A major real estate industry group has updated its forecast for the Canadian housing market this year and next.
The Canadian Real Estate Association (CREA), which represents realtors, expects Canadian home sales will number 482,000 in 2019.
That’s an increase of 19,000 transactions versus what the association had predicted in the previous quarter.
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If CREA’s latest quarterly forecast comes to pass, it would mean national home sales activity had settled to a level that is consistent with the 10-year average.
It would also represent an increase of 5 percent over 2018’s tally, which was a five-year low.
CREA weighed a number of factors when adjusting its forecast.
The association notes that is is now widely anticipated that the Bank of Canada will maintain the overnight rate, which influences mortgage rates, at its current level of 1.75 percent.
And the central bank’s benchmark rate, an average of posted mortgage rates offered by Big Six banks, declined for the first time since 2016.
This bodes well for borrowers — and as a result, homebuying activity — as the benchmark rate is used during the mortgage-qualification process.
As per the stress test federal policymakers brought in last year, uninsured mortgage applicants must qualify for their loans at the benchmark rate or a rate that is 200 basis points above what their lender is offering, whichever of the two is higher.
“Population and employment growth have both remained supportive and the unemployment rate remains low,” CREA says in its forecast, highlighting other positives.
CREA predicts Canadian homes will sell for an average of $491,000 this year, up 0.5 percent from 2018 — when prices dropped 3.9 percent annually. The following year, CREA says prices should increase 2.1 percent to $501,400.
In a response to CREA home sales data released the same day as the upwardly revised forecast, BMO Senior Economist Robert Kavcic also suggested the housing market would remain solid in the near-term.
“Yet again, the housing bears are going to have to take their medicine,” Kavcic writes.
“A solid job market and population flows persist across much of the country, amplified by a roughly 100 bps (basis-points) drop in five-year fixed mortgage rates since late-2018. This momentum should continue into the fall,” the BMO economist adds.
CREA’s home sales forecast for 2020 calls for 518,100 homes to change hands, representing an increase of 7.5 over this year’s forecasted total.
“Sales are forecast to continue to improve through 2020, albeit slowly,” the CREA forecast reads.
Check out the association’s provincial forecasts below: