Introduction

In a notable turn of events, Canada’s national real estate market saw a slight uptick in home sales during September, leading experts to speculate a potential resurgence of buyers by 2025.

Recent Activity and Interest Rates

Recent activity suggests that although the sales environment has remained tepid, changes in the financial landscape may soon breathe new life into the sector. The Bank of Canada has been notably proactive in reducing its benchmark interest rates in June, July, and most recently in September. This trend is expected to continue, easing the path for homebuyers to qualify for mortgages. However, even with these reductions, many potential buyers are still grappling with high monthly payments.

Expert Opinions

Shaun Cathcart, senior economist from the Canadian Real Estate Association (CREA), commented, “It suddenly makes more sense to wait than it did a few months ago.” In fact, the current lowest five-year fixed mortgage rate has dipped below 5 percent—a positive sign compared to last year, yet still more than double the rates seen in the pandemic's early days. Advocates for lower rates point to a slowdown in both inflation and economic activity as evidence that more aggressive cuts may be on the horizon.

“A few months ago, getting a favorable rate felt out of reach, prompting buyers to settle for shorter-term options just to enter the market,” Cathcart explained. “Now, it looks plausible that a better interest rate could be on the table by next spring.”

Buyer Sentiment

This sentiment resonates with private-sector economists as well. Daren King from the National Bank of Canada observed, “Many buyers appear to have opted for patience, opting to sit out while anticipating more advantageous financing options.”

Future Predictions

CREA has made optimistic predictions for the coming year, projecting 499,800 home purchases in 2024—a 6.6% increase compared to 2023, albeit still marginally below the 10-year average. This uptick is expected to be bolstered by forthcoming federal restrictions on mortgage regulations, set to take effect by mid-December, which aim to benefit first-time homebuyers. These new rules will enable them to extend mortgage repayment duration and make lower down payments for homes costing as much as $1.5 million.

Impact on Home Prices

As a result, increased demand is anticipated, potentially lifting home prices. CREA forecasts that the average home price nationwide will soar to $713,375 in 2024, reflecting a 4.4% rise. This comes on the heels of a reported average price of $669,630 in September, marking a 3% increase from August and a 2.1% increase year-over-year. The home price index, which adjusts for outlier properties, stood at $718,200 last month—essentially stable from August but down 3.6% compared to September 2022.

Current Market Analysis

Interestingly, this relative price stability indicates that sellers remain firm in their asking prices, even as buyer interest lags. In terms of sales performance, there was a 1.9% increase from August to September; however, figures still fall short of the 10-year average. Since the Bank of Canada began raising interest rates in March 2022, sales have struggled to rebound, even with the recent rate reductions.

Conclusion

Could this be the calm before the storm? As more buyers prepare to dive into the market, it might be wise to keep a close eye on the housing landscape. Are we on the brink of a major shift in Canadian real estate? Only time will tell!