The Canadian Real Estate Association (CREA) has once again revised its housing market forecast for 2024, citing a slower-than-expected response to recent interest rate cuts. While the Bank of Canada has introduced three rate cuts so far this year, the anticipated gradual recovery in the housing market has yet to materialize as strongly as predicted earlier in the year.
CREA’s Revised Forecast for 2024
In its latest outlook, CREA projects that a total of 468,900 properties will be sold across Canada in 2024, marking a 5.2% increase from the previous year. However, this is a notable downgrade from its July forecast of a 6.1% increase and a significant shift from April’s more optimistic prediction of a 10.5% rise in home sales.
The national average price of homes sold in September 2023 amounted to $669,630, representing a modest 2.1% increase year-over-year. CREA now expects prices to grow only 0.9% in 2024, with an average price of $683,200. This revised figure is also lower than the 2.5% price increase CREA had forecasted in its previous outlook.
Factors Impacting the Housing Market
One of the key reasons behind the sluggish recovery is the cautious approach taken by homebuyers. Despite the recent rate cuts, buyers are hesitant to jump into the market. Toronto-based real estate agent Davelle Morrison pointed out that, while buyers are returning, they are taking their time, particularly in the condo market. “It’s certainly taking a little bit longer than one would like,” she said, reflecting a broader trend across many Canadian markets.
Additionally, while there were 185,427 properties listed for sale across the country at the end of September (up 16.8% year-over-year), the numbers remain below the historical average of around 200,000 listings for this time of year. This low inventory, coupled with buyer hesitancy, has led CREA to forecast a "holding pattern" in the market until spring 2024.
Interest Rates and Buyer Behavior
The Bank of Canada’s rate cuts, which began in June, have reduced the key interest rate to 4.25%. However, CREA’s senior economist Shaun Cathcart notes that these cuts have not significantly boosted sales activity yet. He predicts that the housing market will experience a sharper rebound in the spring of 2024, particularly as more aggressive rate cuts are expected in the near future.
Despite the modest gains seen in sales volumes following the rate cuts, CREA warns that some buyers may continue to delay their purchases in anticipation of further reductions in mortgage rates. This cautious approach could push the rebound in housing activity further into 2025.
Looking Ahead to 2025
CREA’s long-term forecast remains more optimistic, projecting that home sales will increase by 6.6% in 2025, with average home prices climbing 4.4% to $713,375. Experts believe that as interest rates continue to drop and demand picks up, the housing market will recover, though not as rapidly as in previous years.
However, buyers may approach this recovery with more caution. As Morrison highlights, many have learned from past market volatility and may not return to the days of “throwing money at the housing market” without careful consideration of potential future economic challenges.
Conclusion
In conclusion, while the Bank of Canada's interest rate cuts have not yet sparked the housing recovery that was previously anticipated, CREA remains optimistic about a rebound in 2025. The market is currently in a holding pattern, with both buyers and sellers waiting for clearer economic signals before making significant moves. Buyers are likely to be more measured in their approach in the coming years, taking the lessons of recent market fluctuations into account.
As the Canadian real estate market continues to evolve, Coldwell Banker Horizon Realty will be closely monitoring these trends and keeping clients informed about how these changes could impact their buying or selling strategies.
Source: CREA
