Desjardins says real estate correction pace is rising

According to Desjardins, the average home price in Canada will fall by almost 25% by the end of 2023 compared to its February peak.

In its recent outlook, Desjardins predicts a sharp correction in the real estate market, changing its previous forecast of a 15% decline.

Desjardins explains that a more pessimistic outlook was caused by weaker housing results and more aggressive monetary policy than previously expected.

As you know, the Bank of Canada raised its key lending rate by 1% last month, increasing mortgage borrowing costs, with more hikes expected in 2022.

During each of the three months following February with its record prices of $816,720, home prices have been falling by more than 4%.

At the same time, the prices are still expected to exceed the pre-pandemic level at the end of 2023.

The largest prices drops are anticipated in New Brunswick, Nova Scotia and Prince Edward Island – the provinces that have shown the sharpest hikes during the pandemic.

“Although we don’t want to diminish the issues some Canadians are dealing with, this change is helping to bring some sanity back to the national housing market,” – the report noted.

In addition to it, authors also believe the upcoming economic slowdown will ease inflationary pressures enough for the central bank to change the rates direction. In Desjardins’ opinion, Canada’s housing market will stabilize at the end of 2023.