You may have read conflicting real estate forecasts recently regarding the housing market. The Canada Mortgage and Housing Corporation (CMHC) reported that house prices are poised for a dramatic drop, that mortgage deferrals could continue to rise, as might arrears.
Some of these predictions have been countered by a number of leading economists in the country, by many real estate and mortgage brokerages and their associations. And, anecdotally, it’s not what we’re currently seeing in the market. There is no doubt that COVID-19 has slowed down the activity in the housing market, but it has not stopped. According to REMAX, a dramatic price drop is highly unlikely because of what’s occurring right now due to physical distancing – that is, a lack of inventory - there are buyers, but few listings. And since new listings and sales are down, the company believes that prices should remain stable this year. In fact, because there are few listings, we are still hearing about bidding wars in some regions. Benjamin Tal, Deputy Chief Economist for CIBC World Markets said in an interview earlier this month that damage to the housing market isn’t as significant as perceived. And that the CMHC was most likely highlighting a worst-case scenario. Tal also expects the Canadian economy to emerge from the recovery phase in 2022 and that “the demand for real estate will remain very strong.” The Bloomberg Nanos Canadian Confidence Index as reported in May at 39.3% may suggest negative sentiments may be bottoming out. Here’s what we know:
Current interest rates are relatively low.
The qualifying rate has recently come down to 4.94% from 5.04%.
We continue to see refinances and switch/transfers and consumers are still in the market to purchase a new home.
The housing market is a vital component to the success of the Canadian economy.
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