![\"\"](\"https:\/\/www.livabl.com\/articles\/wp-content\/uploads\/2017\/11\/EmeraldCity_ConstructionTour1-1.jpg\")
<\/a><\/p>\nPhoto: James Bombales<\/em><\/p>\n The first quarter of 2018 was dominated by economic forecasts calling for a rough first quarter for the Canadian housing market, followed by a recovery in the spring.<\/p>\n But spring has come and gone, and Canadian home sales are still slumping on a year-over-year basis, while prices in most markets remain stubbornly flat.<\/p>\n While provincial housing policy and a rising interest rate environment have a role to play in the market\u2019s slumping performance, most economists blame a new mortgage stress test introduced on January 1 for the current state of affairs.<\/p>\n So when will the market finally adjust to said test? It depends who you ask.<\/p>\n\n \u201cWe held the view until now that the transitory effect of the stress test implemented on January 1 would start to wane by the spring,\u201d wrote senior economist Robert Hogue, in a note earlier this month. \u201cWell, there was no indication of any material rebound in home resale activity through May.\u201d<\/p>\n Hogue writes that while he had initially predicted that home sales would drop by 4.3 per cent year-over-year in 2018, that number could double by the end of the year. <\/p>\n Meanwhile, Scotiabank senior economist Marc Desormeaux is predicting that a recovery is still on the way, just later in the year.<\/p>\n While in April he wrote that sales appeared to be \u201cbottoming out\u201d and that following the first quarter contraction he predicted a \u201cmodest but broad-based recovery of sales activity [in the second quarter],\u201d he is now predicting that the recovery will happen later in the summer.<\/p>\n \u201cAn early-year slowdown in Canadian housing market activity persists in the wake of rising interest rates and mortgage stress tests that came into effect on Jan. 1st,\u201d he writes, in a recent note, before predicting a \u201cmodest recovery…later in 2018.\u201d<\/p>\n