Earlier this year, the Canada Mortgage and Housing Corporation made a now-infamous prediction that home prices would fall by up to 18% over the course of 2020 and into 2021.
Instead, prices have since risen by approximately 22% to $603,000, as of November.
That discrepancy illustrates how difficult forecasting the housing market has become due to the economic uncertainty created by the pandemic.
For instance, factors suggesting a strong economic recovery in 2021 include promising developments on the vaccine front, sizeable spending by the federal government to support and stimulate the economy, pent-up consumer demand and historically low-interest rates.
On the other hand, rising COVID infection rates, long-term unemployment and a drop in exports are just a few of the factors that could continue to hinder the economy, and in turn impact housing demand and home prices.
Current Home Price Forecasts for 2021
Despite the challenges of forecasting in today’s environment, multiple predictions have been issued over the past couple of weeks. Here’s a summary of where analysts see home prices headed in 2021:
The Canadian Real Estate Association (CREA): +9.1%
“Current trends and the outlook for housing market fundamentals suggest activity will remain relatively healthy through 2021, with prices either continuing to climb or remaining steady in all regions,” the association said.
RE/MAX Canada: +4% to +6%
“While we’ve seen a significant shift in buyer preferences this year.
We believe factors such as the supply issue, pent-up demand and historically lower interest rates will continue to fuel activity in 2021,” Elton Ash, a regional executive vice president at RE/MAX, said in a release.
Royal LePage: +5.5%
RBC (+0.6%) and Scotiabank (+0.4%)
Both banks essentially expect flat price growth over the year, citing continued pandemic-related economic headwinds, continued weakness in regional condo markets and growing affordability concerns.
Fitch Ratings: -3% to -5%
Declining rents, a significant drop in immigration and the B-20 mortgage affordability stress test will put pressure on Canadian home prices.
CMHC: -9% to -18%
As recently as September, CMHC announced it was standing by its original forecast of a peak-to-trough decline in home prices of between 9% and 18% before they start to recover in 2021.
With current forecasts all over the map, some will prove to be more accurate than others. But given how wrong the forecasts from earlier this year turned out to be, the lesson learned is not to take any home price predictions to the bank.
When purchasing a home, it’s important to consider all the other factors as well including; how well it meets your housing needs, affordability, etc.
I would be happy to speak with you to help you decide the best time to buy a house, and put a plan together, regardless of what’s happening or not happening in the housing market.