A new report by TD Economics predicts Canadian home sales and average prices will fall over the coming months but pick up by the second quarter next year.
Economist Rishi Sondhi says the impact of higher interest rates continues to be felt, which will likely push sales and prices lower by 10 and five per cent, respectively, by the end of the first quarter of next year, compared with 2023 third-quarter levels.
The subsequent recovery forecasted is based on an assumption the Bank of Canada will cut its key interest rate by next spring as unemployment rises and the core inflation rate inches lower toward the central bank’s two per cent target.
On Wednesday, the Bank of Canada held its key interest rate steady at five per cent but did not rule out future rate hikes amid projections that show inflation remaining higher in the short term.
Sondhi says that would risk adding pressure on overstretched homeowners renewing their mortgages and push supply higher than expected.
The TD report says it will likely take until 2025 for Canadian home sales to sustainably surpass pre-pandemic levels as affordability challenges persist in most provinces.