Here's a look at what's going on with Canadian housing markets.
Will interest rate cuts raise home prices? What places in Canada can offer better affordability? It is a buyer's market? Read on for some answers.
The leaves are done falling, but interest rates aren't. The Bank of Canada's second double rate cut in December brings a total 1.75% drop in bank prime rates since June 2024.
And so, national Canadian housing activity finally threw on a scarf and braved the open houses in cooler October, as more buyers took advantage of the increased listings posted in September.
The cooler market appealed to those looking to get ahead of a next-spring rush.
$707,700 in October 2024 (a decrease of 0.1% m/m from September's $713,200)
This stat logged a decline of about 2.4% year-over-year and was lower by 17.3% from the $855,800 peak MLS®HPI recorded in March 2022.
(as per MLS® HPI Aggregate Composite Benchmark, not seasonally adjusted)
As more sellers listed in early Fall — perhaps to get out of restrictive mortgage rates — buyers found their deals this October (hopefully without bidding wars), as the sales activity bump reached a level not seen since April 2022.
With interest rate cuts projected to continue into 2025, lower variable rates may help more buyers qualify through the required mortgage stress test, and new mortgage rules may also come into play for a busy Spring 2025 buying season.
A recent Zoocasa survey shows that just over 15% of respondents were waiting for one more rate cut before entering the market, while about 31% indicate they're waiting for significant cuts.
As a result of less-than-stellar market activity so far this year, CREA (Canadian Real Estate Association) recently downgraded its 2025 housing market prediction, now expecting a 6.6% increase in home sales and a 4.4% increase in national average home prices next year.
The federal government brought in two major insured mortgage rule changes for home buyers coming into effect towards the end of 2024:
For the first two rules affecting home buyers, True North Mortgage reported increased inquiries almost immediately. Whether or not these new rules will entice more buyers off the sidelines — many potential first-time buyers have felt locked out of housing markets due to high home prices and high mortgage rates — remains to be seen.
Some experts worry that the new rules might spark enough activity to pressure the existing supply to raise local home prices.
Dan Eisner, True North founder and CEO, thinks the new rules will likely increase transactions over the next few months, but not enough to over-stimulate the markets on a longer-term basis.
"First-timers finally get some help to bid on a home closer to where they might work. Home buying will likely be more attainable, with mortgage payments that are more affordable."
Despite the improved access to insured mortgages, Canadians are still caught in a cat-and-mouse game of whether interest rates will fall enough to improve affordability or if budget challenges across the table will keep a lid on demand to keep prices stable.
Are housing forecasts for real, or are they just 'Pin the Tail on the House Donkey' in predicting where home prices might go?
Housing experts can differ widely on what's happening with our housing markets. No doubt, that's partly due to Canada's size, with regional differences often skewing the big 'housing landscape' picture (for example, Vancouver and Toronto's outsized and outlandish prices and housing demand).
CREA's and Royal LePage's housing forecasts for 2024 predicted increases in average home prices and sales by year-end:
But in contrast, Toronto-based Oxford Economics Canada predicts house prices would take a hit in the second half of 2024 as a result of the growing financial strain on households:
When the sparklers come out and the 2024 data is in, we can review these forecasts to see who pinned the numbers closer.
Tight home affordability in Canada has backed off a bit in the last couple of months as fixed mortgage rates and home prices cooled slightly. However, home prices in Canada are still the highest of the G7 countries (led by the major city centres of Vancouver and Toronto).
Here's what may help keep price growth in check to either deter demand or increase supply:
In 2023, we saw a whopping 46% increase in Canadian newbies waving the red maple leaf. Our rapid population growth, combined with not enough housing starts to keep pace, will restrict the future number of homes that can be available to buy, adding pressure for home prices to go higher, not lower.
Factors that will affect the pace of homes being built:
Federal, provincial, and city governments are furiously trying to clear the road to increase starts or increase the incentive to increase starts.
NIMBYism (not in my backyard) is another major obstacle in the way of slapping up multi-dwelling housing in existing neighbourhoods to ease the strain. (Calgary and Edmonton seem to have less trouble getting shovels in the dirt — both these cities have led national starts for months now.)
Many forces in Canada seem to be at odds, interfering with the pace of the Canadian housing inventory needed to keep up with current and future needs. We're not talking here about housing for low-income needs, which is also very urgent and essential — we're talking about enough housing to meet the general demands of an existing and growing population.
Canada is already down over 5 million homes needed by 2030 (on top of annual construction). The lack of inventory won't help stabilize home prices unless reasonably addressed in the coming years.
One can hope (though it's likely destined to be an unrequited love).
