The Canadian housing market has entered a holding pattern, with buyers showing patience as they await more favorable interest rates. According to the Canadian Real Estate Association (CREA), August 2024 saw a 2.1% decline in home sales compared to the same period in 2023. Despite this dip, there was a modest month-over-month increase of 1.3%, reflecting the market's slow but steady movement amidst high borrowing costs.
Interest Rates: A Key Factor in Buyer Hesitancy
The Bank of Canada has been reducing interest rates throughout 2024, cutting them for the third consecutive time in early September. The current key lending rate stands at 4.25%, and economists predict further reductions into 2025, potentially bringing it down to 2.5% by July next year.
The anticipated rate cuts have caused many prospective buyers to adopt a wait-and-see approach, hoping to secure lower borrowing costs in the coming months. CREA’s senior economist Shaun Cathcart pointed out that the combination of high borrowing costs and stable prices across most of Canada has kept many buyers on the sidelines, waiting for more favorable conditions.
Housing Prices Remain Steady Amid Market Uncertainty
One of the most notable aspects of the current market is the stability of home prices. The national average sale price for August was $649,100, a slight 0.1% increase from the previous year. While some might expect declining prices due to lower sales volumes, the consistent price levels suggest that the market is balanced between supply and demand.
However, regional variations are prominent. Cities like Calgary and Edmonton are seeing an influx of new listings, while areas like the Greater Toronto Area (GTA) have experienced a decline in available properties. This variation in supply has kept national prices relatively stable.
A Mix of Regional Increases and Decreases
The number of newly listed properties increased by 1.1% in August, largely driven by a boost in supply in Alberta, specifically in Calgary and Edmonton. This increase helped offset the supply shortages seen in other major cities like Toronto.
At the end of August, there were 177,450 properties listed for sale across Canadian MLS® systems, an 18.8% increase from a year earlier. However, this figure remains 10% below historical averages, indicating that while supply has grown, it hasn’t yet reached levels seen in more typical market conditions.
Buyer Activity and the Role of Showings
In regions like Hamilton, Ontario, real estate professionals have reported an increase in showings over the past few weeks, signaling potential buyer interest. Mike Heddle, a broker at Royal LePage State Realty, noted that increased showings are often a leading indicator of future sales activity, as more viewings eventually lead to offers.
This uptick in activity may suggest that buyers are testing the waters, preparing for a potential rebound in the housing market as interest rates continue to fall. For now, however, many are holding back from making offers, contributing to the overall holding pattern.
What to Expect for the Rest of 2024
Economists remain optimistic that Canada’s housing market will see growth as interest rates drop further. According to TD economist Rishi Sondhi, the "thaw" in the housing market is expected to occur in Q4 2024, with sales growth accelerating through 2025. However, the affordability backdrop remains challenging, especially in provinces like British Columbia and Ontario, where home prices and demand continue to outpace supply.
This holding pattern offers a unique opportunity for buyers who are ready to enter the market now. With less competition and stable prices, buyers have more room for negotiation and less pressure to make quick decisions. As Mike Heddle noted, it’s a “great time to buy” for those who can afford it, as there’s room to negotiate without the urgency that characterized past seller-dominant markets.
Conclusion
The Canadian housing market is currently in a state of balance, with interest rates playing a central role in buyer activity. As rates continue to fall into 2025, we can expect increased buyer engagement and, ultimately, more robust sales activity. However, for now, the market remains stable, with modest increases in sales and listings.
For buyers, this may be an ideal time to explore opportunities, especially in regions like Alberta where supply is growing, and there’s less pressure to make hasty decisions. As always, it’s crucial to work with experienced real estate professionals to navigate this complex market and find the right home at the right price.
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The content of this article is for informational purposes only and should not be considered as financial, legal, or professional advice. Coldwell Banker Horizon Realty makes no representations as to the accuracy, completeness, or suitability of the information provided. Readers are encouraged to consult with qualified professionals regarding their specific real estate, financial, and legal circumstances. The views expressed in this article may not necessarily reflect the views of Coldwell Banker Horizon Realty or its agents. Real estate market conditions and government policies may change, and readers should verify the latest updates with appropriate professionals.
