Mid-Year Market Update for 2024: What Buyers and Sellers Need to Know
Once again, the number one story in real estate this summer is mortgage rates. But unlike last year, when a surprise series of rate hikes from the Bank of Canada sent skittish buyers back to the sidelines, all signs now point to the opposite scenario. Instead of market-chilling rate hikes, economists now expect market-quickening rate cuts—possibly starting as soon as this month.1
That means the housing market is likely to get interesting over the next few months. If fixed mortgage rates continue to drop in anticipation of a lower policy rate, more buyers are expected to show up looking for a deal before home prices take off in 2025 and 2026.2
Listings are also on the upswing and homeowners are feeling increasingly optimistic that their home values will rise over the next year, per a new Canada Mortgage and Housing Corporation (CMHC) study. So we could see more sellers-in-waiting regain the confidence to list their homes at strong but realistic prices.3,4
With pent-up demand continuing to build, housing market activity could pick up significantly. As TD Bank Economist Rishi Sondhi noted in an interview with The Canadian Press, Canada's housing market is “akin to a bit of a coiled spring.” Often when there's a market-moving event like a rate cut, home sales and prices jump quickly.5
What does that mean for you? Read on for our take on this year's most important real estate news and get a sneak peek into what analysts predict is around the corner for 2024.
MORTGAGE BORROWERS SHOULD FINALLY GET SOME RATE RELIEF
After more than a year of shifting forecasts and delays, it's finally happening: the Bank of Canada's first rate cut since 2020 is nearly here. The central bank is gearing up for two back-to-back meetings this summer to discuss monetary policy, plus three more meetings before year-end. Most experts think we'll see our first rate cut as early as June 5 or in late July.6
But with inflation still elevated in the U.S. and the job market showing surprising gains here at home, the total number of rate cuts we'll see in 2024 is anyone's guess.6 Market watchers are nervously eyeing warmer-than-expected economic data from both sides of the border, with some now second-guessing whether rates will fall as much as hoped.6,7 Previously, many economists thought federal rates would fall by at least a point this year.8
Sticky inflation down south is already putting pressure on bond yields, which help determine the fixed rates lenders charge.7 If the U.S. economy stays hotter than expected, the Bank of Canada may be forced to delay additional rate cuts, which could further impact mortgage rates. 9
As Bank of Canada Governor Tiff Macklem cautioned, Canada's central bank is ready and willing to cut rates before the U.S. Federal Reserve. But there's “a limit” to how much faster they can go. If too much daylight exists between the countries’ key interest rates, that could weaken the Canadian dollar and further boost inflation.9
What does it mean for you? If Canadian homebuyers' past behaviour is any indication, any drop in the Bank of Canada’s policy rate—even a delayed one—is likely to fuel enthusiasm and spark competition. But with lenders already pricing in the first rate cut expected this summer, it could be a while before fixed mortgage rates drop further. If you're a buyer, ask us to refer you to a mortgage broker so you can lock in a competitive rate. It's been a tough year for mortgage originations, so lenders are hungry for new business and may be more willing to cut you a deal.