With the Bank of Canada’s recent 0.25% rate drop, many are wondering if the housing market is set to rebound. Will house prices stop falling? Could May 2024 mark the end of this trend?
Despite these questions, the benchmark price in May 2024 was just over $714,000, down 0.2% from the previous month and 2.4% from April 2023. Many suggest that this might be the lowest point as we move forward into a lower rate environment.
Some believe the market will crash regardless of opinions or data. For those genuinely interested, let's dig into the data since the rate cut.
As of May 2024, there were slight decreases across the board. In the spring market, where prices usually rise, the Bank of Canada's interest rate cut to 4.75% had little impact on what most people could qualify for, due to the stress test.
However, the psychological impact was significant. By mid-June 2024, there was a slight uptick in activity, prompting the Canadian Real Estate Association (CREA) to predict a market turnaround. BMO also forecasts a rise in house prices, though modest, driven by lower interest rates and increased affordability.
Economists agree that a meaningful impact on the housing market will occur when the overnight rate hits around 4%. This is expected to happen by early 2025. Until then, the consensus is that May marked the lowest point, with increased activity and slight price increases anticipated in the summer months.
The Toronto condo market remains sluggish, with many condos incomplete and unsold. Listings are up, slowing this segment of the market. However, the detached market is holding steady with slight increases in activity and prices.
In contrast, Alberta, particularly Edmonton, is experiencing a surge in activity. Multiple offers are now common, with listings quickly absorbed by demand. This market is buoyed by migration and high demand.
Active residential listings in Ontario rose by 63.9% year over year, contributing to the market slowdown. Listings across Canada are up over 28%. Housing starts increased in May 2024, though there are concerns about the CMHC’s Multifamily Select program's effectiveness in larger markets.
From a mortgage company perspective, there has been a noticeable increase in transactions since the rate cut, though not as dramatic as some suggest. The market is moving, but it's not back to the boom times of 2021. Buyers currently have negotiation power and can choose their properties, while correctly priced properties are selling.
Consumer confidence and psychology play crucial roles in the market. If fixed rates drop below 5%, or even 4%, more people will likely enter the market. However, supply is growing, with many sellers listing their properties now, potentially limiting price increases.
The Canadian housing market is at a crossroads. With ample inventory and slowly increasing activity, buyers have opportunities but must decide whether to buy now or wait for potentially lower rates and increased competition. What would you do in this market?
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