Sean MacKay

Last week, the head of the CMHC made a startling prediction that home prices could fall up to 18 percent in the next year as a result of the economic devastation caused by the COVID-19 pandemic.

With many new home projects expected to be delayed until the fall, it’s unclear how much momentum the market will generate in May, even as businesses reopen and consumer confidence trends upward.

Only months after finding itself firmly in seller’s territory, the Toronto housing market has shifted abruptly back into balanced market conditions.

There were 686 homes sold as of May’s midway point, compared to 564 homes sold during the same period in April, a 22 percent month-over-month increase. The MLS data, published by Vancouver broker Kevin Skipworth, will likely be seen as a positive step toward a market recovery.

While a single month doesn’t make a trend, market dynamics are not moving in a direction that favours property investors accustomed to strong monthly rent increases.

New homeowners could find themselves in an especially precarious position since they have relatively little equity in their homes and are now facing potentially significant price declines.

The enormity of the declines thankfully did not blindside housing market experts who had been predicting a huge, but temporary, hit to activity. And with April behind us, the market will now begin the steep, long climb back to some version of normalcy.

On the pricing side, average home prices in BC rose 7.8 percent over the previous year to $737,834 despite the dramatic decline in sales. BCREA pointed to the rapidly shrinking supply of active listings — down 23.7 percent over last year — as the primary reason that prices stayed firm through April.

In a BMO report published earlier this month, Senior Economist Robert Kavcic pointed out that new home listings are sharply declining alongside home sales which likely means that “the deterioration in prices should be contained for now.”

After a good showing in April, the team at BMO Economics is confident that home construction across Canada won’t see a major disruption due to the COVID-19 pandemic.