Here's a look at what's going on with Canadian housing markets.
Will interest rate drops raise home prices? What places in Canada can offer better affordability? It is a buyer's market? Read on for some answers.
Despite sizzling summertime temps and two central bank rate drops, national Canadian housing markets retreated in July (from June's slight warmup of +3.7% home sales) after a somewhat sluggish first half of 2024.
The much-anticipated first rate cut on June 5 hasn't yet persuaded most potential buyers to immediately jump off the sidelines. And the second policy rate cut came too late in July (on the 24th) to show any real market impact in that month.
$724,800 in July 2024 (June was $730,600 for a decrease of 0.8% m/m)
This stat logged a decline of about 3.7% year-over-year and was lower by about 15.3% from peak prices of March 2022.
(as per MLS® HPI Aggregate Composite Benchmark, not seasonally adjusted)
Many home buyers would likely agree that two prime rate drops (for a 0.50% decline) weren't nearly enough to have them stampeding to open houses.
As a result of less-than-stellar market activity so far this year, CREA (Canadian Real Estate Association) recently downgraded its 2024 housing market prediction to:
Buyer confidence is slowly rising with the talk of more rate cuts in the air, though consumer sentiment indicates many are pulling back on spending, especially for big-ticket items. A deteriorating labour market may also factor in, adding to worries of strained household budgets.
There's still anticipation that markets will show recovery in the next half of the year.
Housing experts can differ widely on what's happening with markets and where things could go. No doubt, it's partly due to Canada's size, with regional differences often skewing the big 'housing landscape' picture (for example, Vancouver and Toronto's out-sized, outlandish prices and demand).
In contrast to CREA and Royal LePage's above housing forecasts, Toronto-based Oxford Economics Canada recently predicted house prices would take a hit in the second half of 2024 as a result of the growing financial strain on households:
Canadians are caught in a cat-and-mouse game of whether interest rates will fall enough to improve affordability or if budget challenges across the table will keep a lid on demand to keep prices stable.
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:
Over last year, we saw a whopping 46% increase in Canadian newbies waving the red maple leaf. Our growing numbers, combined with not enough housing starts to keep pace, will 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:
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 in the way of slapping up multi-dwelling housing in existing neighbourhoods to ease the strain.
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.
One can hope (though it's likely destined to be an unrequited love).
How home prices are viewed depends on the perspective: Many buyers want prices to go down, but sellers want them to stay higher (for obvious equity reasons).
Yet 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 elevated prices all around.
Here's what can help rate and price drops co-exist:
Sellers have to consider renewal mortgage rates and their home's potential sale price when making their move to list. Offloading short-term rental or investment properties that are no longer financially feasible may bring homes onto the market faster.
As rates drop, buyers and sellers cancelling each other out would be the best scenario to keep prices from skyrocketing as demand increases.
Both Kitchener-Waterloo and Calgary housing markets top the list for the most newcomers received in 2023.
Yet, Kitchener's July 2024 house prices have decreased since July 2023, and Calgary's have increased:
Newcomers are driving higher demand in Kitchener, but price declines are caulked up to higher interest rates, keeping many first-time and repeat buyers on the sidelines.
*Based on MLS®HPI benchmark prices, not seasonally adjusted
Use our great calculator below for an idea, then give us a shout for your numbers.
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.
July 2024 — The three Canadian centres with the highest average MLS® home prices are:
Based on the MLS®HPI composite benchmark (not seasonally adjusted)
July 2024 — The six Canadian centres with the lowest average MLS® home price.
We're not saying you should (or could) move there, but you can dream about how much home you'd get for the prices.
Based on the MLS®HPI composite benchmark (not seasonally adjusted)
BALANCED – National SNLR (sales to new listing ratio) eased back to 52.7% in July (from June's 53.9%)
Sales were down a bit in July, and new listings (nationally) got a boost from added supply in Calgary, Alberta.
Why is the market balance easing? Even though many buyers are still reluctant to enter the market, there is still more inventory coming on board. Housing sales activity is expected to pick up this fall, assuming more 'promised rate' cuts materialize.
Market disparity? Always. Regardless of national or even provincial sales and listing averages, Canada is a big country (area-wise), and home shoppers and sellers can find very different market conditions depending on where they're buying or selling.
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.
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).
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.
