Home prices could fall 7 per cent in 2021, hitting Prairies hard: Moody's forecast

Moody's Analytics, Inc. says home prices across Canada could tumble about seven per cent in 2021, as unemployment dampens the hot real estate market.

The financial intelligence company says there is a dangerous oversupply of new, single-family homes in Calgary and Edmonton, on top of affordability issues in Vancouver and Toronto.

Moody's report did not go into detail on how it created the forecasts, but says that its 2021 home price index also calls for a 6.7 per cent decrease for single-family homes and a 6.5 per cent decline in condo apartments.

The prediction from Moody's comes after the Canadian Real Estate Association reported record-shattering home sales in July and August amid low mortgage rates.

But Moody's forecast says the real estate sector will lose its momentum, especially in the Prairies, amid fading government supports, the end of mortgage payment deferrals and ongoing struggles with consumer debt and joblessness.

If a COVID-19 vaccine comes out in the back half of 2021, the report suggests that home prices will bounce back in 2022.