Looking Ahead…Part 2 - Issue 395

Looking back at 2023, it was a lacklustre year for Canada's real estate market, locally and nationally. The upcoming prospects for 2024 seem more positive.

Signs point towards the Bank of Canada nearing the conclusion of its current rate-hike cycle, a favourable development for those holding floating rates, especially investment property owners who prefer variable-rate mortgages.

Starting at 5.9% and gradually decreasing to 3.1% in November, the inflation rate indicates that the Bank of Canada may maintain its pause on rate hikes, though a cautious approach is still evident. Although the Bank of Canada may not achieve its 2% inflation target until well into 2025, there are signals suggesting a shift in mortgage rates for 2024. Both market analysts and economists are anticipating a reduction of 1-1.5% in the overnight lending rate. Albeit not all at once, the BoC will likely gradually decrease rates, while closely monitoring inflation and the economy.

This anticipation for both the Bank of Canada and the US Federal Reserve to cut rates in 2024 has spurred a positive response in bond markets, leading to minor reductions in the fixed rates, particularly the 5-year rates, and a decline of up to 1% in some insured rates. These changes in the market favour prospective buyers, especially first-time home buyers with less than a 20% down payment, signaling a big opportunity - time to consider entering the housing market!

While home prices in most urban centres of some provinces declined in 2023, other regions experienced consistent price increases. The expectation of an end to the current cycle of rate hikes could reignite buyer interest, potentially drawing back those who adopted a 'wait-and-see' approach in 2023 and continued this attitude into the 2024 market.

Another item of note are these recent findings & insights provided by Canada Mortgage and Housing Corporation:

The 2022 Rental Market Report, released in January 2023, provides a comprehensive overview of rental dynamics. Based on CMHC's Rental Market Survey and Condominium Apartment Survey, this annual report gives insight into tenant mobility and unit turnover rates and influencing factors such as affordability and regional demand. The report highlights increased turnover in urban centres, potentially linked to job changes or the pursuit of more affordable housing. Rental rate increases have increased in most markets by double digits and vacancy rates have hit all time lows as tenants stay locked in to lower rent units and have been sitting on the sidelines, scared to make a move.

The estimated housing supply gap, which projects a need for 3.5 million more homes by 2030, emphasizes the urgent need for strategies addressing shortages in both the rental and ownership sectors. Addressing this gap is vital to improving affordability and actually achieving the required increase in housing supply. This crisis is driven by factors such as population growth, urbanization, and changing household structures, creating a challenge for policymakers to balance housing development with affordability. We should expect this issue to stay a priority for all levels of government well into 2024 and beyond, as it’s not an issue that will be quickly resolved.

It’s estimated that about $251 billion in mortgages will come up for renewal in 2024, with another $352 billion worth renewing in 2025. As a result, many Canadians will soon face a significant increase in their monthly mortgage payment—a major expense—and will have to adjust their spending.

With that said, many lenders are going to be competing for your business. Working with professionals with access to multiple lenders is essential, as it will allow you to have access to better rates & products. Luckily, we can assist you with introductions to our partners in the mortgage arena!

In 2024, prospective homebuyers, especially first-time buyers, will experience more favourable conditions due to anticipated declining mortgage rates. These reduced rates will improve your ability to qualify for larger mortgages, which was a significant hurdle in 2023. It's important to note that as rates decrease, demand will typically increase, which in turn puts upward pressure on sale prices. Our team of Real Estate and Mortgage professionals can help you be strategic with your purchase, including mortgage rates and terms so you can access the market now with its lower prices, while still having the ability to go after lower rates in the future.

I am looking forward to another year of providing you with strategic knowledge and advice that will be both informative and useful throughout this year and, as always, I am here to help you make informed decisions in the real estate market. No matter what changes come our way in 2024, you can depend on us to be right here, along for the ride.

Enjoy the weekend. Stay safe & stay warm out there!

Paul Fitzpatrick

Appointment Calendar: https://calendly.com/homegrouprealty

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