The Canada Mortgage and Housing Corp. is forecasting home prices could match peak levels seen in early 2022 by next year and reach new highs by 2026.
The agency's latest housing market outlook, released Thursday, says despite an increase in rental housing coming on the market in 2023, supply is not forecast to keep up with demand, leading to higher rents and lower vacancy rates in the coming years.
“Unfavourable financing conditions are expected to make it more difficult for homebuilders to start new rental projects in 2024,” CMHC chief economist Bob Dugan said in a statement.
“We anticipate by 2025-2026 lower interest rates, continued government support, and policies encouraging greater density in urban centres should make more projects viable.”
The CMHC said affordability in the home ownership market will also be a concern for the next three years, as declining mortgage rates and the country's strongest population growth since the 1950s will likely spur a rebound in home sales and prices.
Home sales dropped by around one-third from their peak in early 2021 to the end of 2023, while prices fell by nearly 15 per cent over that time, CMHC said.
“During this time, the pool of potential homebuyers grew through robust population growth, increased savings and higher incomes,” the report said.
“As mortgage rates and economic uncertainty decrease in the second half of 2024, we expect buyers to start returning to the market.”
It said the resurgence would also be driven by a shift in demand toward lower-priced homes and markets across Canada.
The agency predicts sales activity from 2025 to 2026 will slightly surpass the past 10-year average but remain below the record levels recorded from 2020 to 2021, due to how expensive housing remains.
CMHC also says housing starts in Canada are expected to decline this year before recovering in 2025 and 2026, reflecting the lagged effect of higher interest rates on new construction.
A report last week from the agency showed construction began on 137,915 new units last year across Canada's six largest cities, a level that was roughly in line with those of the past three years due to a surge of new apartments.
On a regional basis, the CMHC forecasts Ontario and B.C. will drive the decline in national housing starts this year, warning developers may struggle to boost even apartment construction amid challenges such as financing costs.
It expects the Prairie provinces to perform well, citing affordable home prices and a stronger economic outlook which will likely attract homebuyers and job seekers, leading to increased construction.
In Quebec, housing starts are expected to grow but remain below post-pandemic levels after a sharp decline in new home construction last year.
It said the Atlantic region will likely see less pressure on new home construction than it has since 2022 from unusually strong migration, as starts in certain eastern provinces “will remain historically robust but will realign more closely with weaker population growth.”
This report by The Canadian Press was first published April 4, 2024.
FAQs
Home prices could hit peak levels by next year, set new highs in 2026: CMHC report. OTTAWA — The Canada Mortgage and Housing Corp. is forecasting home prices could match peak levels seen in early 2022 by next year and reach new highs by 2026.
Will the housing market be better in 2026? ›
Bank of America economists predict that house prices will remain high until at least 2026. Their report suggests that while the rapid price surges experienced during the pandemic will cool down, prices will not drop significantly.
What is the housing market prediction for 2025 in Canada? ›
National home sales are forecast climb a further 6.2% to 501,902 units in 2025 as interest rates continue to decline and demand continues to flow back off the sidelines. The national average home price is forecast to rise by 5% from 2024 to $729,319 in 2025.
What is the forecast for the next 5 years of real estate in Canada? ›
The next five years in the Canadian real estate market will be marked by steady growth. While the flurry of activity witnessed in 2020, 2021, and 2022 has tapered, the market remained buoyant in 2023-2024.
Are home prices continuing to rise? ›
The housing market and inflation
Nationally, CoreLogic's most recent home-price analysis reports that home prices rose 4.7 percent from June 2023 to June 2024. It forecasts that price growth will continue, albeit more slowly, with an increase of 2.3 percent by June 2025.
Will mortgage rates go down in 2027? ›
However, increases should slow between 2024 and 2026, and rates may even decline in 2027. Among the factors that could impact mortgage rates in the next 5 years are inflation, Federal Reserve policy, and economic growth. Homebuyers should consider locking in a low mortgage rate now, as rates are expected to rise soon.”
Will mortgage rates go down in 2026? ›
Leading forecasts suggest that by 2026, the average mortgage rate could drop to around 5.0% according to various sources, including the predictions shared by financial analysts on platforms such as Morningstar. They suggest a gradual decline will continue, culminating in rates around 4.5% to 4.25% by 2027.
What will houses be worth in 2030? ›
The state where house prices are predicted to be the highest by 2030 is California, where the average home could top $1 million if prices continue to grow at their current rate. Other states expected to see their average house price rise above the $750k mark include Hawaii, Washington and Colorado.
How much will a house cost in Canada in 2024? ›
Data from the Canadian Real Estate Association (CREA) indicates that the benchmark price of resale residential homes sold across Canada in August 2024 was $717,800, and it decreased by 3.9% compared to a year ago.
What is the real estate forecast for Canada in 2030? ›
To get an idea of the magnitude of the housing supply crisis, CMHC recently updated its Supply Gaps Estimate report in hopes of determining how many housing units beyond current trends would need to be built between now and 2030 to restore affordability. The number CMHC came up with is 3.5 million.
Yes. This is the best time to buy a house in California. With the current trend in the CA housing market, you'll find better deals on your dream home during Q2 2024. As per Fannie Mae, mortgage rates may drop more in Q2 of 2024 due to economic changes, inflation, and central bank policy adjustments.
Why are houses so expensive in Canada? ›
The limited availability of land for development and strict zoning regulations limit the number of new homes being built, thus driving up prices. Also, Canada's growing population, combined with low-interest rates, has led to a strong demand for housing, pushing prices higher.
Is Canada in a housing bubble? ›
The IMF concluded that "Canada runs the highest risk of mortgage defaults among advanced economies" in their June 2023 report comparing 38 countries. Canada's residential housing stock was valued at 3.1 times GDP in 2023 after peaking in 2022.
Where are US home prices doubling? ›
Where housing values grew rapidly
| Rank | City | Years to double in price |
|---|
| 1 | Detroit | 4.9 |
| 2 | Spokane, Wash. | 5.9 |
| 3 | Tampa, Fla. | 6 |
| 4 | Miami | 6 |
8 more rowsMay 8, 2024
It could take until 2026 to see a 'normal' real estate market. To get affordability back to a comfortable range will take a combination of higher wages, lower interest rates and stable prices, economists say, and that combination may take until 2026 or later to coalesce.
Will inflation cause a housing crash? ›
Generally, homeowners, especially those with mortgages, benefit from inflation. The value of homes tends to increase faster than inflation, so their investment does not lose value.
Will there be a recession in 2026? ›
84% of Manufacturing Executives Anticipate a Recession by 2026, According to New Research - Albany CEO.
Is a recession coming in 2025 in the housing market? ›
National Housing Market Predictions for 2025-2029
Although a recession is no longer predicted, economic growth is expected to decline from 2023's fairly robust rate of 2.5% to 2.1% in 2024 and 2% in 2025.
Will my house be worth more in 5 years? ›
Average 5-year home price return since 1975
But this will vary a lot by area: The highest average five-year returns have been observed in Massachusetts (+36%), Rhode Island (+34%), and California (+34%). The lowest average five-year returns have been seen in Oklahoma (+14%), West Virginia (+15%), and Louisiana (+15%).
Should I sell now or wait until 2025? ›
In a recent note, Chief US Economist Michael Gapen and his team revealed that they expect home prices to rise by 4.5% this year and 5% in 2025. Gapen doesn't foresee the market cooling down until 2026 at the earliest. With this in mind, current homeowners can sell for even higher prices down the road.
