WELCOME TO THE ABTEAM APRIL 2024 BLOG

Well, it’s been an interesting year thus far in the world of real estate, to say the least. If there’s one thing that we have all learned over the course of the last few years, it’s to expect strong reactions in our local real estate market from whatever is happening in the financial markets, the global political landscape and even, the environment.

A milder than normal winter translated to an early push to the spring market, with homes selling under multiple offer conditions during January and February, when inventory levels were at their typical lows, but when demand suddenly spiked as the fair weather brought droves of buyers out to open houses once again. The Bank of Canada also contributed its fair share to the momentum, holding the key interest rate at 5% in
early March, marking the 5th consecutive occasion it has done so. The last time they changed it was in July of 2023, when their aggressive campaign to fight inflation -- resulting in 10 rate hikes over the course of 16 months -- finally halted. Speculation has grown ripe as to when the BOC will begin to drop its rate, but it has remained tight lipped regarding it, stating only that further rate increases are unlikely, but that the core
inflation measure must decline further before it considers cuts. Regardless, this stagnant position is still fueling a temporary spike in sales and sale prices across the GTA, and appears to be bolstering consumer confidence in the mortgage arena, with buyers returning en mass to the housing foray.

Depending on the timing and volume of new inventory entering the market, we may have a strong spring once again here in the Durham Region, with robust sales growth mirroring that of spring 2022. Only time will tell. However, we do expect that once inventory levels swell to meet demand, a shift towards a more balanced market will occur, with even the possibility of some minor retractions in values in all price categories except the entry level, which will remain flush and insulated from any upheaval. It is ever a supply and demand dance!

CANADA'S HOUSING MARKET OUTLOOK: A TALE OF TWO HALVES IN 2024 - RBC Chief Economist Robert Hogue

Interest rates will continue to dictate the outcome of Canada’s housing market in 2024 with the first and second halves showing different pictures. We expect slow activity and softer prices to persist in the early part of the year as the Bank of Canada maintains its policy rate at a two-decade high and home ownership stays out of reach for many potential buyers. But a pivot towards rate cuts mid-year will get the wheels turning faster over the second half or perhaps even sooner. There will be a lot of pent-up demand to satisfy in the market once confidence returns, which could heat things up in a hurry. However, poor affordability conditions will restrain the recovery and make it a gradual liftoff. The larger window of opportunity for buyers is likely to open only after interest rates have dropped materially -- something we foresee in the latter stages of 2024 or into 2025. That’s especially the case for first-time buyers who may be more financially constrained.

Improving sales prospects are bound to attract more sellers. Mortgage renewal payment shocks could also prompt more owners to put properties on the market. An influx of sellers would keep supply-demand conditions in balance, and temper any upward pressure on demand. For-sale inventories have been rebuilding over the past couple of years after reaching historical lows earlier in the pandemic 

We project home resales in Canada to rebound 9% year-over-year to 484,400 units in 2024 -- partially reversing massive declines of 25% in 2022 and 11% in 2023. That number of transactions would still fall short of the level reached before the pandemic in 2019 (490,900 units). We expect the recovery to strengthen in 2025 to 562,100 units -- a gain of 16%.

Major forces are working in opposite directions in the housing market. On one side, booming population growth sustains strong underlying demand for homes (including rentals). On the other end, high housing costs restrict many Canadians’ path to home ownership. In 2024, that path is likely to widen once interest rates fall meaningfully. The severe loss of affordability -- arising from soaring prices earlier in the pandemic and the run-up in interest rates since March 2022 -- has been the dominant force in the past two years plunging the market into a deep correction and causing a significant buildup in pent-up demand.

Steep payment increases that await fixed-rate mortgage holders at term renewal will hit many Canadians hard. These increases could be too much for some owners who may have to sell. But we see the risk of a wave of distressed sellers as contained. Most mortgage holders have been stringently stress-tested against a spike in rate - - qualifying at a rate at least 2 percentage points above the rate they received -- at origination. Indeed, this prudent factor has significantly contributed to maintaining mortgage delinquencies at a historical low in this country to date. In any case, for-sale inventories have plenty of room to rise before they reach problematic levels.

While we don’t expect the current booming rate of population growth to be sustained, demographic factors are likely to remain strong for the foreseeable future in Canada. They could easily heat up the housing market to an uncomfortable degree again once the cyclical downturn has run its course. Whether it happens will come down to the supply response. We estimate Canada will need to grow its housing stock by an average of 315,000 units every year between now and 2030 just to keep up with household formation. That’s more than a third above the pace of housing completions in the past few years (which ranged between 220,000 and 240,000 units
annually). Needless to say it’s a tall order, especially considering the labour challenges the construction industry is facing.

MARKET UPDATE: 

In March 2024, Toronto's real estate market saw lower home sales compared to the previous year due to the timing of the Good Friday holiday. Despite increased listings, competition among buyers led to a moderate rise in average home prices.

Sales in the GTA were down by 4.5%, with new listings up by 15%. The first quarter saw an 11.2% increase in sales and an 18.3% rise in new listings. Market conditions are gradually improving, with expectations of further sales growth fueled by lower borrowing costs.

Price growth is expected to accelerate, driven by increased demand and tightened market conditions. Government intervention to increase housing supply is emphasized to address affordability concerns.

UPCOMING DATES TO REMEMBER:

April 22nd - Earth Day

 
April 24th - Administrative Professionals Day

April 30th - International Jazz Day

As always, we are sincerely grateful for the opportunity to serve your real estate needs, and those of your family and friends, neighbours and co-workers.  It is a constant thrill to receive personal recommendations from our clients, and we have been so fortunate to be able to build our business on our name and reputation – and it’s all thanks to you!