The Canada Mortgage and Housing Corp (CMHC) just released its recession forecast. Inflation in Canada is currently at its highest level in almost four decades. To try to curb further inflation, the Bank of Canada just increased their prime interest rate to 2.5 percent. However, many economists predict the Bank of Canada will further increase its interest rate to 3.5% in 2023.
So what will this mean for home sales?
A rate increase to 3.5 percent will slow consumer growth. The national average home price will likely decline by 5 percent. National home sales will likely fall by 34 percent. The recessionary effects would potentially last for two quarters.
However, if the Bank of Canada looks to stay the course at 2.5 percent or only a slight increase from there, and keeps rates relatively level for the next two years, the national average home price may only decline by 3 percent with national home sales falling a bit lower at approximately 29 percent.
With or without a looming recession, things are about to get very interesting in the Toronto real estate market.