How strong can a housing prices decline be in 2023?

The latest report by TD Bank says the average real estate prices may go down by as much as 20-25% by the first quarter of 2023 in Canada compared to the peak numbers we’ve seen at the beginning of this year.

Such a drop could take away a significant share of the price increases reported during the previous few years, thus leading prices to a more reasonable territory, despite being the largest decrease since the late 1980s.

“Our expected drop in national home prices would only partially offset the 46% hike seen during the pandemic,” – noted TD economist Rishi Sondhi. “So it’s more accurate to consider our forecast a recalibration of the market, than something more severe.”

According to the Canadian Real Estate Association (CREA), the trend has already started, with prices going down by 5% on a year-over-year basis to $629,971 in July.

At the same time, the influence of it will be far from the scary housing crash, mostly due to the effects of much stronger consumer purchasing power, pandemic-era savings, and moderated activity caused by restrained market supply.

“Our forecast of a sharp home sales decline coincides with the range seen during the previous housing downturns and was outpaced by the global financial crisis sales drop by 38%,” – Sondhi added.


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