The Canadian housing market has been a bit up and down lately. After some hot weather and a couple of central bank rate cuts, the housing market slowed down in July. Home sales went down a little, and there were a few more new listings. People are still waiting to see how the changes in interest rates will affect their decisions about buying or selling homes.
What’s Happening with the Housing Market?
The Canadian housing market has seen some changes this year:
- Home Sales: Home sales dropped by 0.7% in July. This means fewer homes were sold compared to the month before.
- New Listings: There were 0.9% more new listings in July, but this is a smaller increase than in June.
- Interest Rates: The first cut in interest rates happened on June 5, but it didn’t make many people rush to buy homes. The second cut in July didn’t have much impact on the market either.
Predictions for 2024
Experts have adjusted their predictions for the housing market in 2024:
- Home Sales: The Canadian Real Estate Association (CREA) now expects home sales to go up by 6.1% by the end of the year, which is less than their earlier guess of 10.5%.
- Home Prices: Home prices are expected to rise by 2.5%, not the 4.9% that was originally predicted. However, Royal LePage still thinks prices will go up by 9.0% by the end of the year.
- Buyer Confidence: People are slowly feeling better about buying homes with the talk of more rate cuts, but many are still being cautious about spending.
Why Are Home Prices Staying High?
Even though home prices have cooled a bit, they are still high, especially in big cities like Vancouver and Toronto. Here are some reasons why prices might not drop much:
- High Prices: Many buyers, especially first-time buyers, are waiting because home prices are still very high.
- Debt: People are carrying more debt that isn’t related to their mortgages.
- Higher Taxes and Rates: City property taxes and stress-test rates are going up, making it harder for people to buy homes.
- Mortgage Renewals: Many homeowners will soon need to renew their mortgages at higher rates, which might leave less money for buying new homes.
- Investor Impact: If investors can’t pass higher costs onto renters, they might have to sell their properties, which could lead to more homes on the market.
- Building Efforts: There are efforts to increase the building of rental properties and multi-family homes.
Challenges and Future Outlook
Canada is facing a housing shortage that might affect prices in the future:
- Building Costs: Costs to build new homes are going up.
- Interest Rates: Higher interest rates make it more expensive to borrow money for new homes.
- Taxes and Regulations: Government rules and taxes can slow down new construction.
- Labour Shortage: There are not enough workers to build the number of homes needed.
Canada needs to build a lot more homes by 2030 to keep up with demand. If these issues aren’t fixed, it could keep pushing home prices higher.
Can Lower Rates and Prices Happen Together?
It’s tough to say if lower interest rates will lead to lower home prices. Here’s how it could play out:
- More Buyers and Sellers: If rates drop, more buyers might enter the market, and sellers could list their homes to match the demand.
- Buyer Constraints: Even if rates drop, some buyers might still not be able to afford higher prices or might choose cheaper homes.
- More Listings: If sellers list more homes and buyers don’t increase as much, prices might go down.
Highlights from Canadian Cities
Different cities in Canada are seeing different trends:
- Kitchener-Waterloo: Home prices went down by 5.3% from last year.
- Calgary: Home prices went up by 8.0% from last year.
More people are moving to Kitchener-Waterloo, but higher interest rates are keeping some buyers away. In Calgary, prices are rising as more people move there.
More Facts About the Housing Market
- Construction Workers Needed: Canada needs nearly half a million more workers to build the homes we need.
- Building Costs: The cost to build homes is much higher now than in 2017.
- Inventory Issues: Toronto has a lot of condos for sale, but the market is slow.
- Rents and Permits: Average rents have slightly decreased, and the number of building permits dropped in May.
- Buying Options: Many Canadians are open to non-traditional ways of buying homes, like rent-to-own.
- Property Taxes: Many cities have raised property taxes, which adds to the cost of owning a home.
- Housing Shortage: Canada needs to build 5 million extra homes by 2030 to meet demand.
As the market continues to change, it’s important for everyone to stay informed and be ready to adapt to new conditions.
