The Canadian housing market is poised for stability in 2024, according to a recent research report from BMO senior economist Robert Kavcic. While interest rates are expected to ease, don't anticipate a return to the exuberant price gains of previous years.
Stability on the Horizon
Kavcic notes that the Canadian housing market is likely to experience overall stability this year. Factors such as lower resale prices, easing mortgage rates, and pent-up demand are expected to create a solid foundation for the market. However, Kavcic emphasizes that a return to previous price highs in certain locations is unlikely at this juncture.
Price Trends and Projections
Over the past 24 months, home prices have been on a downward trend since the initiation of the Bank of Canada's rate-hike cycle. As of December, the national average selling price stood at $657,145, marking a 20% decline from the peak reached in February 2022. This downward pressure is expected to persist through the spring, particularly in Ontario, which witnessed substantial price gains during the pandemic.
According to the Canadian Real Estate Association (CREA), the average national price is forecasted to rise by 2.3% in 2024 to reach $694,173. While higher-than-average gains are anticipated in Alberta, Quebec, and most of the Atlantic provinces, British Columbia and Ontario are expected to see flat prices.
Affordability Challenges Persist
Despite the pullback in home prices, persistently high interest rates have offset any benefits in affordability for buyers. RBC economists highlight that affordability issues will restrain any potential price recovery. The National Bank's Housing Affordability Monitor recorded a significant deterioration in affordability in the third quarter, coinciding with a peak in bond yields and fixed interest rates.
Kavcic emphasizes that affordability remains strained, limiting the potential for a rebound in home prices. Anticipated Bank of Canada rate cuts later this year may help, but significant improvement for homebuyers requires further declines in mortgage rates or stagnant prices coupled with an increase in incomes.
The Bright Side
Despite these challenges, Kavcic points out that the market is currently showing few signs of forced selling. This suggests a measured and controlled adjustment in the real estate landscape rather than a chaotic downturn.
In conclusion, while stability is expected to return to Canada's housing market, caution remains the watchword. Homebuyers and investors should keep a close eye on market signals and be prepared for a nuanced and evolving landscape in the months ahead.
Source From: Wealth Professional
Adapted by Jose Gustavo
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