canadian existinghome sales and benchmark house prices fell in may for a second straight month and a revised forecast indicates a sharp drop in realestate activity for 2022 due to higher interest rates the canadian real estate association said wednesday sales of existing homes declined 86 in may from the previous month combined with the previous months drop housing sales activity are now at prepandemic levels and slightly above the 10year average the association said on a nonadjusted basis transactions in may were nearly 22 lower than the same yearago month the association added that its gauge of benchmark house pricessimilar to the sp corelogic caseshiller national home price indexfell 08 in may after a 11 drop in april on an annual basis the benchmark price for a canadian home rose 196 although that marks a slowdown after reaching 27 in march from the start of the pandemic to march canadian home prices surged by over 50 the housing market has cooled significantly after the bank of canada starting in march started to raise its policy rate to douse historically high inflation mortgage rates have risen in tandem and are now at the highest level in 12 years the central bank has so far this year raised its policy rate by 125 percentage points to 15 and said it might consider a threequarter point increase in july as inflation exhibits no signs of slowing we need higher interest rates to take out the excess demandto get inflation down part of that adjustment will no doubt come through the housing market bank of canada gov tiff macklem said last week housing accounted for about 20 of canadas economic growth in 2021 some economists warn the central banks aggressive direction could send the housing market in a tailspin and trigger a severe recession the realestate association which represents realestate agents across the country issued a revised forecast wednesday predicting housing sales are expected to drop about 15 in 2022 earlier this year the association anticipated a drop in sales this year of about 8 still it added the projected level of 2022 sales would be the secondhighest annual figure ever even with the drop it anticipates home sales to decline further in 2023 down 28