In a significant update, the Canadian Real Estate Association (CREA) has once again revised its forecast for the housing market, signaling a slow and steady landscape for potential buyers and sellers alike as the year progresses. Despite recent interest rate cuts by the Bank of Canada, the anticipated surge in home sales has not materialized as hoped.

According to CREA's latest analysis, the national housing market is expected to remain in a "holding pattern" until spring 2024, with an estimated 468,900 properties expected to change hands this year. This represents a 5.2% increase from 2023, a reduction from earlier projections of 6.1% in July and a more optimistic 10.5% in April.

The updated forecast came alongside disappointing September data, which revealed that the average home price sold was $669,630—up 2.1% from a year earlier. For 2024, CREA now estimates a modest annual increase of 0.9% in home prices, forecasting an average price of $683,200, a downgrade from the previous expectation of a 2.5% rise.

While the number of homes sold in September witnessed a year-over-year increase of 6.9%, month-over-month sales showed only a slight 1.9% uptick from August. This stagnation follows the Bank of Canada's series of interest rate cuts, which aimed to stimulate the market and make housing more accessible.

Real estate agent Davelle Morrison from Bosley Real Estate Ltd. expressed surprise at the slow market response, stating, "Buyers aren't jumping in with both feet yet." This sentiment echoes the experiences of many agents who are finding longer selling times and fewer offers on listings, raising concerns about the overall health of the market.

The inventory available for sale is also noteworthy—end-of-September data showed 185,427 properties listed, a 16.8% increase from the previous year but still below the historical average of roughly 200,000 for this period. New listings increased by 4.9% month-over-month, reflecting slight improvements across major Canadian markets.

CREA senior economist Shaun Cathcart commented on the situation, noting that while sales have indeed risen in the months following rate cuts, the gains have been modest. With expectations of more aggressive rate cuts on the horizon, potential buyers may be holding off in anticipation of even better housing conditions.

The central bank, having initiated rate cuts in June 2024, has lowered its key rate by a total of three-quarters of a percentage point, bringing it down to 4.25%. As we approach the next decision on October 23, Governor Tiff Macklem hinted at further cuts, with the possibility of a half-percentage point reduction, which could reshape the mortgage landscape in the upcoming spring.

As consumers brace for potentially lower mortgage rates, BMO senior economist Robert Kavcic pointed out that while the rate relief journey continues, the market has not yet responded significantly to earlier cuts. Anticipation is building for a rebound in the resale housing market, with CREA projecting a 6.6% increase in home sales for 2025 and average prices climbing to $713,375—a 4.4% rise.

However, Morrison cautioned against returning to the aggressive spending habits of the past. "Buyers seem more cautious now," she said, highlighting a changed mentality in the wake of economic fluctuations. "They're trying to protect themselves for what may or may not happen later," indicating a significant shift in consumer behavior that may influence the market's trajectory.

As the Canadian housing market grapples with these challenges and changes, all eyes will be on upcoming economic indicators and potential shifts in buyer sentiment. The unfolding story of the Canadian real estate market is far from over, and many wonder how the next chapter will develop.