Tens of thousands of Canadians are camping out for real estate discounts. Armed with prayers and price drop forecasts from economists, they’re waiting for the housing market to slap big red “On Sale” signs on front lawns this winter.
What’s more, two-thirds of prospective buyers said they’re holding their breath for lower mortgage rates before pulling the trigger, according to a BMO survey conducted last spring.
So, let’s paint this picture. We’ve got latent demand from all these sidelined homebuyers waiting for lower prices and rates – a Goldilocks dream in one of Earth’s most expensive housing regions. Meanwhile, housing inventories remain low, population growth is excessive, incomes are growing faster than inflation, rents are soaring (which increases homebuying’s appeal on a relative basis), and our government is dead set on keeping hard-up mortgagors in their homes through policies that encourage banks to work with borrowers who bit off more mortgage than they can chew.
Add lower prices and rates to this soap opera, and you may have everyone with a down payment thinking it’s Black Friday for real estate, sprinting to capture fleeting “affordability” improvements. History has proven that time and again.
But consider this: If average mortgage rates fell merely one percentage point, all it would take to cancel out that nationwide affordability improvement would be a $63,000 bounce in the $656,625 price of an average home.
That kind of gain can happen in two months, as it did last spring. It was only 10 months ago when the Bank of Canada’s premature rate pause inspired homebuying enough to drive prices $74,167 higher in two months and $116,840 (19 per cent) higher in just four months. Part of that rise was because of a change in the types of homes purchased – what economists call the “composition effect” – but the point remains: low rates and low prices attract high demand.
This isn’t a new phenomenon. Canada saw similar bounces in 2001, 2009 and 2020.
The point is, while prices may drop further – and I’m not saying they will because my crystal ball is in the shop – the window of opportunity for discounted real estate could shut faster than you can say “multiple offers.” When it comes to real estate traffic signals, rate cuts mean “go”.
And even without significant mortgage rate markdowns, seasonality generally results in price strength in the spring market, precisely when the bond market expects the first rate cut.
Bay Street prognosticators are currently pricing in a full percentage point of rate cuts next year as Canada flirts with recession. Home prices have much precedent for rising during recessions, by the way. That’s because homebuyer incomes don’t dive all that much and buying power rises as rates drop. It’s mostly lower-income Canadians, who are disproportionately renters, who get hit the hardest.
And then you have economists like Stephen Brown from Capital Economics. He’s projecting double those cuts — two percentage points in 2024 — mainly because of a faster-than-expected drop in inflation.
Now, anyone who claims that property values wouldn’t surge with two percentage points of rate cuts clearly hasn’t played Monopoly: Canadian Edition. But even if we don’t get the whole two-percentage-point drop in the prime rate next year, we’ll likely see even more than that (total) by 2025. The average percentage drop in Canada’s overnight rate from peak to trough has been 41 per cent since the 1970s. That’s about three percentage points based on today’s 7.2 per cent prime rate.
For my part, I try to avoid the rate-guessing game apart from estimating which part of the rate cycle we’re in. There are just too many wild cards to accurately predict rates 12 months from now. What if lowering rates inflates house prices, which then fan the flames of inflation? Or Uncle Sam’s spending spree keeps global rates high? Or our dear leaders in Ottawa splash more cash to fish for votes, cooking up inflation like a Christmas turkey?
All these outcomes could counterbalance the chill factor of rising unemployment. And believe you me, the Bank of Canada isn’t going to go Edward Scissorhands on rates if inflation is still doing the high jump over 3 per cent.
That said, economies are cyclical, and this one is rolling over. There’s no reason to expect that a 22-year high in the prime rate won’t be enough to get inflation back to 2 per cent. If we don’t get rate cuts next year, it’s because a lower-probability unforeseeable event offset Canada’s inflation progress. And let’s not go there.
Bottom line for first-time homebuyers: If you’ve found a place where you’d happily hang your hat long-term — and can comfortably afford it — don’t play chicken waiting for further “affordability” because you may be ready to retire by the time it gets here.
Mortgage funding costs drop but banks have sticky fingers
It’s another sweet-and-sour report on mortgages this week.
The good news: Selected mortgage funding costs have sunk 92 basis points in less than two months, as measured by four-year swap rate. What’s a four-year swap rate? It’s a handy rough proxy for lenders’ fixed-rate funding costs. (A basis point is 1/100th of a percentage point.)
The bad news: Banks are hoarding all the savings for themselves, like squirrels with winter nuts. That’s particularly true when it comes to uninsured mortgages.
That means lender revenue margins are the widest they’ve been in years. So yes, banks could easily trim fixed rates if they wanted to. But, for now, they’d rather pad their bottom lines ahead of a potential storm with mortgage losses.
That said, lenders far and wide are dying for mortgage volume. They’re hungrier for your business than a pack of wolves at a steakhouse. So this is when you have to negotiate like a pro. Pit multiple mortgage providers against each other and watch the sparks fly. They have the margin to play with and one will be willing to make less money than the others.
Just be mindful of mortgage features and service differences. No-frills mortgage rates often come with less service and advice, or contract limitations that bite you after closing when you try to port or refinance your mortgage.
As for rate changes, the only nationally-available leading rate change this week was to HSBC’s uninsured five-year variable, which rose 10 basis points to prime minus 0.7 per cent.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
