As we move through 2024, the Canadian mortgage landscape is witnessing significant shifts that homebuyers and investors should pay close attention to. With over 15 years of successful lending and underwriting experience, and having financed thousands of deals, Lez Gomez is here to guide you through these changes. The Bank of Canada’s measured stance on interest rates has resulted in relatively stable mortgage rates, but various economic factors—such as inflation, employment trends, and global economic conditions —are still influencing the market.

This year offers both challenges and opportunities, particularly for first-time homebuyers. As housing prices begin to soften in urban areas, 2024 might just be the perfect time to step into the market. Additionally, with an increasing number of consumers leaning towards variable-rate mortgages in anticipation of potential rate cuts later in the year, it’s crucial to stay informed. This blog delves into the latest market trends, expert predictions, and key considerations for navigating the Canadian mortgage market.

A Rollercoaster Ride: The Canadian Housing Market

The past few years have been a wild ride for the Canadian housing market. In 2023, rent costs surged by 8%, according to the Canada Mortgage and Housing Corporation, prompting many to question if 2024 is the right time to buy. Recent data from Wahi’s 2024 Homebuyer Intentions Survey reveals that nearly a quarter of Canadians aged 18 to 34 and 22% of those aged 35 to 54 are considering purchasing a home this year. Among these potential buyers, 49% are waiting to see how home prices evolve, while 48% are keeping a close eye on interest rate movements.

Whether you’re a first-time buyer or looking to make a repeat purchase in 2024, it’s vital to consider several factors before making one of the most significant financial decisions of your life.

Expert Insights: What Economists Are Saying About the Housing Market

Economists are offering valuable insights into the potential trajectory of the Canadian housing market in 2024. Robert Hogue, Assistant Chief Economist at RBC, suggests that the best opportunity for buyers might not arise until interest rates drop significantly, possibly in the latter part of 2024 or 2025. This is particularly important for first-time buyers facing financial constraints.

Hogue also cautions that if interest rates begin to fall mid-year as expected, pent-up demand could quickly reignite the market, potentially driving prices higher. However, he does not anticipate a drastic drop in housing prices, as affordability challenges may temper the market’s recovery.

Similarly, Robert Kavcic, Senior Economist at BMO, predicts that the rapid price gains seen in recent years are unlikely to return. He expects continued downward pressure on prices in regions like Ontario throughout the spring, though prices will remain relatively high, and affordability challenges will persist.

Marc Desormeaux, Principal Economist at Desjardins, shares a similar outlook, forecasting softer home prices and sales this spring, despite a surge in sales in December 2023. He expects a broad-based rebound in home prices by mid-year, especially in high- priced markets like Toronto and Vancouver, which are more sensitive to interest rate fluctuations.

The Bank of Canada’s Role in the Housing Market

The Bank of Canada’s monetary policy plays a crucial role in the housing market by directly influencing mortgage interest rates. When inflation rises, the Bank typically raises rates to curb consumer spending. Conversely, as inflation nears the Bank’s 2% target, the likelihood of rate cuts increases. The prime rate, currently at 7.2%, is 2.2 percentage points higher than the overnight rate and serves as a benchmark for variable-rate mortgages.

In its latest rate decision, the Bank of Canada kept the overnight rate at 5%, acknowledging that while inflation is trending downward, some components of the Consumer Price Index (CPI), particularly shelter costs, remain high. Bank Governor Tiff Macklem has indicated that while the housing market is expected to rebound alongside potential interest rate cuts later in 2024, significant uncertainty surrounds housing prices. He also emphasized that housing affordability is a major challenge that monetary policy alone cannot solve.

The Real Estate Industry’s Outlook for 2024

In January, the Canadian Real Estate Association (CREA) updated its forecast for home sales and average home prices. CREA anticipates a 2.3% increase in the national home price in 2024, with the average reaching $694,173. Sales and prices are expected to continue rising in 2025, with the largest gains likely in provinces with strong housing demand, such as Alberta, as well as in regions recovering from lower sales volumes, including British Columbia, Ontario, and Nova Scotia.

Despite this overall positive outlook, CREA notes significant regional differences. For example, price declines have been most pronounced in Ontario’s Greater Golden Horseshoe area and parts of British Columbia. In contrast, prices in Alberta, New Brunswick, and Newfoundland and Labrador have remained strong or continued to climb.

Key Takeaways: Is 2024 the Right Time to Buy?

Interest rate cuts are widely expected to begin around mid-2024, depending on the Bank of Canada’s progress in controlling inflation. These cuts could stimulate housing demand, potentially driving up prices later in the year. However, the market response will vary by region, with some areas likely experiencing stronger rebounds than others.

One critical factor to consider is the large number of mortgage renewals expected in 2024 and 2025. According to Tania Bourassa Ochoa, Senior Specialist of Housing Research at CMHC, up to 2.2 million mortgage borrowers—representing 45% of all outstanding Canadian mortgages—will be up for renewal during this period. Many of these borrowers secured fixed-rate mortgages at historically low rates, potentially leading to financial stress as they renew at higher rates. This could influence housing supply, as some homeowners may be forced to sell, creating opportunities for buyers.

Is 2024 a Good Time to Buy a House?

Deciding whether to buy a house in 2024 depends on several factors, including your financial situation, market conditions in your area, and your long-term goals. While borrowing costs are currently high, housing prices have softened compared to the peaks seen during the pandemic. However, affordability remains a significant challenge, especially in regions like Ontario and British Columbia.

If you’re considering buying a house, it’s essential to evaluate your readiness and financial stability. Factors such as stable income, low debt levels, a solid credit score, and a sufficient down payment are crucial for securing a favorable mortgage. Additionally, understanding your mortgage options and being prepared for long-term homeownership can help you navigate the complexities of buying a home.

The Bottom Line

Buying a house is one of the most significant financial decisions you’ll make. While market conditions and interest rates are critical factors, ensuring your financial stability is just as important. Whether you choose to buy in 2024 or wait for more favorable conditions, understanding the market dynamics and preparing yourself financially will help you achieve homeownership with confidence.

For the best mortgage deal tailored to your personal situation, contact Lez Gomez at +1 416 723 1313. Lez’s extensive experience and proven track record will help you find the perfect solution for your needs. Brokerage License #12728.