Mid-Year Market Update for 2024: What Buyers and Sellers Need to Know

01 Jun 2024 by Nadia Clark

Once again, the number one story in real estate this summer is mortgage rates. But unlike last year, when a surprise series of rate hikes from the Bank of Canada sent skittish buyers back to the sidelines, all signs now point to the opposite scenario. Instead of market-chilling rate hikes, economists now expect market-quickening rate cuts – as early as this month.¹

That means the housing market is likely to get interesting over the next few months.

If fixed mortgage rates continue to drop in anticipation of a lower policy rate, more buyers are expected to show up “looking for a deal” before home prices take off.²
Listings will increase, as sellers feel increasingly optimistic that their home values will rise over the next year, per a new Canada Mortgage and Housing Corporation (CMHC) study. We could see more sellers-in-waiting regain the confidence to list their homes at strong, but realistic prices.^3,4
With pent-up demand continuing to build, housing market activity could pick up significantly. As TD Bank Economist Rishi Sondhi noted with The Canadian Press, Canada’s housing market is “akin to a bit of a coiled spring.” Often when there’s a market-moving event like a rate cut, home sales and prices jump quickly.⁵

What does that mean for you? Read on for a sneak peek into what analysts predict is around the corner for 2024.

1. MORTGAGE BORROWERS SHOULD FINALLY GET SOME RATE RELIEF

After more than a year of shifting forecasts and delays, the Bank of Canada’s first rate cut since 2020 is nearly here. The central bank is gearing up for two back-to-back meetings this summer to discuss monetary policy, plus three more meetings before year-end. Most experts think we’ll see our first rate cut as early as June 5 or in late July.⁶

With inflation still elevated in the US, and the CDN job market showing surprising gains, the total number of rate cuts we’ll see in 2024 is anyone’s guess.⁶ Market watchers are eyeing economic data from both sides of the border, with some second-guessing whether rates will fall as much as hoped.^6,7 Previously, many economists thought federal rates would fall by at least a point this year.⁸
High US inflation is putting pressure on bond yields, which influence fixed mortgage rates.⁷ If the U.S. economy stays hotter than expected, the Bank of Canada may be forced to delay rate cuts, which could further impact mortgage rates.⁹
As Bank of Canada Governor Tiff Macklem cautioned, Canada’s central bank is willing to cut rates before the U.S. Federal Reserve. But there’s “a limit” to how much faster they can go. If Canada goes too soon ahead of the US, that could weaken the Canadian dollar and further boost inflation.⁹

What does it mean for you? Any rate drop in the Bank of Canada’s policy rate is likely to fuel enthusiasm and spark competition.

Since lenders are already pricing in the first expected cut, further fixed rate drops might take time.

Buyers should consult mortgage brokers to secure competitive rates as lenders seek new business.

It’s been a tough year for mortgage originations, so lenders are hungry for new business and may be more willing to cut you a deal.

2. PENT-UP DEMAND COULD SOON BURST INTO VIEW

A rate cut could change the market’s second half of 2024. The Canadian Real Estate Association (CREA) noted quiet markets this year, due to high rates and uncertainty.10

Market activity is expected to rise with lower rates.2,7
BMO research shows aspiring homebuyers are more financially ready, with 72% of buyers waiting for lower rates.11
New federal measures may boost demand from first-time buyers, allowing larger RRSP withdrawals and longer mortgage terms for new constructions.12
Affordability issues may still dampen sales if buyers and sellers clash over prices.13

What does it mean for you? Get ready to move quickly! Increased competition almost always means faster home sales and a need for quick decision-making.

If you’re a buyer, make sure all your financial documents and mortgage pre-approvals are in hand, and your cash is liquid for a certified deposit.
If you’re a seller, consider listing early before pent-up supply leads to a surge in inventory. Budget-conscious homebuyers aren’t the only ones who have been sitting on the sidelines for the past two years. Reach out to me for your area’s current sale inventory – this can make a HUGE difference to your potential sale.

