Since COVID began there have been any number of conflicting real estate forecasts released, which have painted a very murky outlook – with some industry leaders say home prices could increase by 7.8%, while some have said prices could drop by 14%.
However, a new report from RE/MAX reports that while their brokers seeing housing inventory down in many markets, demand is remaining high, with multiple offers a common scenario. If demand continues at its current course, RE/MAX expects that real estate prices in Canada will remain relatively stable or experience a single-digit price correction at worst – which is vastly different from a recent report from Canada’s federal housing agency which called for a housing price decline of up to 18% due to the economic impacts of COVID-19.
What’s more, CMHC warns that mortgage deferrals could rise from 12 to 20% by September, with up to one-fifth of all mortgages ending up in arrears, if the Canadian economy does not recover sufficiently.
“CMHC doesn’t seem to understand the sheer number of sellers that would have to accept this kind of price reduction, in order for average housing prices to plummet to this degree in such a short time span,” says Christopher Alexander, Executive Vice President and Regional Director, RE/MAX of Ontario Atlantic Canada. “Sellers simply won’t accept that kind of discount on their listings. A statement of this nature is panic-inducing and irresponsible.”
According to RE/MAX, many brokers think a dramatic price drop on a national level is unlikely under the current conditions. “But assuming current market conditions remain stable, the current inventory of homes for sale continues to fall short of demand – even amidst this pandemic, social distancing measures and the economic fallout,” reads the report.
Here in Toronto, RE/MAX says since new listings and sales are down the company believes house prices should remain stable this year. Given that homes are selling for asking price, or slightly above or below that price point, and the region has not experienced any decline in prices, if current conditions continue, RE/MAX says there’s “nothing to indicate that prices will fall between nine and 18%, as CMHC has predicted.”
“Toronto continues to experience multiple-offer scenarios, with RE/MAX reporting a consistent two or three offers on every listing. These conditions were prevalent prior to the lockdown on March 13, and continue to be the case, even with social distancing measures in place and the economic fallout. Toronto’s housing supply shortage continues, and demand remains high, as evidenced by the many multiple offers RE/MAX is seeing across the board,” reads the report.
What’s more, while the pandemic has negatively impacted listings with many homeowners who were planning to sell are now opting to hold on to their listings, and when government financial assistance runs out and the six-month mortgage deferral period expires, RE/MAX believes people may then start listing their homes, especially if they can’t afford to keep them.
However, RE/MAX says this is currently not the case and if a flood of listings does occur in Toronto this fall, it will be a short cycle.
But given how uncertain this year has already proven to be, RE/MAX says “anything is possible.” Except, apparently, the projection from CMHC.