As anticipated, national home sales came to a screeching halt in April. Home sales across Canada plunged both 57% on a year-over-year and a month-over-month basis. In other words, either way you want to slice it, it was the slowest April on record, dating back to 1984 when our population was one third smaller.

Thankfully for the housing market it was in a strong footing prior to the pandemic, with relatively low levels of inventory. There was just 4.3 months of supply for sale in March, although that figure, which measures how long it would take to liquidate current inventories at the current rate of sales activity- has now ballooned to 9.2 months in April.

he question everyone wants to know now is when, and perhaps how much, will home prices fall? Of course that is an impossible question to answer. Yet there seems to be no shortage of predictions today. I have to laugh and feel somewhat empathetic to the economists who are trying to model home prices. According to CMHC, in a best case scenario national home prices will rebound to their pre-virus levels at the end of 2022. On the other hand, I read a report from one major bank last week that suggested national home prices would be up 11% by the end of 2021. But how on earth do you forecast (guess) where prices will be in a year or two from now, particularly when we are only two months into this nightmare.

The economy and the virus are both complex, dynamic, and relatively unknown. How are models taking into consideration the following:

– How many people have the virus, including those who are asymptomatic?
– Will we get a second wave of infections?
– When will a vaccine be developed, if at all?
– When and how will we know if we have reached herd immunity?
– How long will social distancing measures be in place?
– How long will it take the economy to rebound and when will businesses be confident enough to rehire workers?
– Will the economic recovery be a V, U, W, or L shape?
– Have peoples habits been altered, and will they be more inclined to save?

It is simply impossible to know the outcomes. What we do know for sure is home prices, as per the MLS benchmark index, declined by 0.6% from last month. That tells us a few things, one home prices are dropping. Two, home prices are incredibly sticky.

Price declines will certainly be buffered through generous policy actions, in particular, mortgage deferrals. As of today, we know that about 10% of all insured mortgages at CMHC are in deferral, 15% of all mortgages at Canadian banks are in deferral, and most recently, one of Canada’s largest alternative lenders, Equitable Group, announced 18% of their mortgage book is in deferral. These deferrals will persist for as long as six months, although it certainly can’t be ruled out that there may be additional extensions. The Bank of Canada still believes mortgage arrears could triple from todays levels, which would be more than double the Great Recession. However, without these measures in place, mortgage arrears would be at least 62% higher.  Again, these numbers are derived from a lot of assumptions.

What we know for sure is there will be financial stress on households. And, if one were a betting man, the probabilities for a further reduction in home values almost certainly outweighs the probabilities for higher prices in the near term.

That’s of course not the answer most will settle for, as we humans desperately seek out prophets, even false ones, to help us pinpoint the future.

Doubt is not a pleasant condition, but certainty is absurd.

Three Things I’m Watching:

1. April home sales plunge 57% across Canada. Lowest since 1984.

2. Home prices are sticky. While they fell 0.6% from last month, they are still up 6.4% from last year.

3. According to the median forecast in a Bloomberg survey of economists, Canada’s economy will shrink by 42% annualized in the second quarter.




  1. As Hemingway said about bankruptcy, it happens, “slowly at first, then all at once”. We are in the slow stage, all at once happens once we hit September and time runs out on deferrals.

    How much will prices fall? Anybody’s guess, but the last time things were as uncertain, in western Canada at least, was 1982.


    Deflationary times.

  2. In New york city during mid May the median sale price was 3% below the same period last year, marking the first negative year-over-year price growth in 2020…


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