Canada’s housing market is in “recessionary” territory, and it’s going to get worse before it gets better, economists warned this week.

Home sales that reached a peak of 64,000 in early 2021 are now down 45 per cent, said Canadian Imperial Bank of Canada’s housing market outlook. That’s 12 per cent below their pre-pandemic 10-year average.

The picture looks even bleaker when viewed by population with per capita sales at lows not seen since the 2008 recession.

“The housing market in Canada is in recessionary territory, as it faces its most significant test since the 1991 recession,” said CIBC economists Benjamin Tal and Katherine Judge.

“And activity will deteriorate further into the first half of 2024 as interest rates remain elevated, and supply floods the market.”

So far prices have not suffered as much as sales. The benchmark home price is down only 11 per cent from the 2022 peak and is still 38 per cent above pre-pandemic levels, said the report.

What has shielded prices is a lack of new listings in the market. From early 2022 to early 2023, new listings fell 31 per cent and fewer homes coming on the market helped to stem the decline in prices.

But that is changing, CIBC said. New listings have been climbing in recent months, rising 31 per cent from the low in March 2023.

“That surge in part reflects increased distress sales as owners list their properties due to financing issues as mortgages payments increase rapidly,” the economists said.

More listings and fewer sales has national housing headed for a buyers’ market — Toronto is already there, they said. But this is unlikely to draw buyers off the sidelines because elevated mortgage rates are keeping costs high.

“With listings on an upward trajectory, and demand from strong population growth and a relatively tight labour market eroded by high interest rates, housing market activity will continue to deteriorate,” Tal and Judge said.

Home sales could fall another 10 per cent to 15 per cent by the end of the first quarter of 2024 and probably won’t rebound to pre-pandemic levels until early to mid-2025, CIBC said.

CIBC’s outlook comes as economists at Toronto-Dominion Bank say they expect home prices to fall twice as much as they had thought.

TD had been predicting average prices would fall five per cent through the first quarter of 2024, but on Nov. 22 they increased that decline to 10 per cent, Bloomberg reports.

TD expects higher bond yields will cause fixed-mortgage rates to rise, shutting more buyers out of the market. The buyers who remain will have more bargaining power to negotiate lower prices.

_____________________________________________________________________

Was this newsletter forwarded to you? Sign up here to get it delivered to your inbox.
_____________________________________________________________________

Recession appears to be weighing on Canadians’ minds, much more than their American neighbours.

November saw a big spike in Canadians typing the word “recession” into internet search engines, today’s chart from National Bank of Canada shows. Understandably — gross domestic product in this country has stalled over the past six months and the unemployment rate has risen 0.7 percentage points. In the United States, meanwhile, GDP has surged to 4.9 per cent.

“While recent developments could escape the recession label, Canadians seem concerned about the situation currently prevailing in the country, especially given recent mass layoffs,” said National Bank economists Alexandra Ducharme and Matthieu Arseneau.

But be careful what you search for. “It is well documented that a recession can be self-fulfilling, in the sense that it is all the more likely to occur when people feel they are in one and begin to adjust their behaviour accordingly,” said the economists.

• U.S. markets closed for Thanksgiving Day.
• Prime Minister Justin Trudeau hosts European Union leaders for the 19th Canada-EU Leaders’ Summit in St. John’s, Newfoundland.
• The inaugural Indigenomics on Bay Street Conference continues in Toronto.

Get all of today’s top breaking stories as they happen with the Financial Post’s live news blog, highlighting the business headlines you need to know at a glance.

• Liberals’ mortgage charter draws praise and warnings as renewal cliff looms
• What economists are saying about Ottawa’s fiscal update
• Disney has stopped making hits — can it rediscover the magic?

If you’re one of the many in Canada who is both a U.S. citizen and a resident of Canada for tax purposes, welcome to a world of onerous tax filing requirements for U.S. tax purposes and, in some cases, extra taxes. Kim Moody walks you through it.

Today’s Posthaste was written by Pamela Heaven, @pamheaven, with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com, or hit reply to send us a note.

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters financialpost.com.