The housing market could make a turnaround by 2024 according to a Desjardins report
Desjardins Economics released a report that predicts home sales in Canada will reach a low in the second half of 2023 and pick up again.
The report argues that the possible drop in Bank of Canada's benchmark interest rate could drive the resurgence of the housing sector along with strong demand from immigration and higher purchasing power.
The Bank of Canada signaled a pause in further changes to its policy rate while it lets the previous year's rate hikes take effect.
Governor Tiff Macklem has stated that it is too early to be thinking about cutting rates, but the pause in rate hikes might have a stimulating effect on the sector.
Desjardins expects five-year fixed-rate mortgages to continue to drop and variable-rate products to follow suit if and when cuts begin.
The housing correction has already been pronounced with existing home sales down 38% and average sale price down 20% from the peak.
Desjardins report says there is likely more pain ahead for Canadians, including a recession in 2023.
Bank of Canada's revised outlook says the housing market will continue cooling through mid-2023 before rebounding slightly.
The housing correction and subsequent rebound will vary by province, with Ontario and B.C. being the most vulnerable to further correction in 2023.
Quebec is expected to see a 20% decline in home sales before hitting a 10-year low and starting a gradual climb back up in 2024.
The Maritime housing markets have shown some resiliency in the correction, but there might be early signs of a downturn.
Strong commodity activity and prices are expected to boost economic output in Prairie provinces and lift the housing market.
The relative affordability of Calgary, Edmonton, and Winnipeg is expected to make each city an attractive destination for immigration.
“We expect the massive increase in interest rates will continue to hold back activity and compress purchasing budgets for some time.”
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