Desjardins expects the average home price in Canada to drop by about 25 percent by the end of 2023 from its peak value reached in February this year.

In its latest residential real estate forecast published on Thursday, Desjardins said it expects a sharp correction in the housing market, revising its previous forecast which anticipated a 15 percent decline in the average home price over the same period.

Desjardins says the gloomy outlook stems from weaker housing data and tighter monetary policy than previously expected.

The Bank of Canada raised its key interest rate by a full percentage point in July, increasing borrowing costs tied to mortgages, with further hikes expected this year.

The report also points to home prices dropping by more than four percent in each of the three months following February, when the national average home price hit a record high of $816,720.

Despite the revision in forecasts, prices are still expected to be higher than pre-pandemic levels by the end of 2023.

Regionally, the report says the largest price corrections are likely to occur in New Brunswick, Nova Scotia, and Prince Edward Island, where prices rose significantly during the pandemic.

The report stated, "While we do not want to downplay the difficulties faced by some Canadians, this adjustment helps restore some sanity to Canadian real estate."