How home prices are viewed depends on the perspective: Many buyers want prices to go down, but sellers want them to stay higher (for obvious equity reasons).
Yet home affordability is at an all-time low in Canada, with high home prices (still down only about 16% from the 45% peak of March 2022), higher interest rates, and elevated prices all around.
Here's what can help rate and price drops co-exist:
Sellers have to consider renewal mortgage rates and their home's potential sale price when making their move to list. Offloading short-term rental or investment properties that are no longer financially feasible may bring homes onto the market faster.
As rates decline, buyers and sellers cancelling each other out would be the best scenario to keep prices from skyrocketing as demand increases.
Both Kitchener-Waterloo and Calgary housing markets top the list for the most newcomers received by the end of 2023.
Yet, Kitchener's October 2024 average house prices have decreased since peak 2023 prices, and Calgary's have increased:
Newcomers are driving higher demand in Kitchener, but price declines are caulked up to higher interest rates, keeping many first-time and repeat buyers on the sidelines.
*Based on MLS®HPI Composite Benchmark prices, not seasonally adjusted
According to National Bank stats, mortgage affordability improved again in Q3 2024, with lower interest rates and increased income seeing 9 of 10 Canadian centres eased:
And, according to BMO (Bank of Montreal), a mortgage rate below 4.0% plus a 30-year amortization brings us back to pre-pandemic levels for mortgage payments as a percentage of household income.
Use our great calculator below for an idea, then give us a shout for your numbers.
Despite higher rates, national average home prices in Canada are among the highest in the G7 countries. There's been talk of housing bubbles here for years. Yet, nothing has burst (yet), and homeowners take tremendous pride in owning a home, riding local price waves up or down.
To help you time your home-buying or selling decisions, here's a snapshot of our nation's current housing market trends and a look ahead to what experts say is coming to a market near you.
October 2024 — The three Canadian centres with the highest average MLS® home prices are:
Based on the MLS®HPI Composite Benchmark (not seasonally adjusted)
October 2024 — The six Canadian centres with the lowest average MLS® home price.
We're not saying you should (or could) move there, but you can dream about how much home you'd get for the prices.
Based on the MLS®HPI Composite Benchmark (not seasonally adjusted)
BALANCED – National SNLR (sales to new listing ratio) rose to 58% in October from September's 52.0%
This measure tightened with more buyers snapping up current listings, and new listings in the month not enough to overcome the increased sales.
A few other details:
Why is the market balance tightening? Many buyers have been looking this Fall but didn't find their deal until after September brought in more choices through increased market listings. Is more inventory coming on board from over-leveraged homeowners or those wanting to get their home sale over and done by year-end? Will buyers take a winter break or continue to buy ahead of a projected busy Spring 2025? Check back next month for an update!
Market disparity? Always. Regardless of national or even provincial sales and listing averages, Canada is a big country (area-wise), and home shoppers and sellers can find very different market conditions depending on where they're buying or selling.
According to CREA (Canadian Real Estate Association), a strong buyer's market is when the sales-to-new-listings ratio (SNLR) is 40% or below.
At that ratio percentage, there are typically more properties for sale than buyers, offering more choice and bargaining power — especially in placing purchase offers with conditions that protect a buyer's rights and finances.
When the SNLR falls between 40% and 60%, market conditions are considered 'balanced' in buyer demand, available listings, and sales levels that keep prices relatively stable, thus allowing reasonable purchase and sale terms.
The middle ground of housing competition — balanced markets can lean more towards the buyer's or seller's spectrum. And despite any prevailing national or local trends, a particular house, street or area can defy it (you know who you are).
An SNLR of 60% or higher is a market that strongly favours the seller.
A seller's market means there are more buyers than sellers, and the properties sell quickly and at higher prices, giving the seller more power to set their price and terms of sale.
When the demand for housing exceeds supply, buyers often resort to a gamut of strategies to snap up a house before others, such as engaging in bidding wars or feeling pressured to place no-condition offers.
This graphic offers a provincial snapshot of prices in Q3 2024 compared to 1 year, 3 years, and 5 years ago.
As you can see, most home prices in Canada have increased over the past 5 years.
Want an even more interesting stat? The average Canadian MLS®HPI composite benchmark home price has risen about 201% since 2005 (over 19 years)!
Here are a few multi-numbered sources to keep you busy and in the know:
Our friendly, highly trained brokers can get your best rate, better mortgage options, and offer strategies for first-time buyers and home affordability to help make the difference in owning and keeping a home in Canada.
Make sure to ask about features such as portability, free payment frequency changes and mortgage recasting, as well as products like Purchase + Improvements when looking to buy your next home.
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