3. PROPERTY VALUES WILL CONTINUE TO INCREASE

The good news for homebuyers: Today’s home prices are down significantly from where they were toward the tail end of the pandemic. The bad news: That’s probably not going to last. Experts say that home prices have almost certainly bottomed out.^{14, 15}

In fact, the CMHC thinks home values could return to peak levels as early as next year, before hitting an all-time record high in 2026. As the CMHC notes, home prices and sales declined significantly after rates began to jump in 2022. In the years since, Canada’s population boomed at a record pace, while many people had their incomes and savings increase. As a result, there’s now a bigger pool of potential homebuyers.¹⁶
That doesn’t mean, though, that home sales will be so strong that sellers can expect the same level of price gains they saw before. TD Bank notes that rate cuts will help boost prices for now, but “affordability pressures will likely keep the gains from being too strong.”¹⁵
CMHC projects that lower-priced homes will enjoy the fiercest competition. However, overall sales activity will be much more modest than in 2020 and 2021, when rock-bottom rates made mortgage payments more affordable.¹⁶

What does it mean for you? Even with rate cuts, expect affordability issues to limit overall price growth.

Sellers will need to be realistic with their asking price and negotiation tactics, especially if they’re looking to close quickly.
Buyers should not wait, if they can afford to make a deal now. Increased competition could lead to a bigger-than-expected price surge.

4. EVEN WITH MORE HOMES FOR SALE, INVENTORY WILL BE TIGHT

According to a winter survey by Dye and Durham Ltd., more than a quarter of Canadians have been holding out for a rate cut before buying or selling a home. So we could see a lot more homes go up for sale this year once rates decline.¹⁷ Already, inventory is picking up as more sellers come to market, giving new buyers more choices when comparing homes. The spring market, in particular, saw a notable jump in listings.^3,15

Even if more homes come to market this summer and fall, the total number of Canadians who want to buy a home will still surpass the number of homes available. So both the resale market and new home market are likely to remain squeezed for some time.¹⁸
TD Economics estimates that Canada will be short of more than 300,000 homes between 2023 and 2025. Adding to the problem: Housing construction continues to lag population growth and, despite some recent improvements, it is still far from catching up.¹⁸
Persistently high rates are also discouraging builders from starting new projects, so the inventory of available homes is likely to get tighter. The CMHC expects housing starts to decline in 2024 and drop even more significantly in 2025.¹⁶

What does it mean for you? Inventory will increase and many prospective homebuyers will still be priced out of the market.

Competition for lower priced, more affordable homes will be especially steep.
Buyers who can afford it may be able to retain some bargaining power, especially for premium homes.
However, total inventory is expected to remain tight, so sellers are still more likely to have the upper hand.

I’M HERE TO GUIDE YOU

With rate cuts impacting the market, local expertise is crucial. As a local market expert, I can help you navigate your neighbourhood’s housing market with ease and understand what’s driving home values and sales. If you’re considering buying or selling a home, contact me anytime to discuss how to build a successful plan.

The postings on this site are my own and do not necessarily represent the positions, strategies or opinions of Bosley Real Estate Ltd., Brokerage. The above references an opinion and is for informational purposes only. It is not intended to be financial, legal, insurance, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

Sources:

Nadia Clark

I am a proud Torontonian who has lived in many of the city’s diverse neighbourhoods, as well as other beautiful cities across Canada. My love for travel and adventure has taken me around the world and on countless road trips, enriching my appreciation for different cultures and communities.

Before diving into real estate, I worked extensively in marketing, product development and sales for multi-national companies. With 20+ years of experience, I’ve honed a keen eye for detail, design, and efficiency.

My purpose is to empower my clients to make confident decisions and to achieve their real estate dreams. I am passionate about simplifying complex processes and delivering exceptional service with integrity and expertise.

Success for me is about building lasting relationships based on trust and respect, as well as closing deals as smoothly as possible. I strive to be a reliable advisor and advocate, prioritizing my clients' best interests. I seek innovative ways to enhance my services, always aiming to provide a seamless and enjoyable experience. Driven by a desire to create value, I am dedicated to helping my clients find the perfect home, to achieve successful sales, and to realize their goals.

My Designations: SRS® ABR® SRES® MCNE®

SRS® A Seller Representative Specialist® is exceptionally skilled to represent Sellers, providing expert guidance, strategic marketing, and a commitment to maximizing property value.

ABR® An Accredited Buyer's Agent® offers robust real estate knowledge, best-in-class service, and a commitment to protecting Buyers throughout the home purchasing process.

SRES® A Seniors Real Estate Specialist® is uniquely qualified to help Seniors take the next step, if looking to retire, downsize, or join an active adult lifestyle community.

MCNE® A Master Certified Negotiation Expert® has advanced negotiation skills designed to achieve better results, whether buying or selling.