Is Now The Time To Buy In Canada? Navigating The 2024 Housing Market Maze

Nationwide, home sales experienced a significant increase of 8.7% in December compared to November.

Similarly, Toronto’s housing market saw a surge in activity during January 2024, with 4,223 sales recorded through the Toronto Regional Real Estate Board’s (TRREB) MLS® System. Although the number of new listings also rose compared to the previous year, the increase was just around six percent.

Both sales and new listings saw a month-over-month increase after seasonal adjustments. However, sales outpaced listings, leading to more competitive market conditions than in December 2023.

Experts analyze these trends positively, seeing them as indications of a strengthening market. They anticipate further growth in home sales, especially with the expected policy rate cuts from the Bank of Canada by mid-2024.

Buyers can expect increased competition in 2024 with growing demand and limited listings. Consequently, this will likely increase selling prices over the next two years.

OSFI Concerns

Speaking at the Annual Financial Services Conference, an official from the Office of the Superintendent of Financial Institution’s (OFSI) highlighted housing concerns, particularly the increased risks associated with variable rate mortgages featuring fixed payments and extended amortization periods. Residential mortgage lending has been consistently identified as a primary risk in OSFI’s Annual Risk Outlook and its fall update. High household debt remains a significant factor affecting credit risk, the safety and soundness of federally regulated financial institutions, and overall financial system stability. Additionally, OSFI issued Guideline B-15 and its first formal regulatory notice on the commercial real estate market.

Key points:

  • The anticipated number of interest rate cuts for 2024 has risen in recent months. Coupled with the growing demand for housing in Canada, the forecast for home sales activity this year has been lifted. However, starting from a lower base than expected, the 2024 annual forecast remains unchanged.
  • Approximately 489,661 residential properties are predicted to change hands according to the latest CREA analysis in 2024, marking a 10.4% increase from 2023. The most significant sales boosts are anticipated in provinces with robust housing demand, notably Alberta, and those poised for a rebound from historically low sales volumes, such as British Columbia, Ontario, and Nova Scotia.
  • The national average home price is projected to rise by 2.3% annually to $694,173 in 2024. Alberta, Quebec, New Brunswick, Nova Scotia, Newfoundland and Labrador are all expected to witness price gains surpassing the national average increase. At the same time, British Columbia and Ontario are likely to see prices remain relatively stable.
  • National home sales are forecasted to surge by another 7.3% to 525,498 units in 2025, driven by further declines in interest rates approaching more normalized levels. Despite this, activity is expected to remain below its long-term trend.
  • The national average home price is expected to climb by 4% from 2024 to $722,063 in 2025, fueled by strengthening demand amidst ongoing supply constraints. Once again, Alberta and the East Coast are anticipated to experience more robust price growth than Canada’s other regions in 2025.

Potential Impact of Declining Mortgage Rates on Housing Prices: What Homebuyers Need to Know

With interest rates stabilizing, expect a surge in home sales and prices in the coming months. Canada’s top 5-year fixed mortgage rates dropped from 5.49% in October 2023 to 4.84% in January 2024. Since August, the leading 5-year variable mortgage rates have remained steady at 5.95%. While the Bank of Canada (BoC) plans to lower rates once inflation stabilizes, it has maintained its current stance. Speculators anticipate the first rate cut by June. This trend will likely drive home sales as hesitant buyers finally make their move. Analysts project a significant increase in home sales once the BoC starts cutting rates, which is expected in the latter half of 2024. This may push selling prices higher over the next couple of years.

Fewer Homes, Higher Prices – What to Expect?

Canada’s housing market saw a spike in sales last December but remains in a healthy equilibrium overall. The key indicator, the sales-to-listings ratio (SNLR), sits at 57.8%, signifying fair competition among buyers. Consider the SNLR as an indicator: above 60% favours sellers, below 40% favours buyers, and the sweet spot (like now) means balanced competition. While some provinces lean slightly towards sellers, this December surge is expected due to fewer new holiday listings. So, the market isn’t shifting drastically in either direction – it’s just the seasonal impact. Remember, this doesn’t predict future trends, so stay informed of the housing market fluctuations.

The Bottom Line

Be optimistic. December is typically slow for real estate, with people avoiding transactions during the holidays. January looks better in comparison. Mortgage rates have stabilized, and sales are picking up faster than new listings. But this trend must continue for a few months to make a real impact. The average time on the market in Toronto for homes increased from 15 days in 2021 to over 50 days. Even if new listings stop, it would still take 73 days to sell all available homes at the current rate. Change takes time. Expect home prices to stay relatively steady in the first half of 2024. Contact Pegasus, your trusted mortgage partner, for any housing or mortgage concerns. We’re here to assist you every step of the way.

Note: The projections presented are based on current data and market interpretations. Remember, the housing market is dynamic and future trends can differ. It’s crucial to stay informed about market updates and seek professional guidance for informed decision-making.