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Housing and Mortgage Market Review in Canada 2024

Falling inflation sets the stage for Canadian housing market recovery in 2024

Inflation in Canada continues to march lower, albeit with some volatility along the way. December saw a slight uptick to an annualized 3.4% from 3.1% in November, but the trend is still clearly to the downside.

There are also now very tangible signs of a slowdown in the economy. Q3 GDP registered a surprisingly weak -1.1% annualized reading, while the unemployment rate nationally has steadily risen from 5.0% in Q2 to 5.8% at the end of 2023. 

With risks of a reacceleration of inflation fading, the path to rate cuts in 2024 is now clear. As of the time of writing, markets are expecting four quarter-point rate cuts beginning in April, which would bring the Bank of Canada overnight rate to 4% by the end of the year, equating to a consumer prime rate of 6.2%.

The high probability of rate cuts this spring has bolstered consumer confidence with regards to real estate back. The Bloomberg-Nanos Real Estate Outlook Index, which measures the share of survey respondents who expect house prices to rise over the next year, has risen sharply in recent weeks from a low of 37 in early November to 45 as of January. More optimism around housing should translate into stronger demand heading into the spring as prospective buyers, who may have previously been sidelined over fears of additional rate hikes, have now been given an “all clear” from the Bank of Canada to re-engage

Mortgage rates continue to drop

Bond markets have priced in rising odds of rate cuts in 2024, with the bellwether 5-year—a major driver of fixed mortgage rate pricing—having fallen roughly 80 basis points, or 0.8%, from the October highs.

That paved the way for a decline in fixed mortgage rates, which have fallen roughly 70 bps over that same time. But with bond yields having risen sharply in recent weeks, there’s now a floor under mortgage rates for the time being.

Mortgage growth remains tepid, with outstanding balances up just 0.25% in November and up 3.4% over the past year—the lowest rate of annual growth since 2001. 

Mortgage originations were down 9% year-over-year in November, but there was a notable uptick in variable rate loans to 16% of the total. The share of variable-rate originations will likely push above 25% in the coming months as borrowers increasingly position for Bank of Canada rate cuts later this year.

Real Estate and Housing Market Update in Lethbridge, AB

January 2024 – With 115 sales and 129 new listings, the ratio of sales to new listings increased to 89 percent, leading to a decrease in inventory levels for the month. Inventory levels fell to 293 units, which is 46 percent below the long-term average for this month and represents the lowest January inventory reported since 2007.

The combination of strong sales and limited supply caused the months of supply to drop below three months. Both the average and median home prices showed an upward trend compared to the levels reported last month and last year. While price fluctuations may occur due to seasonal factors and the types of sales, January prices surpassed the total annual figures for 2023.

Last March saw 150 home sales and 225 new listings. These inventory levels were well below long term trends for March. Time will tell how March 2024 compares, and whether or not we will see growth and movement back towards typical levels.

What it all means 

Elevated mortgage rates and challenging affordability dynamics weighed on demand in Q4, but home sales did end the year on a positive note in December. With rates set to decline, and with population growth continuing to set records, the market looks set to remain in balanced territory this year. Improving affordability from falling mortgage rates and strong wage gains this year should help reinvigorate mortgage demand in 2024. For more insight about the housing and mortgage market in Canada, contact Chris Marriner.

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