Realtors expect home prices to fall

The group that represents realtors in Canada has downgraded its housing forecast and now expects home prices to drop this year.

The Canadian Real Estate Association (CREA) predicts home prices will fall 1.1 per centin 2012. A previous forecast issued in November said home prices were to remain flat this year.

"Risks to the Canadian economic outlook remain elevated owing to the European sovereign debt quagmire," said CREA chief economist Gregory Klump.

Multimillion-dollar home sales activity in Vancouver caused the national average price to spike in early 2011.CREA said it does not expect this to happen again this year.

Last year, the national average price of a resale home in Canada rose overseven per cent to $363,116.

The average price is now projected to dip to$359,100 by the end of this year. CREA expects a modest rise of 0.9 per cent in 2013 to $362,300 still below where prices were at the end of 2011.

CREA expects home prices to fall the most in British Columbia, with smaller drops expected in Ontario and New Brunswick.

The largest gains in the country are expected in Manitoba, Quebec and Newfoundland.

Prices in all provinces are expected to rise in 2013.

Home sales are expected to rise 0.3 per centthis year, and fall by the same amount in 2013.

CIBC economist Benjamin Tal said the new CREA forecast is much more in line with what he is projecting, and if anything it is "a best case scenario" forecast, with his bias being toward an expectation of more significant price declines.

"This is basically a stagnating housing market," Tal said.

"This is not a housing market that is going to be on fire. This is a housing market that you'll see activity moderating and prices actually going down."