As some COVID-era mortgages approach their renewal dates, many homeowners and potential homebuyers may be curious about whether the country is on the cusp of a buyer’s market.
From interest rate trends to our changing economy, I’ll explain some of the key factors affecting the current real estate landscape and discuss how buyers might soon hold the reins in many Canadian markets.
WHAT IS A HOMEBUYER’S MARKET?
Let’s start by defining exactly what a homebuyer’s market is.
Essentially, it’s the real estate version of a shopper’s paradise, where “For Sale” signs tend to linger a bit longer on front lawns, and prices are less likely to be inflated, leaning in favour of the buyer.
In this case, many homes have outstayed their welcome on the market, and sellers are more inclined to negotiate their prices, which may result in better deals for buyers.
A buyer’s market doesn’t just pop up overnight – it’s a direct result of the imbalance between the number of homes for sale and the number of buyers willing to purchase them. When supply outweighs demand, buyers can afford to be more choosy and take their time when buying a home.
Major cities such as Toronto and Vancouver in particular appear to be on the cusp of a buyer’s market, as real estate supply begins to outpace demand, leading to more favourable buying conditions for prospective homeowners.
Additionally, new data published by the Canadian Real Estate Association (CREA) on Wednesday shows Canada’s sales-to-new-listings ratio dropped to 49.5 per cent in October, a 10-year low. This ratio is used by real estate experts to analyze the relationship between the number of homes sold over a specific period of time, and how many new listings were added to the market. According to the association, a lower percentage points to a buyer’s market.
Don’t get your hopes up without doing your due diligence, though. Just because the tables are turning in one region, this doesn’t mean the rest of the country will follow suit.
To really understand if Canada is shifting towards a buyer’s market, prospective homebuyers and those expecting to renew their existing mortgages need to watch for telltale signs, such as:
Higher inventory levels
A drop in median sale prices
An increase in the average number of days homes spend on the market
These key indicators often reveal whether the housing market is turning in favour of homebuyers rather than sellers. One of the best ways to stay updated on this information is by reviewing the monthly housing market statistics provided for free by the CREA around the middle of each month.
About one in three borrowers have seen their monthly mortgage rates increase since interest rate hikes began in March 2022, according to data released by the Canada Mortgage and Housing Corporation (CMHC) on Nov. 9. This has particularly been the case for those with variable-rate mortgages, where interest rates fluctuate based on the Bank of Canada’s policy rate.
The CMHC report also showed that during the first half of 2023, more than 290,000 mortgage holders renewed their agreement at a higher rate than they previously held, possibly indicating the beginning of a trend. These renewals would have taken place after a number of years, depending on the length of each mortgage holder’s agreement. In Canada, most mortgage terms are five years or less, according to the federal government.
Fast forward to 2024 and 2025, and we’re looking at a staggering 2.2 million mortgages due for renewal – that’s nearly half of all Canadian mortgages, many of which were signed with rock-bottom rates.
CAN MORTGAGE RENEWALS AFFECT THE HOUSING MARKET?
But this isn’t just about higher monthly payments – this will likely produce a ripple effect that could jostle the entire housing market.
The CMHC estimates that average monthly mortgage payments could increase by an estimated 30 to 40 per cent as mortgages come up for renewal over the next few years. This means that Canadians, as a whole, would need to find an additional $15 billion within their household budgets to afford housing costs.
In September 2021, five-year fixed mortgage rates fell to a historical low of 1.44 per cent, leading to lower monthly payments for many homeowners. Fast forward to this year, however, and the average five-year fixed mortgage rate sits at 6.49 per cent, according to real estate company WOWA.
Homeowners who benefitted from the incredibly low mortgage rates during the early part of the pandemic, particularly those who locked in fixed rates, may be in for a major shock as their agreements come up for renewal. Facing the highest average mortgage rates in more than a decade, these homeowners can expect their monthly payments to increase.
Ultimately, higher mortgage payments could lead distressed homeowners to sell their property in order to find more affordable housing. This, in turn, could cause housing inventory to increase, and tip the scales in favour of a buyer’s market with increased competition among sellers.
ARE YOU A PROSPECTIVE HOMEBUYER?
In these uncertain times, potential homebuyers should approach the market with both caution and patience. Ultimately, it’s a waiting game as we’ll have to see how the housing market unfolds with the impending renewal of COVID-era mortgages.
Stay informed by tracking indicators such as inventory levels, average sale prices, and the amount of time homes spend on the market, which will allow you to see any shifts in conditions.
During this time, don’t rush. Instead, budget wisely, consider the possibility for potential interest rate hikes, and understand your financial limits.
TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.
The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.
The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.
“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.
“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”
The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.
New listings last month totalled 15,328, up 4.3 per cent from a year earlier.
In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.
The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.
“I thought they’d be up for sure, but not necessarily that much,” said Forbes.
“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”
He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.
“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.
“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”
All property types saw more sales in October compared with a year ago throughout the GTA.
Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.
“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.
“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”
This report by The Canadian Press was first published Nov. 6, 2024.
HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.
Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.
Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.
The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.
Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.
They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.
The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.
This report by The Canadian Press was first published Oct. 24, 2024.
Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.
Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.
Average residential home price in B.C.: $938,500
Average price in greater Vancouver (2024 year to date): $1,304,438
Average price in greater Victoria (2024 year to date): $979,103
Average price in the Okanagan (2024 year to date): $748,015
Average two-bedroom purpose-built rental in Vancouver: $2,181
Average two-bedroom purpose-built rental in Victoria: $1,839
Average two-bedroom purpose-built rental in Canada: $1,359
Rental vacancy rate in Vancouver: 0.9 per cent
How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent
This report by The Canadian Press was first published Oct. 17, 2024.
