Data tells a story, but context helps bring it to life. Earlier this month, the Canadian Real Estate Association (CREA) released its resale housing market forecast for 2025 and 2026, anticipating a busy market—starting as early as this spring—as buyers move off the sidelines. 

Shaun Cathcart, CREA’s Director and Senior Economist, Housing Data and Market Analysis, joins this episode of the REAL TIME podcast to unpack the housing market outlook; what’s happening in different regions of the country; and how advances in housing technologies could help address housing supply shortages.

Transcript

Shaun Cathcart: Prices went up a lot during COVID and they were expensive. Then interest rates went up and those were expensive.

Shaun Majumder: What do you think is going to happen to the Canadian housing market?

Shaun C: I think they're waiting for the bottom to know that now is the time to lock in.

Shaun M: Where is the Canadian housing market headed? This is a question everybody wants an answer to, but unless someone invents a reliable crystal ball, we're never going to have a firm answer. Data, and when I say "data," I don't mean what my kids call me all day every day, "Dada, dada, dada." No, I'm talking about data. Data can certainly paint a telling picture of what's to come along with expert assumptions and risk analysis. Today, we are being joined by Shaun Cathcart, CREA's Senior Economist. We're going to dive deep into the Canadian Real Estate Association's housing market forecast for 2025. There's a lot to get into, so let's get started.

This is my very first episode of hosting REAL TIME. I'm so stoked. I'm very thankful that not only did they present me with my first guest that has the exact same name as me, but to ease me in, they wanted to make sure they scoured the internet. The only person who was available that had the same spelling as me was Shaun Cathcart, senior economist for CREA. This works out so perfectly.

Shaun C: It does. How does it feel to have a super common short name that has three different spellings?

Shaun M: I know, Shaun, Senior Economist for CREA. Wow, this is a great way to start my tenure here because you are the man that holds the key. You are the gatekeeper to this year's forecast. I've watched your presentation on the big stage in the parliamentary bureau office, wherever that was. It was pretty powerful. How did that feel, first of all? That's got to feel like a lot of pressure on your shoulders. You're the one coming out with the forecast. You're the one presenting it to the world. How did that feel doing that?

Shaun C: Well, one thing that was tough about it was I tend to go on and on. I do presentations around the country all the time. I say 45 minutes is the perfect amount. I can go on that long. Otherwise, I'm cutting out important stuff. For this one, I only had 10 minutes. That was difficult to figure out how to jam that much into that time without talking way too fast, which was also something I was told not to do.

Shaun M: Right.

Shaun C: Then in behind the scenes of that thing, you're in these wood-paneled rooms, way in the dark corners of West Block. You're walking through this maze to get to it. Then there's all these flags and you got to go be quiet. You get counted in and then you walk in and then you do it. It was definitely much more formal than what I'm used to.

Shaun M: You know what it is? It is serious. It's very important. Canada is in what they call a housing crisis. We're going through major heavy changes all over the world right now politically, economically. There are so many things that seem like are actually happening. I watched you present this information. You did a great job. For me, not being immersed in the weeds of data, you presented it very clearly. I was really excited to come and talk to you today. I did have some questions about the data. Tell me, where this data comes from? Who sources it? How do you pull from it? Which data do you pull from to present this forecast?

Shaun C: Sure. Well, the first one is the data that we're actually forecasting, which is data that we at CREA, and real estate boards, and associations across the country produce and put out into the world. That's the data that comes off of all of the transactional listings and sales that are happening on all of Canada's MLS systems. That's the entire existing home market.

The big chunk of the housing market that really tells the story is the data that we and our boards and associations across the country collect and aggregate and then we put it all together into one big Canada database. That's the data that we actually forecast, but the data we pull in comes from everywhere, right? It comes from CMHC. It comes from Statistics Canada and the Canadian Housing Statistics Program. It comes from the Bank of Canada.

It comes from private sector forecasts for all of the things that affect housing like population growth and GDP growth and income growth and mortgage rates. There's other people that are experts in forecasting that stuff that put that out into the world that we bring in as inputs to our forecast. We're really going out there and finding every piece of information that can help us do that that's out there, but the data that we're mainly talking about in forecasting is the data that we put out into the world.

Shaun M: When we talk about forecasting in the housing market, is it a forecast or is it more of a state of the union like state of the industry, "This is where we're at and this is where we can see ourselves going over the next year"? Do you focus on a year? Do you focus on quarters? How does that work? What's a forecast and what's, "This is where we're at"?

Shaun C: Best forecasting advice is the further you go out, the bigger your error term gets. We don't want to go out five years from now when who knows what's going to happen, as you mentioned, one or two weeks from now? We typically, as is a practice around the forecasting world, forecast for the current year out to the end of that and then the next one.

The main focus is always what's going to happen this year because that's where you have the best current information about the trends exactly where we are. Like you mentioned, where we are is so important, right? What's a starting point for this? Are we starting at a decade low? Even if you got a big increase, you're still not doing that great. Are we starting at a record high and ticking down a little bit? Ooh, it's a decline, but it's still a really strong year. That's all context that goes into this and that's important to know as well.

Shaun M: Take me through. How are we doing? What's the forecast?

Shaun C: Well, that's a tough question. Let me start at the Canada level. We're going to have to get into some regional stuff because there's vast differences right now as there always is, although this is a bit of an Uno reverse card compared to history. I'll start with the Canada numbers. We are starting off on the sales side low because we've been in an inflation crisis. Prices went up a lot during COVID and they were expensive. Then interest rates went up and those were expensive.

People couldn't afford to borrow enough money to buy homes. A lot of people couldn't. The market has been very quiet. I called it a market in hibernation. Our forecast is that we think that's about to wake up probably this spring, but we're already seeing evidence of that in some parts of the country. On the sales side, good increase, but still a couple of years away from just getting back on track with what would normal would be. On the price side, we're going to see some gains there too because we still have a supply crisis in this country.

Shaun M: Right, so there's a supply crisis in the country. A lot of people are still on the sidelines because of inflation, because of the interest rates. What are happening with interest rates and how do you think that is going to affect these sideline buyers, central buyers?

Shaun C: If you go back six months, everyone was making predictions about how the Bank of Canada would-- when they would start. Everyone wanted to throw their hat in about like, "When the first one's going to be," even though it's more of a psychological thing. Then it was really the pace of how many they're going to do over what time period, and when are they going to stop. A lot of that has already played out.

Shaun M: You're talking about cuts?

Shaun C: Cuts, yes.

Shaun M: You're talking about mortgage rate cuts, right?

Shaun C: Exactly. From the inflation-fighting peak to where we are now is most of that has already happened. We're currently at 3.25% on the overnight rate. Between 2.25% and 3.25%, that's what the Bank of Canada considers neutral. As of the most recent cut, that's their foot basically off that brake pedal on the economy. We're still at the high-end of that, but I think there's only one more cut at this point penciled in for this year, which could be more, depending on how various other things I'm sure we'll talk about are going to play out in the months ahead.

For now, that would be a neutral interest rate. Where I think the important milestone is going to be is when the bank signals that they're done cutting because Canadians typically are risk-averse. They love their five-year fixed-rate mortgages. The time to lock that in is when the rates aren't going to go down again next month. When they're done fallin