2024 Housing Market Forecast

What could keep home prices down?

Tight home affordability in Canada has backed off a bit in the last couple of months as fixed mortgage rates and home prices cooled slightly. However, home prices in Canada are still the highest of the G7 countries (led by the major city centres of Vancouver and Toronto).

Here's what may help keep price growth in check to either deter demand or increase supply:

• High Canadian home prices in general, compelling many buyers (including first-timers) to hold off
• Increasing household non-mortgage debt
• Higher qualifying stress-test rates
• Higher city property taxes hitting budgets and mortgage-approval ratios after this spring
• A wave of renewals coming in the next 1-3 years will see homeowners paying more for their mortgage (i.e. less spending room for a new house)
• For investors, if higher mortgage payments aren't passed onto renters, they may need to sell, which could increase listings
• Curbing short-term rental property ownership through restrictions and tax deterrents to release more primary housing
• Increased efforts to spur multi-housing and rental construction

Yet, a national housing crunch doesn't bode well for the future of Canadian home prices.

Since last year, we had a whopping 46% increase in Canadian newbies waving the red maple leaf. Our growing numbers, combined with fewer housing starts, will only serve to restrict the future number of homes that can be available to buy, adding pressure for home prices to go higher, not lower.

Factors that will affect the pace of homes being built:

• Higher building costs
• Higher interest rates
• Restrictive government taxes and legislation
• Fewer available labourers

Federal, provincial, and city governments are furiously trying to clear the road to increase starts or increase the incentive to increase starts. NIMBYism (not in my backyard) is another major obstacle to slap up multi-dwelling housing in existing neighbourhoods.

Many forces in Canada seem to be at odds, interfering with the pace of the Canadian housing inventory needed to keep up with current and future needs. We're not talking here about housing for low-income needs, which is also very urgent and essential—we're talking about enough housing to meet the general demands of an existing and growing population.

Canada is already down over 5 million homes needed by 2030 (on top of annual construction). The lack of inventory won't help stabilize home prices unless reasonably addressed in the coming years.

Home price drops and interest rate drops: can they co-exist?

One can hope (though it's likely destined to be an unrequited love). Home affordability is at an all-time low in Canada, with high home prices (still down only about 14% from the 45% peak of March 2022), higher interest rates, and higher prices all around.

Many buyers want prices to go down, but sellers want them to stay higher (for obvious equity reasons). Yet, buyers entering the market could meet more sellers listing the moment rates drop — who need to downsize for better affordability or to offload previous short-term rental or investment properties that are no longer financially feasible.

Or buyers may hold off while sellers list, easing demand-based pressures to keep prices on a slow decline.

More housing tidbits:

• In Q4 2023, Canada started construction on only one new single-family home for every 25 people added to the population.
• But in January 2024 in Calgary, housing starts hit record highs
• Are home prices under $500K vanishing across Ontario?
• Q1 2024 has already seen solid price appreciation and increased sales activity, well before anticipated interest rate drops
• According to a recent CIBC poll, 56% of non-homeowners said they still hope to own a home one day
• In the same CIBC poll, 48% of Canadians are considering a move to a smaller city to get more home value for their buck
• BC drops fees to search its ownership registry, which aims at outing hidden property ownership
• In a recent Re/Max survey, 49% of Canadians said they would consider buying a home through non-traditional means (like rent-to-own and co-ownership)
• 'No more GST' to build rental buildings has already spurred construction activity, which may (eventually) help alleviate housing pressure demand
• Mortgage arrears jumped by 11% nationwide over the past year
• Property taxes are being hiked in many Canadian city centres at more than double the inflation rate
• Canada needs to build 5M extra units by 2030 on top of annual construction (Benjamin Tal, CIBC deputy-chief economist, Feb. 6, 2024)

How much home can you afford?

Use our great calculator below for an idea, then give us a shout for your numbers.

Are we in a housing bubble?

Despite higher rates, national average home prices in Canada are among the highest in the G7 countries. There's been talk of housing bubbles here for years. Yet, nothing has burst (yet), and homeowners take tremendous pride in owning a home, riding local price waves up or down.

To help you time your home-buying or selling decisions, here's a snapshot of our nation's current housing market trends and a look ahead to what experts say is coming to a market near you.

Buyer's or seller's market?

BALANCED – National SNLR (sales to new listing ratio) tightened to 57.4% in March (from February's 55.6%)

Sales were up, but new listings were down. Listing levels are expected to rise from sellers who held back over the past few months entering the market this year.

• Markets in some regions are edging closer to seller's territory.
• The highest national SNLR so far was 67.9%, reached in April 2023.
• The long-term average for this national measure (according to CREA) is 55.1%

Why is the market balance tightening? Enough buyers entered the market nationally, but enough sellers didn't list to meet demand. Housing activity is expected to pick up, though how the market will unfold in the coming months will likely hingle on interest rate events.

Here are some interesting notes on home-price setting this year. According to this Financial Post article, more homes in the GTA (Greater Toronto Area) and Vancouver sold below the asking price within the first quarter, suggesting that sellers aren't finding the price points they had hoped (or their realtors hoped) — and that tight affordability could help keep prices stable.

• 60% of all homes in the GTA sold below asking price
• 72% of homes in Vancouver sold below asking price

What is a buyer's market?

According to CREA (Canadian Real Estate Association), a strong buyer's market is when the sales-to-new-listings ratio (SNLR) is 40% or below.

At that ratio percentage, there are typically more properties for sale than buyers, offering more choice and bargaining power — especially in placing purchase offers with conditions that protect a buyer's rights and finances.

What is a balanced housing market?

When the SNLR falls between 40% and 60%, market conditions are considered 'balanced' in buyer demand, available listings, and sales levels that keep prices relatively stable, thus allowing reasonable purchase and sale terms.

The middle ground of housing competition — balanced markets can lean more towards the buyer's or seller's spectrum. And despite any prevailing national or local trends, a particular house, street or area can defy it (you know who you are).

What is a seller's market?

An SNLR of 60% or higher is a market that strongly favours the seller.

A seller's market means there are more buyers than sellers, and the properties sell quickly and at higher prices, giving the seller more power to set their price and terms of sale.

When the demand for housing exceeds supply, buyers often resort to a gamut of strategies to snap up a house before others, such as engaging in bidding wars or feeling pressured to place no-condition offers.

Need a mortgage with that house? That's where we come in.

Our friendly, highly trained brokers can get your best rate, better mortgage options, and offer strategies for first-time buyers and home affordability to help make the difference in owning or keeping a home in Canada.

Make sure to ask about features such as portability, free payment frequency changes and mortgage recasting, as well as products like Purchase + Improvements when looking to buy your next home.

We're here to help, anywhere you are in Canada. Apply with us today online, over the phone, or drop by a store location near you. Plus, our marvelous mortgage chatbot, Morgan, can help connect you.