The Canada Mortgage and Housing Corporation (CMHC) just released their latest housing market predictions, and guess what? They think home prices will hit rock bottom this year–but, it’s important to note, they don’t think they're not gonna dip below the prices we saw before the pandemic.

Highlights from the report

In their spring Housing Market Outlook, CMHC mentioned that things like slower growth and rising mortgage rates are going to keep putting the brakes on the housing market and the economy for a while.

According to the report, CHMC expects "a price decline between 2022 and 2023, but the average price will not revert to pre-pandemic levels," and that the decline should stop sometime in 2023. 

• Their latest predictions say the average MLS home price will drop to about $643,325 in 2023, which is almost a 9% decrease from the average price of $703,875 in 2022. But even then, prices will still be nearly 14% higher than they were in 2020.
• With the economy and immigration picking up steam, CMHC also thinks home prices will start climbing again in 2024, hitting an average of $694,196 in 2024 and $746,410 in 2025.
• They've also got this alternative scenario where high inflation and interest rates stick around for longer. If that happens, their average price forecasts are about 5% lower. 

Regional predictions for the housing market

First up, the Prairie provinces are gearing up for some good news! CMHC expects these areas to have a better go of it in the housing market than other regions. Even with a bit of a dip in housing starts (new residential construction projects) expected in 2023, the drop won't be as steep as in other places. A few reasons behind this:

1. A boost from people moving in from other regions during the forecast period.
2. Housing affordability is doing pretty good thanks to the lower home prices.
3. A more robust economic outlook in general.

Now, on the flip side, Ontario, British Columbia, and Québec might have a tougher time. They're expecting bigger decreases in housing starts in 2023 compared to other regions. This isn't great news, especially since these provinces are where you'll find the three biggest housing markets– Toronto, Vancouver, and Montréal–which are already squeezed for supply.

As for the Atlantic region, it's kind of in the middle of the pack. CMHC's forecasting that in 2023, growth in the economy and housing will be somewhere between what's expected for the Prairies and what's predicted for Ontario, British Columbia, and Québec. 

City predictions for the housing market

Toronto

In 2023, the CMHC is expecting the total number of housing starts to take a bit of a tumble. But don't worry, things should pick up again in 2024 and 2025. The catch here is that higher costs for things like construction financing, labour, and materials might put a damper on construction activity.

The average price for homes on the MLS® in the Greater Toronto Area (GTA) is predicted to drop a bit in 2023. But just like with housing starts, prices should start going up again in the following couple of years. That said, the high price levels in the GTA will make it tricky for people to buy their first home.

As for the rental market, it's going to stay pretty tight, which means rent prices are likely to keep climbing. 

Calgary

First up, the rental market. It's gonna get a bit tougher for renters as affordability goes down. This is because vacancies are expected to keep decreasing while rents keep going up. Not the best news for renters, unfortunately.

When it comes to buying a home, we're expecting the average price to stay pretty much the same, and sales activity to dip a bit. So, things might be a bit slower on the home-buying front.

And what about new home construction? Well, it's expected to cool off a bit. Expensive financing is making it harder to get new projects off the ground, and demand for single-family homes is slowing down. So we might see a slight slowdown in the construction of new homes.

Regina

In 2023, the CMHC is anticipating a bit of a cool down in housing activity. Construction starts and sales will likely be on the lower side for the first half of the year, mainly due to the country’s high interest rates.

But it's not all slow and steady. Average house prices are expected to see a modest uptick in 2023, and should climb even higher in 2024 and 2025 as people start showing more interest in single-detached homes again.

But things are looking up for Regina's housing market in 2023 thanks to some strong economic fundamentals like rising employment, high prices for key commodities, major projects, and record international migration. With all of these factors in play, expect more investment, higher commodity prices, and rising wages. This should lead to higher demand for housing.

If these positive market conditions stick around into 2025, there may even be an influx of people moving from Alberta into Saskatchewan, which would boost housing demand even further.

Halifax

In Halifax, the number of homes up for sale is still pretty low, which means prices will likely keep climbing for a while.

As for new home construction, or housing starts, expect a bit of a drop in 2023. This is mainly because home sales are expected to be weaker, and there are some other economic challenges in the mix too. But don't fret, things should pick up again in 2024 and 2025.

Now, for renters, there's a bit of good news and a bit of bad news. On the bright side, a record number of completed housing units should take some pressure off the rental market. But on the downside, rents are still expected to rise over the next few years.

For more information you can read the full report here.