2024 Housing Market Forecast

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.

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 costs 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

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

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:

• 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 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.

Rate drops and home price drops: can they co-exist?

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:

• As rates drop, buyers entering the market could meet plenty of sellers listing to match demand
• Despite rate drops, buyers' budget constraints may still keep them out of the market or unable to afford bidding wars (keeping a limit on local price increases), or they'll buy a smaller (cheaper) home
• If more sellers suddenly (and continually) list without a corresponding surge in buyers, prices could decline as sellers look to unload their properties

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.

More housing tidbits:

• June 2024's first interest-rate drop in 4 years didn't spur an instant wave of new buyers
• It's estimated that 83% more on-site construction workers are needed (that's nearly half a million people) over the coming decade to meet building-demand needs
• "There will be a growing gap between [prices of] detached houses and condos." — Globe & Mail, Benjamin Tal (CIBC)
• Toronto's housing inventory has increased to the most in over a decade; over 2/3 of condos sold in Canada are in Toronto, with those listings reaching 10-year highs
• The condo market has been recently characterized as "a buyers' market with no buyers"
  
• Residential building permits in Canada dropped 16.7% in May m/m after a 28% surge, though they were stlll above the historical average.
• In June, average rents across all property types fell 0.8% to $2,185 from last month
  
• Roughly 48% of Canadians are considering a move to a smaller city to get more home value for their buck (in a CIBC poll)
• About 49% of Canadians said they would consider buying a home through non-traditional means (like rent-to-own and co-ownership) in a recent Re/Max survey
• Property taxes were hiked this spring 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)
• In a win against NIMBYism (not in my backyard), Calgary recently passed a (controversial) major residential rezoning policy allowing more housing density to potentially move in next door

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 53.9% in June (from May's 52.8%)

Sales were up slightly, but the new-listings gain didn't meet it. Listing levels are still expected to rise as sellers who held back over the past few months enter the market this year as mortgage rates start to fall.

• Nationally, inventory listings measured 4.2 months worth, logging a decrease over the last couple of months
• Long-term average for inventory listings is 5 months (according to CREA)
• The highest national SNLR so far was 67.9%, reached in April 2023
• Long-term average for the SNLR is 55.1%

Why is the market balance tightening? Even though many buyers are still reluctant to enter the market, there has been enough activity to meet the increasing numbers of sellers listing, closing ranks an inch on the spread. Housing activity is expected to pick up, especially with another summer rate cut widely expected.

Market disparity? Regardless of national or even provincial sales and listing averages, Canada is a big country (area-wise), and home shoppers can find very different market conditions depending on where they buy.

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 and 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.

Are your mortgage details more complex? We have the flexibility to help customize a short-term solution. Get in touch with your expert broker here.

We'd love to help with your mortgage needs, 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.