What’s Ahead for Home Prices? October 20, 2022
Ian Walterhouse
Thursday, October 20, 2022
What’s Ahead for Home Prices?
As the housing market cools in response to the dramatic rise in mortgage rates, home price appreciation is cooling as well. And if you’re following along with headlines in the media, you’re probably seeing a wide range of opinions calling for everything from falling home prices to ongoing appreciation. But what’s true? What’s most likely to happen moving forward?
While opinions differ, the most likely outcome is we’ll fall somewhere in the middle of slight appreciation and slight depreciation. Here’s a look at the latest expert projections so you have the best information possible today.
What the Experts Are Saying About Future Home Prices
Royal LePage has forecasted that home prices will drop by 3.5 per cent in the fourth quarter of 2022. This forecast is a readjustment from a prior forecast in its July 2022 report which showed home prices increasing by at least three per cent.
Mortgage Sandbox believes politicians are hoping to guide the market toward a typical annual real estate cycle with price growth in the range of 1 to 3% annually – in line with income growth.
The Canada Mortgage and Housing Corporation has predicted continued price growth through to 2023, though at slower rates than seen recently.
Re/Max Canada president Christopher Alexander said many markets are experiencing softer sales given the recent interest rate hikes.
"This provides some reprieve from the unprecedented demand and unsustainable price increases we've seen across Canada through 2021 and in early 2022. However, the current lull in the market is only temporary. Until housing supply increases, these 'boom' and 'bust' cycles will likely be a recurring event."
Desjardins has concluded that Canadian home prices set to drop by almost 25% by end of 2023. However, the silver lining in their prediction is that prices are still expected to be above the pre-pandemic level at the end of 2023.
While there isn’t a clear consensus, if you take the average, the most likely outcome is, nationally, home price appreciation will be fairly flat next year.
What Does This Mean?
Basically, experts are divided on what’s ahead for 2023. Home prices will likely depreciate slightly in some markets and will continue to gain ground in others. It all depends on the conditions in your local market, like how overheated that market was in recent years, current inventory levels, buyer demand, and more.
The good news is home prices are expected to return to more normal levels of appreciation rather quickly. The latest forecast from Wells Fargo in the United States shows that, while they feel prices will fall in 2023, they think prices will recover and be net positive in 2024. That forecast calls for 3.1% appreciation in 2024, which is a number much more in line with the long-term average of 4% annual appreciation. While the Canadian market is unique in many ways, often the overall trends are similar between the two countries.
As Jason Lewris, Co-Founder and Chief Data Officer for Parcl - a blockchain-based real estate platform that allows users to invest in a digital square foot of physical real estate in the most lucrative markets, says,
“In the absence of trustworthy, up-to-date information, real estate decisions are increasingly being driven by fear, uncertainty, and doubt.”
Don’t let fear or uncertainty change your plans. If you’re unsure about where prices are headed or how to make sense of what’s going on in today’s housing market, reach out to a local real estate professional for the guidance you need each step of the way.
Bottom Line
The housing market is shifting, and it’s a confusing place right now. Let’s connect so you have a trusted real estate professional to help you make confident and informed decisions about what’s happening in our market. Call me to talk about your needs - 416-522-1112.
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