
Toronto-based realtor Davelle Morrison with Bosley Real Estate Ltd. said that with high-interest rates, "people are really feeling the pinch."
"You just don't have as many people in the market right now looking," she said. "For the people who are in the market and looking, it's a great opportunity for them, simply because they have less competition."
The CREA report said while there has been an uptick in new listings since Labour Day, the influx of new supply has not led to increased sales. The national sales-to-new listings ratio has fallen from nearly 70 per cent to 50 per cent in the span of five months.
BMO Capital Markets economist Robert Kavcic said demand is struggling a bit under the pressure of higher mortgage rates.
"Back in the spring, we had a bit of a bounce in prices because listings were really being held back and that's just not the case now," Kavcic said.
"So the market balance is kind of tilting and I think there's probably some downward pressure on prices across a few markets."
He said many potential buyers held off earlier this year due to weak market conditions, but that could change heading into 2024.
"Now you're getting to the point where if you have to move properties, or if you have to move jobs or locations, or if you're an investor holding multiple properties, you can only kind of sit there so long and wait."
CREA said the major risk to its forecast remains what happens with the Bank of Canada's key interest rate between now and next spring.
"The current assumption is either no more hikes, or at most one more, along with some indication from the bank at some point that the next move will likely be down," the association said.
The forecast came as CREA reported home sales in September were up 1.9 per cent compared with the same month a year earlier. On a month-over-month basis, sales in September were down 1.9 per cent.
The actual national average home price was $655,507 in September, up 2.5 per cent from September 2022.
The aggregate home price Index edged down 0.3 per cent on a month-over-month basis in September, the first decline since March, which the association said "was entirely the result of trends in Ontario" as prices are "still rising, albeit more slowly than they were, across other provinces."
It said incoming data over the next few months will show whether Ontario is an outlier or possibly "the first province out of the gate to show the kind of softening price trends that would be expected to play out in at least some other parts of the country given where interest rates are."
Morrison said the downward price trend in the Toronto region has also provided opportunities for some to buy properties that would have otherwise been unaffordable in recent years.
For a first-time buyer client looking to buy a condo with two bedrooms on a $1-million budget, Morrison said she was able to find a house instead.
"They were contemplating whether they should buy or not buy because interest rates are high, but when we were looking at the fact that some of the houses now are available below $1 million, they realized that this is actually an opportunity," she said.
"They can get a 'deal' on a house in Toronto now because prices are slightly lower than they used to be."
This report by The Canadian Press was first published Oct. 13, 2023.
Sammy Hudes, The Canadian Press