Home Prices Could Drop 10% if Sales Fall Below Pre-Pandemic Levels

According to Capital Economics, rising borrowing rates could trigger a 10% slide in home prices over the next year before an even bigger drop in real estate investment. Stephen Brown, senior Canada economist at Capital Economics, said, “With sales plunging, it is no longer a question of whether house prices will fall, but rather how much will they fall by?” He believes a 10% drop in home prices is possible if home sales drop 25% below the pre-pandemic average from 2019. Brown added, “If house prices were to fall by much more than we expect, the bank would loosen policy in 2023,” However, he doubts interest rates returning to 0.25%, because it could reignite the housing cycle all over again.

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