How is Canada's housing market shaping up for 2024?

Activity remains subdued – but is there cause for optimism on the horizon?

How is Canada's housing market shaping up for 2024?

Borrowers across the country may be waiting for the first indication that the Bank of Canada is readying interest rate cuts in 2024 – but there’s been much-needed good news on the rate front in recent weeks with a sharp drop in five-year Government of Canada bond yields.

Perched just below 3.80% at time of writing, that measure – typically the sole most significant influence of fixed mortgage rates in Canada – has fallen precipitously since the middle of October, hitting a low not seen since the end of the summer.

While the national housing market is still in the midst of a protracted slump, that development was a positive one, with other economic indicators also trending in the right direction, according to a prominent mortgage broker based in Newfoundland.

Robert Jennings (pictured), of East Coast Mortgage Brokers in St. John’s, told Canadian Mortgage Professional that while he didn’t expect a massive housing and mortgage resurgence in 2024, the signs for a busy market next year were increasingly evident.

“What I expect is inventory to creep up once again – not at the same extreme levels that some are projecting in the GTA [Greater Toronto Area] and other places,” he said. “We know a lot of mortgages, a lot of 2019s, are coming up for renewal in in 2024. So we plan on being busy.

“As mortgage brokers, we’re already seeing fixed rates decrease… because inflation is coming down. The US CPI [consumer price index] came in under. I won’t pretend to be an economist, that [bond yield figure] can go up just as fast as it came down – but we should have some rate relief in 2024.”

That’s likely to result in a steady and stable year ahead for the Newfoundland market, he said, marked by gradual progress rather than spectacular growth. “And I would take that every year until I retire as opposed to some extreme ebbs and flows,” he added.

Which regions are most affected by the recent market downturn?

Elsewhere, interest rate increases over the last 20 months have thrown cold water over the housing market, with a brief resurgence during the spring quelled by two consecutive summer Bank of Canada hikes.

Ontario remains the province that’s been most significantly impacted by that downturn, according to a new analysis by Royal Bank of Canada assistant chief economist Robert Hogue, which said home resales there marked their lowest levels – excluding the onset of the COVID-19 pandemic – since the global financial meltdown of the late 2000s.

Across the country, there’s little indication that the market will reverse course in 2024 and see another surge, Hogue said.

“High interest rates, major affordability challenges and mounting economic uncertainty have kept homebuyer demand muted, especially in high-priced markets in Ontario and BC,” he wrote. “We see this trend continuing into next year.”

The prospect of higher interest costs at renewal could bring an influx of new sellers to the national housing market, a development that would swing momentum back towards buyers and “set the stage for further price erosion” in Ontario and BC, according to Hogue.

Still, activity is likely to remain muted until the Bank of Canada begins to slash interest rates, he added, which RBC expects to take place sometime in the middle of 2024 even with long-term bond yields inching lower before that point.

Bank of Canada decisions will have significant say on 2024 market

Homebuyers across the country are currently “in hibernation” as high interest rates and borrowing costs persist, according to Canadian Real Estate Association (CREA) chair Larry Cerqua.

He said the association’s latest housing market figures – released last week – indicated that Canadians could be shelving their home-selling plans until the spring as they adopt a wait-and-see approach on the trajectory of interest rates.

Shaun Cathcart, senior economist at CREA, reinforced that the Bank of Canada holds all the cards – but added a positive note on the possibility that activity might pick up in 2024. “The rebound in activity this past spring was an example of what we might see next year,” he said.

“It will really come down to whether the Bank of Canada has to increase interest rates again, or whether by next March it’s simply a matter of how soon we’ll see the Bank make its first cut.”