TD, one of Canada’s biggest banks, predicted in a period that Canada will grow through a great adjustment phase in 2024. They expect house prices to drop by almost 10% in the first half of 2024. We hope this article offers a clearer understanding of the forecast to support your future real estate investment decisions.
Home prices dropping steadily
Rishi Sondhi, TD Bank economist, said that they are watching out for a turning point. In October 2023, the ratio of sales to new listings in Ontario experienced a significant decline, dropping to 39% from May’s 63%. This decrease is primarily attributed to an increase in available listings, coupled with a consistent decrease in sales.
As defined by the Canada Mortgage and Housing Corp. (CMHC) sales-to-new listings ratio (SNLR) is a metric that compares the number of existing home sales to new listings in a market. It’s a tool used to gauge the temperature of the housing market, with a lower ratio indicating a market favourable to buyers and a higher ratio suggesting an advantage for sellers.
Recently, the Canadian Real Estate Association (CREA) reported a significant drop in the national SNLR to 49.5% in October, marking a 10-year low from a peak of 67.9% in April. The average long-term national SNLR stands at 55.1%.
Larry Cerqua, CREA’s chair, commented in a press release, “As we enter November, it seems many potential home buyers are opting out of the market. October’s figures also suggest that some sellers are postponing their selling plans until the spring season.”
CREA’s data indicates that, as of the end of October, the Canadian market had enough inventory to last 4.1 months at the current sales rate, a metric known as ‘months of inventory.’ This figure is up from May’s low of 3.1 months but still below the long-term Canadian average of nearly five months, giving homesellers a slight edge.
Would house prices go lower than pre-pandemic levels?
Despite these changes, economists at TD Bank caution that even with a potential 10% decrease in house prices, they would still be 15% higher than pre-pandemic figures.
If Bank of Canada makes cuts in the second half of 2024, the potential house prices will again start increasing. This means, you can still expect uncertain rates hikes.
In contrast to the national trend, Calgary’s housing market has seen an increase in home prices in the latter half of 2023, a trend expected to continue into 2024. Royal LePage forecasts that Calgary will lead major markets in price growth next year, with an estimated 8% increase in aggregate home prices to $711,612. Corinne Lyall, a broker and owner at Royal LePage Benchmark, notes that, unlike other Canadian cities, Calgary’s home prices have remained stable due to a persistent shortage of supply.
A weak real estate market: CIBC Economist
Currently, there are more houses on the market than there are buyers. On average, a property is up for sale for 4.1 months before it is sold or suspended. The condo market has been the fastest to slow down but the economist, Benjamin Tal, feels this is a healthy situation to be in.
On the other hand, James Laird, co-CEO of Ratehub.ca and president of CanWise mortgage lender, expects property prices to rise slightly in 2024 owing to strong immigration numbers. “Two years from now when interest rates are (lower) and demand is there, the supply of new units will not be there,” Laird said.
If you’re planning to enter the market, do your due diligence and work with an experienced realtor, who knows the nitty gritties of neighbourhoods you’re interested in purchasing. Don’t rush the process and wait for the right home to come to you.