Home Sales and Prices Edging Up as Housing Market ‘Could Get Interesting

Home Sales and Prices Edging Up as Housing Market 'Could Get Interesting,' Reports Say

As we navigate through 2024, the Canadian housing market exhibits subtle but significant shifts that may define its trajectory for years to come. A pair of new reports released this Friday by Royal LePage and the Canadian Real Estate Association (CREA) indicates a cautious uptick in home prices and sales. Economists hint that the market might soon enter an “interesting” phase, spurred by various economic factors and policy adjustments.

Recent Data on Home Prices and Sales

The latest quarterly Home Price Update and Market Forecast by Royal LePage paints a promising picture for the future of the Canadian housing market. It projects an aggregate increase of nine percent in home prices nationwide by the fourth quarter of 2024 compared to the previous year. This optimistic forecast is supported by a gradual recovery in market activities as evidenced by recent sales data.

On the other hand, the Canadian Real Estate Association (CREA) reports a modest 0.5 percent rise in home sales between February and March 2024, which still lags about ten percent behind the decade’s average. However, a notable surge in new listings and sales activity was observed in early April, following a “bounce in new supply” that started in the second week of March.

Economic Predictions and Market Responses

According to Shaun Cathcart, CREA’s senior economist, the market’s response to the influx of new properties could be pivotal. “We’ll have to wait for the April data to really understand how buyers are responding, but if last spring is any indication and considering the record population growth and a central bank more likely to cut rates this summer, things could certainly get interesting,” he explained.

This sentiment is echoed in the community of buyers and sellers who are speculating on whether high interest rates will sideline potential buyers or if the anticipated rate cuts will lure them back into the market. The consensus among experts leans towards a mixed reaction, influenced by both apprehensions of high rates and the allure of potential rate reductions.

Regional Market Trends

The forecasts indicate that not all regions are created equal when it comes to potential price hikes. Toronto is expected to witness a 10 percent increase in home prices year-over-year, outpacing the 8.5 percent rise anticipated in Montreal and overshadowing the gains in Calgary, which was previously tipped as the frontrunner for 2024.

Despite these disparities, Toronto’s market dynamics suggest it could soon surpass Vancouver in terms of price increases, a significant shift given Vancouver’s long-standing status as Canada’s most expensive market. Meanwhile, Calgary remains robust, with properties continuing to clear quickly and prices climbing by 11 percent year-over-year, notes Robert Kavcic, a senior economist at BMO.

Focus on Toronto

Toronto’s housing market specifically stands out with its strong performance and anticipated growth. The regional factors contributing to this surge include record population growth, a stable job market, and an increasingly favorable lending environment expected from pending rate cuts. These elements collectively create a fertile ground for real estate investment and residential market growth in the Greater Toronto Area.

Central Bank’s Role and Future Actions

The Bank of Canada’s recent decision to hold its key interest rate steady at five percent marks the sixth consecutive hold since July. However, Governor Tiff Macklem left the door open for a potential rate cut in June, stating it’s “within the realm of possibilities.” This has led to heightened market speculation and a noticeable shift in buyer behavior, with more opting for variable-rate mortgages in anticipation of improved affordability.

Kavcic highlights that “fewer and fewer want to lock in with rate cuts presumably looming, and/or they’re discounting improved affordability ahead.” This sentiment is increasingly prevalent among potential home buyers, reflecting a cautious optimism that the central bank might indeed lower rates in the near future.

As we look ahead, the Canadian housing market stands at a crossroads, influenced by macroeconomic indicators, regional market dynamics, and central bank policies. The next few months will be crucial in determining whether these emerging trends will solidify into long-term growth or adjust under the weight of economic realities. With expert analysis suggesting a turn towards a more dynamic and possibly buoyant market, stakeholders remain watchful, ready to adapt to the new landscape that the Canadian housing market is shaping into.

Source: https://www.cbc.ca/news/business/housing-reports-crea-lepage-1.7171675