What is in store for house prices in 2021 

 In early 2020 the Canada Mortgage and Housing Corporation predicted that home prices would fall by up to 18% over the course of 2020 and into 2021. Instead, prices in Canada have since risen by approximately 22% as of November 2020

That discrepancy illustrates how difficult forecasting the housing market has become due to the economic uncertainty created by the pandemic.

Factors suggesting a strong economic recovery in 2021 include promising developments on the vaccine front, sizeable spending by the federal government to support and stimulate the economy, pent-up consumer demand and historically low interest rates.

On the other hand, rising COVID infection rates, long-term unemployment and a drop in exports are just a few of the factors that could continue to hinder the economy, and in turn impact housing demand and home prices.

Despite the challenges of forecasting in today’s environment here are things to consider:

• The current trends and the outlook for housing market fundamentals suggest activity will remain relatively healthy through 2021, with prices either continuing to climb or remaining steady in all regions.

• There has been a significant shift in buyer preferences this year and factors such as the supply issue, pent-up demand and historically lower interest rates will hopefully continue to fuel activity in 2021

• Interprovincial migration during the pandemic has increased with more people arriving from Ontario and British Columbia than compared to last year. Buyer demand has been at an all time high.

• A word of caution. After a year of rising housing prices and bidding wars in the Halifax market, the Canada Mortgage and Housing Corporation has elevated its assessment of the vulnerability of Halifax's housing market. The main driver behind moving Halifax's rating from a vulnerability rating of "low" to "moderate" was CMHC's assessment of the overvaluation of the market. House prices were higher than levels supported by housing market fundamentals. Those fundamentals include the amount of disposable income in a given city, population level and increase, interest rates and employment. This means that Halifax house prices are moving beyond what's considered affordable for people who live in the area.

No on can really predict what will happen in 2021 with the uncertainty we are experiencing today. However, one thing for sure is that when purchasing a home today, it’s important to consider all factors but mostly whether or not the property meets your housing needs and affordability. When selling, listen to your Real Estate agent. They will interpret the market statistics with you to find the perfect sweet spot in pricing to assure that your home will sell quickly, but for top dollar.

Sources: CMHC Kelvin Ndoro is a senior analyst with the CMHC's economics section