A Historic Housing Correction Is Underway Says Rbc. Here S How Much Prices Could Drop.

GTA home prices have soared during the pandemic and are up nearly 36 percent year-over-year in February alone.
But the Bank of Canada’s aggressive rate hike campaign has weighed on the market since then, which has now seen four straight months of falling prices.
In its report, released last week, RBC said it now expects average home prices across Canada to decline by about 12 per cent from the February peak to early 2023.
He says that if this does materialize, it will “rank as the steepest correction of the last five national declines.”
The bank, however, says the fix will work differently depending on your purchase.
He says housing could be “more resilient” in markets that are already relatively affordable, with prices only expected to fall by about 3 per cent in Alberta and Saskatchewan and between five and eight per cent in most others provinces.
But the bank warns that buyers in high-price markets like Ontario and British Columbia will be “particularly sensitive to interest rates” and could find themselves on the sidelines in greater numbers.
This, in turn, could lead to a more significant correction in these markets.
“We forecast home resales in British Columbia and Ontario to decline cumulatively by 45% and 38%, respectively, in 2022 and 2023, setting the stage for a decline in the home price index of more than 14 percent from a quarterly peak to lower price in both provinces.  the report states.  “The magnitude of the recession would rival that of the early 1990s in Ontario (when resales fell 41 per cent and prices 15 per cent), though it would be much smaller than the early 1980s episode in the UK Colombia (when resales fell 62 percent and prices 27 percent).”
The Bank of Canada has raised its key overnight lending rate from 0.25 per cent to 2.5 per cent over the past several months in an effort to curb inflation, and has warned that more increases are likely to be needed.
In its report, RBC said it now expects the overnight rate to reach 3.25 percent by October.
This, combined with higher mortgage test eligibility rates, will “hold back extended buyers in every region of the country” and ultimately bring about a “substantial correction”, the bank says.
However, RBC economist Robert Hogue notes in the report that the bank does not foresee a “collapse” in house prices at this point.
“We would argue that the unfolding recession should be seen as a welcome reprieve after a two-year frenzy that put a huge financial burden on many new homeowners and made it harder to achieve their home ownership dreams,” he said.  “While a more severe or prolonged recession cannot be ruled out, we expect the correction to be over sometime in the first half of 2023 – which will last about a year – with some markets likely to stabilize faster than others.  Stable demographics (including rising immigration) and a low chance of overbuilding will keep the market from entering a death spiral.”
The latest data from the Toronto Area Board of Realtors showed sales fell 41 per cent year-over-year in June, while the median home price was still up five per cent from the previous June to $1,146,254.