Highlights:

• Pandemic has soured the outlook almost overnight: Social distancing and the economic shock will cut home sale activity to a trickle near term. The timing and speed of the eventual rebound is uncertain.
• We expect property values to fall briefly: Surging unemployment and the market’s illiquidity will compel a growing number of tight-squeezed sellers to make price concessions.
• Oil-producing regions are the most at risk: The oil price plunge will compound the damage to housing demand at a time when Prairie markets still struggle with excess inventories.
• Policy response will soften the impact: Interest rate cuts, government financial support and banks’ offer to defer mortgage payments will help many households navigate through the storm.
• Housing affordability will take a back seat: Though it’s still a big issue in Vancouver and Toronto, the pandemic and economic turmoil will draw more attention near term. RBC’s aggregate affordability measure for Canada was unchanged at 50.0% in the fourth quarter of 2019, after improving slightly in the three previous quarters.