TD Economics says it expects Canadian home prices will fall even further than its previous forecasts for the third quarter and into early 2024. 

An economic and financial outlook report published Tuesday raised the potential for Canada to experience “an even bigger” correction in home prices. The TD economists who authored the report said they are now forecasting a 10 per cent drop in home prices, up from the five per cent drop they had expected in September. 

“We've had to magnify that drop to around 10 per cent,” the report said. 

“There are two main culprits underpinning this change. The first is our upgraded bond yield forecast. The second is the larger-than-anticipated loosening in B.C.'s and Ontario's housing markets.” 

The authors noted that the rest of Canada experiences different market conditions than Ontario and B.C., and other regions have “benefited from tighter markets and better affordability” when it comes to housing.

Ontario’s sales-to-new-listings ratio fell to 39 per cent in October from 63 per cent in May, the report said, attributing the falling ratio to a “sudden surge in supply.” 

The authors noted that population growth cushions the downside potential on average home prices.

Despite the downward revision in average home price expectations, the economists said “perspective is warranted.” 

Although a 10 per cent decline is sharper than the previous prediction, the report noted that even after that decrease, average home prices would still be 15 per cent higher than they were before the pandemic. 

In October, a report from RATESDOTCA said the average home price in Canada was $757,600.