Housing Trends and Affordability - COVID-19 Edition
- 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.