Dire predictions for house-price drops
Joanne Lee-Young
The Province
Canada’s national housing agency is continuing its grim forecasts for how hard the COVID-19 pandemic will hit home sales, prices and construction, including sharp drops for B.C.
But one local realtor said many people in the local real estate sector and construction industry believe Canada Mortgage and Housing Corp. is being too pessimistic.
Last week, CMHC CEO Evan Siddall told a parliamentary committee that Canadian house prices could drop by as much as a 18 per cent.
He also said that 20 per cent of mortgage holders who are deferring payments could be in arrears at the end of September, when the COVID-19 deferral period finishes, if the economy doesn’t improve.
He said Vancouver could be one of the hardest-hit places, along with Toronto and Alberta.
On Wednesday, the CMHC said home prices in B.C. could drop by 10 to 19 per cent from pre-pandemic levels, slightly exceeding its forecast range for home prices across Canada of nine to 18 per cent.
It said home sales in B.C. could decline by 15 to 25 per cent and housing starts could drop from 44 to 64 per cent, compared to national forecasts of home sales dropping 19 to 29 per cent and housing starts dropping 50 to 75 per cent from pre-pandemic levels.
But one realtor said many in the real estate and construction industry are still “classically optimistic” and insist they are still seeing demand for housing in Metro Vancouver.
“I think everybody wants to keep the market healthy and churning, and when these reports come out, all they see is that it puts hesitation in buyers’ psyche,” said agent Steve Saretsky.
He said some are calling the CMHC predictions ridiculous. “I’m not sure if they are just saying that to me, or if they actually believe it.”
As for himself, Saretsky thinks it’s unusual for a cautious, crown corporation like CMHC, which oversees the entire mortgage market, to be overly negative in its forecasts unless it needed to be.
Immigration is often cited by the real estate industry as being a resilient, driving factor in major housing markets such as Vancouver, but CMHC chief economist Bob Dugan said that “with the (travel) restrictions on the movement of people, immigration is effectively slowed down dramatically.”
He said that, in the optimistic view, when travel restrictions are lifted, immigration can return, but in the pessimistic view that changes if there are “repeated waves (of infections) and further lock downs.”
Dugan said there isn’t a “lot of data yet on the impact of the coronavirus on the Canadian economy, but we do have some early indicators that the impacts are fairly significant.”
As for the spectre of mortgage deferrals becoming arrears, Dugan said statistics show over three million jobs have been lost, causing the unemployment rate to rise from 5.6 per cent in February to over 13 per cent in April.
“While employment decreased by three million people, the number of unemployed only increased by less than 1.3 million,” said Dugan. The gap “is created by the fact that many people who have lost their jobs have left the labour force and are not actively looking for work, and therefore are not counted as unemployed.”
Corrected for this, the unemployment rate in April would be 20 per cent.
“This doesn’t really count for the fact that many other people who remained employed either had to have their hours reduced and had much lower income than they would have had before the onset of the pandemic.”
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