The Canadian Real Estate Association has lowered its forecast for sales and prices for the remainder of 2023, as higher interest rates continue to weigh on the housing market, particularly in Ontario and British Columbia.
In a news release, CREA says the national average price of a home is expected to decline 3.3 per cent annually to $680,686 this year, down from its previous forecast. The association says the revision is primarily due to the impact of lower sales in Ontario and B.C., the country's most expensive markets when it comes to real estate.
The revision comes as Canada's housing market slowed again in September, with sales falling, the number of listings jumping and prices dipping slightly.
"These dynamics suggest that prices will continue to be pressured down," BMO senior economist Robert Kavcic wrote in a note on Friday, adding that the risk for prices "is another leg lower that runs through around the middle of 2024."
"All told, more ample listings, restrictive mortgage rates, cautious investor demand and a subdued economic outlook all suggest tough market conditions... There are buyers out there, and there are now plenty of sellers too, but the market needs lower prices to clear under these mortgage rate and qualification settings."
CREA says national home sales fell 1.9 per cent on a monthly basis in September, marking the third straight month of declining sales, but were up 1.9 per cent compared to last year. The number of new listings jumped 6.3 per cent on a monthly basis. That brings the sales-to-new listings ratio down to 51.4 per cent, the first time the measure has fallen below the long-term average of 55.2 per cent since January.
"The recent trend of slowing sales and rising new listings continued in September," Larry Cerqua, chair of CREA, said in the release.
"This presents an opportunity for buyers, although many of them seem content to stick to the sidelines until there's more evidence that interest rates are indeed finally at the top. This, combined with sellers who, by and large, do not need to sell, means the market will likely remain on the slower side until next year."
The MLS Home Price Index, which CREA says is a more accurate price comparison than the median or average price, slipped 0.3 per cent on a monthly basis, the first decline since March. The dip was due to a slowdown in prices in Ontario.
"Incoming data over the next few months will determine whether Ontario is an outlier or just the first province out of the gate to show the kind of softening price trends that would be expected to play out in at least some other parts of the country, given where interest rates are," CREA said.
Calgary housing market remains strong
While national data are showing weakness, there are still pockets of strength in the Canadian housing market. Calgary's real estate market registered a sales-to-new listings ratio of 79.3 per cent, as Canadians flock to more affordable housing markets. The average price of a home in Calgary in September increased 8.2 per cent annually, rising to $553,300, still below the national average.
"Calgary (is) still the strongest market in Canada, and it's not really close," Kavcic wrote in the report.
"Don't call us surprised, as the economy is firm, affordability is relatively favourable and people are moving there from other regions in large numbers."
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.