Housing Prices Forecasted to Drop 10 Percent: TD Bank

A for sale sign is displayed in front of a house in the Riverdale area of Toronto in a file photo. The Canadian Press/Evan Buhler

Housing prices are expected to drop 10 percent over the next several months, according to a newly released TD Bank forecast.

The bank had predicted a 5 percent drop in prices in September, but has now revised its forecast to double that number partly due to the “larger-than-anticipated loosening” of the housing markets in Ontario and British Columbia and partly due to the bank’s upgraded bond yield forecast. Bond yield is the rate of return a bond generates.

“Ontario’s sales-to-new listings ratio has plunged to 39 percent in October from 63 percent in May,” the report said. “A sudden surge in supply is largely behind the deterioration in the ratio, abetted by a more prolonged drop in sales.”

The report notes that even a 10 percent drop in housing prices would still mean they are 15 percent 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,” the authors wrote.

Drop In Home Sales

The Canadian Real Estate Association (CREA) says housing sales have continued to drop, based on statistics from October.

“National home sales fell 5.6 percent month-over-month in October,” it said. “The sizable decline was the result of fewer sales in most of Canada’s largest markets.”

CREA said the actual national average home price was $656,625 in October, which is up 1.8 percent from the previous year.

“We know housing demand is extremely high all across the country, but October’s resale data was further confirmation that it probably won’t be manifesting itself in the existing home market for the remainder of this year and likely not until spring 2024 at the earliest,” said Shaun Cathcart, CREA’s senior economist.

Mr. Cathcart said the market could see a repeat of the rebound activity the markets experienced this spring.

“It will really come down to whether the Bank of Canada has to increase interest rates again, or whether by next March it’s simply a matter of how soon we’ll see the bank make its first cut,” he said.

The Bank of Canada is expected to make another interest rate announcement on Dec. 6.

It opted to keep the rate at 5 percent during the last announcement in October. However, the bank said it would raise rates again if needed to bring inflation down.

Statistics Canada says inflation dropped to 3.1 percent on a year-over-year basis. That is down from 3.8 percent in September.