TD Downgrades Forecasts

TD is downgrading its home sales forecast with monetary policy tightening more acutely than anticipated. The overnight rate is forecast to rise an additional 175 basis points (bps) hitting 3.25 per cent in fourth quarter of 2022. TD forecasts that rising borrowing costs will continue to weigh heavily on housing activity, with a 33 per cent peak-to-trough decline in Canadian home sales from the first quarter of 2022 to the first quarter of 2023. Home sales are likely to decline the most in British Columbia and Ontario in 2022 and 2023. Beyond that timeframe, activity should begin to firm, (while remaining at low levels) through the remainder of next year, as interest rates drop from their multi-year highs. This dynamic results in a 23 per cent annual average decline in Canadian home sales in 2022 and a 12 per cent pullback in 2023.