TD doubles forecast for housing price drop amid ‘sudden surge in supply’
One of Canada’s major banks is forecasting a steeper drop in home prices amid a “sudden surge” of supply in some real estate markets.
TD Bank updated its forecast Wednesday, calling for a 10 per cent drop in home prices from their third-quarter level through the early part of next year. In September, it pegged that drop at five per cent.
Its economists said there are two reasons for the change: its upgraded bond-yield forecast and a “larger-than-anticipated” loosening in British Columbia and Ontario’s housing markets.
“Ontario’s sales-to-new listings ratio has plunged to 39 per cent in October from 63 per cent in May. A sudden surge in supply is largely behind the deterioration in the ratio, abetted by a more prolonged drop in sales,” they said.
“However, some perspective is warranted. A 10 per cent decline in average home prices would still leave them 15 per cent higher than pre-pandemic levels. Our expectation that the Bank of Canada will be cutting rates towards the end of the second quarter of next year prevents a steeper decline.”
TD’s update comes after the Canadian Real Estate Association (CREA) said last week that Canada’s biggest housing markets saw a “sizable decline” in sales in October.
CREA said home sales recorded in October were down 5.6 per cent from the previous month. On a non-seasonally adjusted basis, the national average sale price for a home in October was $656,625. That’s up 1.8 per cent annually and slightly above figures seen in September.
CREA senior economist Shaun Cathcart said that while housing demand is still “extremely high” across the country, October’s data is showing that pressure is likely to be suppressed until spring 2024 “at the earliest.”
“It will really come down to whether the
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