In its latest housing market update, RBC is forecasting national benchmark home prices to fall 7% by the middle of 2021.
Noting May's impressive percentage changes in both sales and listings, the bank warns that the 'rebound' May saw is overinflated when given proper context; namely, April was the worst month in three and a half decades for home sales and an increase from its sub-basement levels does not mean the Canadian housing market is back on track.
Simply put, we may have climbed out of the sub-basement, but that only means we're now in the basement.
According to RBC, "the eye-catching month-to-month gains across the country overstate the rebound. Activity was still 40% to more than 50% below year-ago levels in most major markets. The increase in May made up only one-fifth of the drop in March and April in Vancouver and Toronto, and closer to one-quarter in Ottawa."
The bank also believes that a combination of factors, including but not limited to, rising supply, COVID's full economic shock on (once) potential homebuyers, and home prices cresting.
"Despite easing in May, demand-supply conditions generally remained balanced across Canada or still favoured sellers. That’s likely to change. We expect the increase in supply to tip the scale in favour of buyers in many markets across Canada, some sooner than others."
In Ontario, RBC notes that "Strong starting points in Ottawa, Montreal, Toronto, and Halifax will provide these markets with a temporary buffer" from downward pressure on home prices. Indeed, the Toronto real estate market has been picking up a lot of steam over the past few weeks, with multiple offers and bidding wars once again becoming the norm.
That said, the main reason home prices in Toronto aren’t dropping is that – up until this point – supply and demand have fallen in tandem. Meaning, while fewer houses are for sale for fewer buyers than in previous years because both have fallen equally, the demand (buyers) is still strong relative to the supply (sellers). So much so, in fact, that Toronto real estate remains a sellers’ market. RBC's report notes that it "could take a little longer in Ontario" to see market favour tip toward buyers, but they do suspect it will happen.
While on a national level there was a discrepancy in the number of new home sales and new listings in May (12%), in Toronto, that difference was still less than 1%.