The head of Canada’s housing agency is looking to clear the air over its previous pessimistic forecasts for home prices.
In a series of tweets Monday morning, Canada Mortgage and Housing Corporation (CMHC) President and Chief Executive Officer Evan Siddall said unforeseen circumstances helped the domestic housing market avert the worse-case scenario, which CMHC had described as a potential 18 per cent drop in home prices from pre-pandemic levels.
“Our recent work highlights compositional/mix changes, shifting preferences, heightened savings rates, decline in immigration and reverse urbanization as unforeseen developments that help explain our forecast errors,” he wrote in one of the tweets.
Canadian home prices have bucked all expectations through the pandemic, as the non-seasonally-adjusted national average home price rose 22.8 per cent year-over-year in January to a record $621,525, according to data from the Canadian Real Estate Association. Since CMHC’s initial warning in May 2020, the average Canadian home price has risen 25.7 per cent.
While CMHC’s warning was dire, ranging from a nine to 18 per cent decline in prices, the Canadian economy was staring down skyrocketing unemployment and wage disruptions in the early days of the pandemic.
What was less clear was the impact of work-from-home trends, which allowed Canadians to decamp from major cities like Toronto, Vancouver and Montreal and the accompanying high costs of living, in favour of smaller, more affordable markets.
Though home prices have proven resilient, Siddall said a reversal of those work-from-home trends could pose a risk to continued home price appreciation.
“Today, we remain very concerned about an even partial reversal of these factors, economic adjustments, increased debt, the diversion of economically valuable investment [dollars] into housing, increasing inequality and increased GHG emissions post-pandemic with cities less populated,” he wrote.
While the worst did not come to pass, Siddall said the agency’s goal was to contribute to the discourse around the domestic housing market and the potential risks to homeowners.
“We never pretended to have an crystal ball. Nor are we all-knowing on housing,” he said. “We meant to contribute to a discourse, even though it was hard to be precise about future. In hindsight, we could have made that clearer.”