Is a resurgence brewing in the Canadian real estate market? After a turbulent period marked by high rates and soaring property values, signs of a potential rebound emerge. The convergence of several key factors—including falling interest rates, stabilizing housing prices, and a slower economy—suggests that the tide may be turning in favour of home buyers. Here, we look to today’s housing market in Canada to identify opportunities and challenges for prospective homebuyers.

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Key Takeaways

• Declining interest rates are gradually improving mortgage affordability and boosting buyer confidence.
• Housing prices show signs of stabilization, creating predictability and encouraging potential buyers to re-enter the market.
• Despite high debt levels, record savings rates could fuel a market resurgence as economic conditions improve.

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The Ripple Effect of Rate Cuts

The Bank of Canada’s recent interest rate cuts have brought optimism to the housing market. Since June 2024, the country’s benchmark borrowing rate has dropped by three-quarters of a percentage point (0.75%), bringing down lender prime rates and, by extension, variable mortgage rates. Hopefully, further declines in the bond market will follow with lower fixed mortgage rates, which means more affordable mortgage payments, potentially stimulating homeownership demand. Future bond market expectations are for further rate cuts into 2025, which could help more prospective buyers pass the mortgage stress test and enter the market.

While recent rate cuts have had a muted immediate effect on home sales, markets such as Toronto are seeing increased listings, driven partly by investors looking to offload condos at a favourable time. This boost in supply could lead to more pricing adjustments that benefit buyers, especially those interested in condos.

The Stability Factor

One of the biggest hurdles for homebuyers over the last two years has been the unpredictability of home prices. However, the market is starting to show signs of stabilization. For instance, in Ontario, average home prices declined by 2.4% month-over-month in August 2024, and British Columbia witnessed a 2.2% monthly drop. Despite these declines, overall stability is returning, especially in markets like Calgary, which has seen increased listings, creating a more balanced market.

In August 2024, Ontario and British Columbia saw a significant decline in average purchase prices, creating a more favourable environment for potential buyers eager to enter the real estate market at lower price points. The Greater Toronto Area (GTA) has transitioned into a buyer’s market, evidenced by a notable sales-to-new listing ratio (SNLR) of 39.7%, indicating that buyers currently have the upper hand in negotiations and options.

On the other hand, Québec remains a strong seller’s market, with a robust SNLR of 65%, highlighting the ongoing demand for homes in the province. In Atlantic Canada, especially in Nova Scotia, the market also leans towards sellers, as home purchase prices have increased by 4.7% year-over-year, reflecting a healthy rise in property values and continued buyer interest.

In Calgary, the housing market is rebalancing, with a surge of new listings helping to moderate the previously steep price hikes. Even with this adjustment, the demand for housing remains strong, suggesting that market activity will stay lively as buyers and sellers adapt to the changing landscape.

This newfound price predictability encourages prospective buyers, who were previously on the sidelines due to fears of buying at inflated prices. In fact, according to the Canadian Real Estate Association (CREA), national home sales are forecasted to grow by 6.1% in 2024, with further growth expected in 2025 as mortgage rates in Canada continue to fall.

Across Canada, many markets, even in larger cities like Québec and Edmonton, offer the charm and conveniences of urban living at much lower prices than major markets like Toronto, Vancouver, or Calgary. For first-time homebuyers (FTHB), saving for a challenging 20% downpayment can take more than a few decades in more expensive markets. Conversely, prospective homebuyers can reach their goal in less than five years in more affordable markets, making the dream of owning a home much more achievable.

Pent-Up Demand and Savings Surge  

Many potential homebuyers have been waiting for favourable conditions to enter the market, contributing to a build-up of demand. As borrowing costs decrease, more buyers get pre-approvals, signalling an impending uptick in market activity. In August 2024 alone, home sales in Canada rose by 4.8% year-over-year.

During the pandemic and subsequent economic uncertainty, Canadians increased their savings substantially. With the savings rate at its highest level in nearly three decades, many individuals now have the financial capacity to make significant down payments. According to the Canada Housing and Mortgage Corporation (CMHC), financial preparedness could significantly translate into increased purchasing power as mortgage interest rates drop.

Navigating the Mortgage Stress Test

While the market outlook is improving, FTHBs still face the challenge of passing the mortgage stress test. The current stress test requires buyers to qualify at the higher of either the benchmark rate or their contracted rate plus two percentage points (2%), which remains a significant barrier for many. However, as interest rates trend downwards, this hurdle may become less cumbersome, allowing more individuals and families to qualify for mortgages in the coming months.

Is Now the Right Time to Buy?

The big question for many potential homebuyers is whether now is the right time to make a move. While it’s impossible to predict the future with absolute certainty, the current conditions do present a unique opportunity for prospective buyers:

Interest Rates: With inflationary pressures and interest rates falling, this could soon mean more affordable mortgage payments and easier qualification.

Price Stability: With home prices stabilizing and showing moderate declines in some regions, buyers can better plan their budgets without worrying about sudden, unpredictable price hikes.

Market Dynamics: Increased listings, particularly in major cities, could result in further pricing adjustments, creating opportunities for buyers.

CREA forecasts that the national average home price will rise by 2.5% in 2024 and an additional 5% in 2025, indicating that the current price dip may not last long. Therefore, those who act soon might secure better deals than those who wait for the market to heat up again.

Seize the Moment

The Canadian real estate market is showing signs of a cautious resurgence. A rising unemployment rate and tepid economic growth should provide the cover that average households need to keep their cost of borrowing within their budgets. Falling mortgage interest rates, stabilizing home prices, and pent-up demand create a window of opportunity for buyers waiting on the sidelines. While challenges such as the stress test still exist, the overall landscape is becoming increasingly favourable for those ready to make their move. 

If you are considering buying a home, now might be the time to take action. Securing a low mortgage rate could make all the difference, as the mortgage rate forecast expects falling interest rates. Locking a low rate on today’s best mortgage can provide all the confidence to move forward with your mortgage strategy. Reach out to nesto mortgage experts and take the first step towards homeownership.

Are you still deciding whether to go fixed or variable or waiting for rates to drop? Nesto’s Prime Time can help you save with a discounted mortgage payment now while waiting to lock in later. Contact nesto’s mortgage experts to help you choose the best mortgage for your unique needs.

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Why Choose nesto

At nesto, our commission-free mortgage experts, certified in multiple provinces, provide exceptional advice and service that exceeds industry standards. Our mortgage experts are non-commissioned salaried employees who provide impartial guidance on mortgage options tailored to your needs and are evaluated based on client satisfaction and advice quality. nesto aims to transform the mortgage industry by providing honest advice and competitive rates using a 100% fully digital, transparent, seamless process.

nesto is on a mission to offer a positive, empowering and transparent property financing experience – simplified from start to finish.

Contact our licensed and knowledgeable mortgage experts to find your best mortgage rate in Canada.

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