Housing market 2024: What to expect with rate cuts in the forecast

Housing market 2024: What to expect with rate cuts in the forecast

Canada’s housing market has been very turbulent over the last five years. From skyrocketing housing prices and bidding wars during the COVID-19 pandemic to price corrections and high Bank of Canada lending rates, the market has seen it’s fair share of extreme ups and downs.

While the prices of homes have finally reached pre-pandemic levels in most major cities across the country, high Bank of Canada lending rates over the last two years have forced many potential homebuyers out of the market. In a survey by IPSOS Reid last December, 73 per cent of the homebuyers interviewed stated the high lending rates were the main reason they couldn’t buy a house. So what will the 2024 housing market in Canada look like for anxious homebuyers?

According to experts in the real estate and financial industry, there is a glimmer of hope on the horizon. While the lending interest rates have held at 5 per cent in the first three months of this year, the Bank of Canada is hinting that these rates will start to drop sometime in 2024. Some financial experts are even predicting that the decrease could start happening in the next few months.

What can hopeful homebuyers expect for the Canadian real estate market forecast in 2024? There are many factors that continue to influence the nation’s housing market.

Increased Number of Buyers

Once the lending rates start to go down, there will be more people looking for a home. Housing prices aren’t expected to rise by more than 5 per cent in most cities, but, with a higher number of potential buyers coming into an industry that is seeing unprecedented housing shortages, this year could quickly turn into a seller’s market.

While affordable houses under the $500,000 price range could see increased offers and possibly multiple offers, other markets like the high end homes, will likely remain out of reach for many home buyers because of high inflation costs.

Interest Rates and Inflation

Despite the predictions that lending rates will start to drop, the high rates and inflation will continue to affect the housing market in Canada. No one knows when or by how much the interest rates will decrease, but it will continue to be a factor as homebuyers start re-entering the market.

If the prices start dropping before summer, the real estate industry could have a busy season. However, if the rates remain the same during the first half of this year, there will be less people looking to buy a home.

Inflation continues to affect home buyers and sellers. High taxes and cost of living continues to affect Canadian’s decisions about buying and selling homes.

Number of Homes on the Market

Today, there are more older adults staying in their homes. As long as the lending and inflation rates remain high and rental property shortages continue to plague Canada’s housing market, fewer empty nesters are looking at selling their homes.

Expiring Fixed Mortgage Rates

Over the next year, the five-year fixed mortgage rates that homeowners signed before the pandemic will be expiring. Many homebuyers will be facing a mortgage renewal with a much higher interest rate. While this isn’t expected to create a sudden increase in the number of homes on the market, the rates could force some current homeowners to sell. Others will have to readjust their budgets.

Housing Shortages

Another driving factor in the Canada housing market is the continued low supply vs high demand for both real estate and rental properties. There is an unprecedented housing shortage in almost every major city in Canada in both rental and real estate housing. While efforts are being made to address this issue, it’s not going to be fixed in one year. This shortage will continue to drive the market as people look to buy as an alternative affordable option versus renting.

The housing market predictions for 2024 Canada are hopeful and optimistic. If the lending rates drop, there will be a modest increase in number of buyers and housing prices but the market will likely not have significant price hikes or over-the-top bidding wars as seen in previous years.

Published Feb. 29, 2024

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