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'Remarkable' home prices haven't taken a hit yet, economist says, as big declines projected

Last Updated May 20, 2020 at 11:49 am PDT

Homes are pictured in Vancouver, Tuesday, Apr 16, 2019. THE CANADIAN PRESS/Jonathan Hayward
Summary

Given economic shocks brought by COVID-19, expert says it's surprising we haven't seen more movement on housing prices

We could see price declines of as much as 18 percent nationally over the next year: CMHC

Some feel we'll have to wait until mortgage deferrals start expiring to get a sense of the true impact

VANCOUVER (NEWS 1130) – Home prices are expected to drop around Metro Vancouver, but questions remain about just how bad the decline will be, and when we’ll see it happen.

We could see price declines of as much as 18 percent nationally over the next year, in the assessment of the Canada Mortgage and Housing Corporation.

UBC housing economist Tom Davidoff says, given the economic shocks brought on by COVID-19, it’s surprising we haven’t seen more movement on housing prices.

“It’s hard to believe that if while employment rates and closed or barely functioning businesses persist for another year, that you wouldn’t see damage to the housing market and further damage to other asset markets,” he explains. “I think Evan Siddall made a reasonable forecast based on his guess of where the economy’s heading. It’s been remarkable to me that we haven’t seen much damage to the housing market except very few transactions.”

Davidoff notes that while there are fewer buyers, there are also fewer sellers, meaning price reductions have been limited so far.

“As time goes on, you expect that there’ll be more forced sales or people just deciding it’s time to sell,” he adds.

Meanwhile, others feel we’ll have to wait until mortgage deferrals start expiring to get a sense of the true impact.

Earlier this month, an assessment shared by credit rating agency DBRS Morningstar projected a decline of 10 to 15 percent in home prices in the Vancouver area, even under a moderate scenario.

The agency acknowledged there are many variables, but the big question, it noted, is how long it will take for the economy to bounce back, with the agency noting the speed of the recovery will be key in whatever happens in reality.