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Recent Canadian home price declines from pandemic-era record highs are expected to cease in mid-2023, according to the latest Housing Market Outlook published by Canada Mortgage and Housing Corporation (CMHC). However, the average annual price for Canadian homes is expected to close this year below the 2022 level.

Rising prices, higher mortgage rates and inventory shortages will continue to make homeownership less affordable for many Canadians, with many households forced to stay in a rental market that has its own supply shortage dilemma. The CMHC is predicting housing starts will decline and remain below 2021 and 2022 levels, due to higher construction and borrowing costs for housing developers. And while a new wave of housing starts is being forecast in 2024 and 2025, this activity is not expected to meet current demand.

“Affordability will continue to deteriorate through 2023, in both the ownership and rental markets,” said CMHC Chief Economist Bob Dugan. ”With inflation coming back to the 2% target by the end of the forecast period, mortgage rates will gradually decline, supporting both housing demand and a recovery in the construction of new housing supply. However, with demand for housing still well outpacing new housing supply, affordability challenges will persist for owners and renters.”