2024 Housing Market Forecast (2024)

Here's a look at what's going on with Canadian housing markets.

Will interest rate drops raise home prices? What places in Canada can offer better affordability? It is a buyer's market? Read on for some answers.

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Back to a slight chill in the air?

Despite sizzling summertime temps and two central bank rate drops, national Canadian housing markets retreated in July (from June's slight warmup of +3.7% home sales) after a somewhat sluggish first half of 2024.

• Home sales declined by 0.7% from last month
• New listings gained 0.9% (compared to +1.5% in June)
• The MLS® Home Price Index (HPI; not seasonally adjusted) decreased by another 0.8% from last month

The much-anticipated first rate cut on June 5 hasn't yet persuaded most potential buyers to immediately jump off the sidelines. And the second policy rate cut came too late in July (on the 24th) to show any real market impact in that month.

Door-to-Door: Housing Market Prediction for 2024

Some housing forecasts were downgraded after a tepid spring and muted reaction to the first rate cuts in 4 years.

Many home buyers would likely agree that two prime rate drops (for a 0.50% decline) weren't nearly enough to have them stampeding to open houses.

As a result of less-than-stellar market activity so far this year, CREA (Canadian Real Estate Association) recently downgraded its 2024 housing market prediction to:

• A 6.1% increase in home sales by year-end, from an original musing of 10.5%
• A 2.5% increase in home prices compared to their original estimate of about 4.9%
• Royal LePage, however, is standing by its prediction of a 9.0% national increase in home prices by year-end

Buyer confidence is slowly rising with the talk of more rate cuts in the air, though consumer sentiment indicates many are pulling back on spending, especially for big-ticket items. A deteriorating labour market may also factor in, adding to worries of strained household budgets.

There's still anticipation that markets will show recovery in the next half of the year.

Canadians are 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.

What could keep home prices down?

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:

• High Canadian home prices in general, compelling many buyers (including first-timers) to hold off
• Increasing household non-mortgage debt
• Higher qualifying stress-test rates
• Higher city property taxes hitting budgets and mortgage-approval ratios after this spring
• A wave of renewals coming in the next 1-3 years will see homeowners paying more for their mortgage (i.e. less spending room for a new house)
• For investors, if higher mortgage costs aren't passed onto renters, they may need to sell, which could increase listings
• Curbing short-term rental property ownership through restrictions and tax deterrents to release more primary housing
• Increased efforts to spur multi-housing and rental construction

A national housing crunch doesn't bode well for the future of Canadian home prices.

Over last year, we saw a whopping 46% increase in Canadian newbies waving the red maple leaf. Our growing numbers, 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:

• Higher building costs
• Higher interest rates
• Restrictive government taxes and legislation
• Fewer available labourers

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.

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.

Rate drops and home price drops: can they co-exist?

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 14% 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:

• As rates drop, buyers entering the market could meet plenty of sellers listing to match demand
• Despite rate drops, buyers' budget constraints may still keep them out of the market or unable to afford bidding wars (keeping a limit on local price increases), or they'll buy a smaller (cheaper) home
• If more sellers suddenly (and continually) list without a corresponding surge in buyers, prices could decline as sellers look to unload their properties

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 drop, buyers and sellers cancelling each other out would be the best scenario to keep prices from skyrocketing as demand increases.

A home-price tale of two Canadian cities.

Both Kitchener-Waterloo and Calgary housing markets top the list for the most newcomers received in 2023.

Yet, Kitchener's July 2024 house prices have decreased since July 2023, and Calgary's have increased:

• Kitchener-Waterloo – $741,500 vs $785,200 (-5.3% y/y)
• Calgary – $589,000 vs $542,200 (+8.0% y/y)

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 benchmark prices, not seasonally adjusted

Housing Hot Takes:

• Two prime rate drops (the first such occurrences 4 years) haven't spurred an instant wave of new buyers
• It's estimated that 83% more on-site construction workers are needed (that's nearly half a million people) over the coming decade to meet building-demand needs
• Today's cost of residential construction is 81% higher across Canada’s major cities compared to 2017 and up 107% in the Toronto region
• "There will be a growing gap between [prices of] detached houses and condos." — Globe & Mail, Benjamin Tal (CIBC)
• Toronto's housing inventory has increased to the most in over a decade; over 2/3 of condos sold in Canada are in Toronto, with those listings reaching 10-year highs
• The condo market has been recently characterized as "a buyers' market with no buyers"
  
• Residential building permits in Canada dropped 16.7% in May m/m after a 28% surge, though they were still above the historical average.
• In June, average rents across all property types fell 0.8% to $2,185 from last month
• About 49% of Canadians said they would consider buying a home through non-traditional means (like rent-to-own and co-ownership) in a Re/Max survey
• First-time home buyers can now get a break with 30-year amortizations for new home builds, but may face higher deposits
• Property taxes were hiked this spring in many Canadian city centres at more than double the inflation rate
• Canada needs to build 5M extra units by 2030 on top of annual construction (Benjamin Tal, CIBC deputy-chief economist, Feb. 6, 2024)
• Housing starts decreased by 23.5K in June to 241.7K (the wrong direction)
• New Brunswick falls short of planned housing starts 1 year after program launch, and rent limits not working

How much home can you afford?

Use our great calculator below for an idea, then give us a shout for your numbers.

Are we in a housing bubble?

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.

What's hot in housing?

July 2024 — The three Canadian centres with the highest average MLS® home prices are:

1. Oakville-Milton, ON – $1,251,100 (-$15,802 from last month)
2. Greater Vancouver, BC – $1,197,700 (-$9,400)
3. Lower Mainland, BC (including Burnaby, Richmond, Surrey and New Westminster) – $1,129,300 (-$6,800)

Based on the MLS®HPI composite benchmark (not seasonally adjusted)

Housing underdog? Some of the best home values in Canada.

July 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.

1. Mauricie, QC – $279,000 (+$100 from last month)
2. Centre du Quebec, QC – $292,900 (+$300)
3. Sault Ste Marie, ON – $305,100 (+$100)
4. Saint John, NB – $308,300 (+$4,900)
5. Fredericton, NB – $311,800 (+$3,600)
6. Regina, SK – $318,400 (+$300)

Based on the MLS®HPI composite benchmark (not seasonally adjusted)

Buyer's or seller's market?

BALANCED – National SNLR (sales to new listing ratio) eased back to 52.7% in July (from June's 53.9%)

Sales were down a bit in July, and new listings (nationally) got a boost from added supply in Calgary, Alberta.

• Nationally, inventory listings measured 4.2 months worth, unchanged from June
• Long-term average for inventory listings is 5 months (according to CREA)
• The highest national SNLR so far was 67.9%, reached in April 2023
• Long-term average for the SNLR is 55.1%

Why is the market balance easing? Even though many buyers are still reluctant to enter the market, there is still more inventory coming on board. Housing sales activity is expected to pick up this fall, assuming more 'promised rate' cuts materialize.

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.

What is a buyer's market?

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.

What is a balanced housing market?

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).

What is a seller's market?

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.

How do home prices compare over the last 5 years?

This graphic offers a provincial snapshot of prices in Q2 2024 compared to 1 year ago, 3 years ago, and 5 years.

• Canadian home prices can dip up and down through economic cycles.
• They increased dramatically during the pandemic (peaking in March 2022) and then fell (though not nearly as dramatically) as soaring interest rates suppressed markets.
• The Bank of Canada began a rate-drop cycle (in June 2024), but the effect has yet to show up.

As you can see, most home prices in Canada have increased over the past 5 years.

Need a mortgage with that house? That's where we come in.

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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