There is a "dangerous" oversupply of new, single-family homes in Calgary and Edmonton, on top of affordability issues in Vancouver and Toronto, the financial intelligence company said in a report this week.
"The housing market will no longer be able to escape the poor condition of the labor market," said the report, which used data from a Brookfield Asset Management Inc. subsidiary, RPS Real Property Solutions Inc.
"Not even lower interest rates will be enough to save the housing market."
Moody's report did not go into detail on how it created the forecasts, but said 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.
Moody's forecast says the real estate sector will lose its momentum in the first half of 2021, and it’s not alone. Canada Mortgage and Housing Corp. economist Bob Dugan also predicted earlier this week that housing prices will fall going forward.
"Moody’s Analytics expects that the shortlived burst of growth in the third quarter will produce too few job gains to meaningfully reduce unemployment," the report said.
For instance, Moody’s said that housing starts - a closely watched statistic that has rebounded sharply this summer - partly reflects investments made before the pandemic.
"Builders have spent too much money on the projects to abandon them," the report said.
Moody’s forecast hits especially hard the Prairies, amid fading government supports, the end of mortgage payment deferrals and ongoing struggles with consumer debt and joblessness. The report notes that bankruptcy filings and insolvency proposals have been rising since late 2018.
"The pandemic will lead to even further widening in economic inequality, including housing," said the Moody’s report.
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