Spring is traditionally a boom time for the Canadian housing market, fueled by eager buyers and rising prices. However, 2024 is proving to be anything but typical.
Uncertainty Reigns Supreme
Uncertainty surrounding the Canadian economy and potential interest rate cuts by the Bank of Canada (BoC) is casting a long shadow over the spring market. This wait-and-see approach from potential buyers is leading to sluggish activity and a pause in price increases.
National Market Snapshot
The Teranet-National Bank Composite House Price Index, which tracks prices in the 11 largest Canadian Metropolitan Areas (CMAs), offers a glimpse into the current market.
- Good News: April saw stable prices following two months of gains. Edmonton, Montreal, and Calgary experienced positive month-over-month growth. Smaller gains were observed in Ottawa-Gatineau, Vancouver, Hamilton, and Winnipeg (all under 1%).
- Not-So-Good News: Quebec City (-2.1%), Victoria (-1.9%), Toronto (-1.2%), and Halifax (-0.7%) saw price declines.
The report attributes the stabilization to a sluggish resale market, particularly in Toronto, Canada's largest city. Here, the unemployment rate has jumped significantly from 5.6% a year ago to 7.9%, leading to a more cautious buyer pool.
Silver Linings on the Horizon
Despite the current slowdown, there's cautious optimism for the future. Here's why:
- Population Growth: Canada's steady population growth continues to put pressure on housing supply.
- Limited Inventory: The number of available properties remains relatively low, which could push prices higher once buyer confidence rebounds.
- Interest Rate Cuts: The expectation of future rate cuts by the BoC could incentivize buyers to jump back into the market later in the year.
Buyers Take a Breather
The Canadian Real Estate Association (CREA) reports that national home sales dipped in April 2024 compared to March. However, the number of properties for sale did increase, signaling the official start of the spring market.
While year-over-year sales activity shows improvement, it's likely influenced by the timing of Easter weekend this year.
More Choice, Less Competition
Shaun Cathcart, CREA’s Senior Economist, observes a stark contrast to the spring of 2023. “Last year, we saw a surge of buyers competing for a limited number of new listings. This year, there's a healthier inventory, but buyer enthusiasm is muted.”
The new Chair of CREA's 2024-2025 Board of Directors, James Mabey, offers a positive spin. He sees this as the most balanced national market since the pre-pandemic era.
“Mortgage rates are still a hurdle for many,” Mabey acknowledges, “but for those able to enter the market, it's the first time in years where they can shop around, take their time, and potentially negotiate.”
CREA's latest forecast predicts a market rebound over the next two years, fueled by anticipated interest rate easing.
The Takeaway
The Canadian housing market in 2024 is a story of pause and cautious optimism. While the traditional spring surge hasn't materialized, underlying factors like population growth and limited supply suggest potential for future growth. As interest rates become more favorable, buyers are expected to return, leading to a more balanced market with room for negotiation.
