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What to Expect From the 2024 Spring Housing Market

A wave of mortgage renewals, supply challenges, and cautious homebuyers are all projected to impact the Canadian real estate market this season.

By Josh Sherman | 5 minute read

Apr 1

In a normal year, the Canadian housing market heats up in the spring — but experts note that this year is anything but normal.

All eyes are on Canadian real estate as the spring market gets underway. 


Traditionally the busiest time of year for home sales, this spring is shrouded in uncertainty and speculation. A rapid runup in borrowing costs followed by expectations that the Bank of Canada will soon begin cutting its overnight rate — which influences the mortgage market — has put more attention on the seasonal market.

“Seeing when interest rates are going to come down, the anticipation around that, the anticipation around what will happen to the housing market given the volatility it has experienced over the last few years, certainly there’s a lot of attention — and arguably more attention than there has been in several years,” Marc Desormeaux, principal economist at Desjardins, tells Wahi.

 

With the official start to spring already behind us, Wahi asked experts what they’re noticing in the real estate market so far — and what they expect to see through June.

 

Homebuyers Are Taking a “Wait-and-See Approach” — for Now

 

“One thing we’re seeing is that both consumers and the Bank of Canada are taking a ‘wait and see’ approach. There are a lot of unknowns regarding how the market will react to rate cuts,” Bekim Merdita, executive vice president of Rocket Mortgage Canada, tells Wahi.

 

Desormeaux of Desjardins doesn’t anticipate a substantial increase in sales activity (or prices) until the Bank of Canada, which has held the overnight rate at 5% since July 2023, embarks on a rate cut. That’s something it last did in March 2020 and would be a move that should tempt many more buyers off the sidelines. “Our view is that we won’t see a really strong rebound in the market until the Bank of Canada reduces rates and makes it official, but we could see some buyers enter before that happens if they are fairly certain that rate cuts are coming soon, and this is something we’ve seen even at the beginning of this year,” he explains.

 

Desjardins and other major financial institutions don’t foresee a cut until June at the earliest, but with an announcement scheduled for April 10, the central bank could surprise us sooner. “I suspect that there will be some anticipatory behaviour where folks get in earlier,” adds Desormeaux. These homebuyers could be rewarded, experts say.

“We do know that demand for home ownership is as high as ever and most Canadians view owning a home as a major financial and familial goal. We don’t expect this to change.”

 

“A Bumpy Ride” Ahead?

 

In a recent report, RBC Assistant Chief Economist Robert Hogue says the latest available data from the Canadian Real Estate Association (CREA) suggests there’s “a bumpy ride for the market in the months ahead.”

 

This past February, the benchmark price of a Canadian home was $719,400, representing the first time since August 2023 that it didn’t decline month-over-month and signaling a possible end to the correction. “But this more upbeat outlook isn’t yet translating into a steady recovery in activity. The sharp loss of affordability during the pandemic still firmly restrains buyers,” notes Hogue, who underscores home sales declined 3.1% month-over-month. “While the tightening of demand-supply conditions since December has paved the way for modest price appreciation, resales are likely to bounce around amid a standoff between buyers and sellers.”


The standoff that Hogue describes is based on how homebuyers and sellers are likely to view the market very differently. The former may be encouraged by the slight uptick in prices and stand firm in negotiations, while the latter have limited homebuying power due to heightened interest rates and other housing-affordability challenges. “We expect these positions will lead to a standoff between the two parties in many markets, keeping deal making subdued until interest rate cuts boost buyers’ purchasing budget later this year.”

Of course, trends vary locally. Alberta, for example, benefits from a relatively stronger economy driven largely by the oil industry. That continues to attract out-of-province homebuyers who are willing to resettle for better employment prospects. “We anticipate that the gains will be muted in the Canadian housing market, broadly speaking. Some cities are doing better — Calgary and Edmonton are still looking pretty strong — but Toronto and Vancouver are likely to feel the impacts of those effects,” Desormeaux tells Wahi, citing a cooling economy overall as another headwind in addition to the heightened-interest-rate environment.

 

A Wave of Mortgage Renewals Is Just Beginning 

 

The first quarters of this year represent the beginning of a “massive mortgage renewal wave in Canada,” notes Merdita. “An estimated 60%-65% of mortgages will renew in 2024, 2025, and 2026. The clients renewing primarily have rates in the 2.5% range so with fixed rates currently in the 5% range, people are hopeful the Bank of Canada and the bond market move in their favor.” (While variable mortgages are more immediately sensitive to BoC rate decisions, posted fixed-rate mortgage rates generally move in line with bond yields.)

 

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Homeowners who are unable to afford higher mortgage payments may be compelled to list their homes for sale, Desormeaux suggests. In a previous Desjardins report published midway last month, the economist already observed a rise in new listings on the market. “February’s second consecutive increase could mean improving market sentiment if prospective sellers are responding to recent strength in buying activity,” he writes in the report. “But rising listings could also reflect homeowners forced to sell under pressure from higher mortgage rates at renewal.” While the extent to which each scenario is driving more listings on the market remains unclear, this increased supply could ultimately boost home sales due to pent-up demand, he explains.

Supply — or lack thereof — ultimately remains top of mind for many policymakers in addressing the housing-affordability crisis, and it should continue to influence the market moving forward. “We’re still facing a supply issue and we’re not building homes fast enough to support our growing population,” notes Merdita of Rocket Mortgage Canada. “Rates certainly have an impact on housing affordability, but supply and demand will ultimately dictate housing prices.”

Looking at the big picture, Merdita remains confident in Canadians’ overall attitudes toward homeownership. It’s a sentiment supported by a recent Wahi survey of Angus Reid Forum members which found that nearly one in five Canadians aged 18 and up say they probably will or may buy a home this year. “We do know that demand for home ownership is as high as ever and most Canadians view owning a home as a major financial and familial goal,” says Merdita. “We don’t expect this to change.” 

Josh Sherman

Wahi Writer

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