Economists Foresee A Significant Turning Point In The Housing Market This Year, Coinciding With The Imminent Interest Rate Cuts
Economists Foresee A Significant Turning Point In The Housing Market At a Glance
Good news for the Canadian housing market! After a cautious year with rising borrowing costs, economists predict a rebound in 2024. This is largely due to forecasts that the Bank of Canada may begin cutting its key interest rate from the current level of five percent as early as the second quarter of this year. While there have been softer market conditions since the end of last summer, there are indications that the market is starting to turn around. Although price declines have mainly been an Ontario phenomenon, home prices were also starting to soften late in the year in other areas. However, prices were mostly holding firm or continuing to climb in provinces such as Alberta, Saskatchewan, New Brunswick, Prince Edward Island and Newfoundland and Labrador.
The interest rate story is one of many unknowns lingering after the calendar flipped to the new year, but economists are optimistic that a cut in interest rates will bring more activity and small increases in prices over the second half of the year. While there may not be a rapid recovery, any rate cut will spur excitement and activity in the housing market.
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The Details Of Economists Foresee A Significant Turning Point In The Housing Market This Year, Coinciding With The Imminent Interest Rate Cuts
After a cautious year with changing expectations due to higher borrowing costs, economists are optimistic that the Canadian housing market will experience a rebound in 2024. This largely depends on the forecast that the Bank of Canada may begin lowering its key interest rate, currently at five percent, as early as the second quarter of this year.
TD Bank economist Rishi Sondhi stated that they are monitoring the market for signs of a turning point. Weak sales and price activity in recent months suggest that the market, at least in terms of demand, is starting to recover.
According to the Canadian Real Estate Association, the housing market has experienced softer conditions since the end of last summer, with both sellers and potential buyers taking a more cautious approach. While price declines have mainly been seen in Ontario, there are indications that prices are also starting to soften in the Fraser Valley, Winnipeg, and Halifax. However, prices in other provinces like Alberta, Saskatchewan, New Brunswick, Prince Edward Island, and Newfoundland and Labrador have either remained stable or continued to rise.
Larry Cerqua, chair of the Canadian Real Estate Association, noted that he does not expect any major headlines in the resale housing market in the next few months. This suggests a positive outcome, as a balanced and stabilizing market is desirable.
Realtor Tim Hill in Vancouver shared his optimism, stating that sentiment among his clients has gradually shifted due to modest price improvements in recent months. He believes consumer confidence will increase, and people will begin considering housing moves again in 2024.
While the Bank of Canada has kept interest rates steady in the face of moderated inflation, there is still a possibility of rate hikes. However, most forecasters expect the next move to be a rate cut. Sondhi mentioned the risk of maintaining high rates if inflation remains elevated.
Nathan Janzen, assistant chief economist at RBC, pointed out that there are many uncertainties as the new year begins. In addition to watching the central bank, he highlighted the weakening labor market as a factor affecting housing activity.
Janzen predicts that housing activity will remain slow in the early stages of 2024, but as inflation slows down, the Bank of Canada can consider interest rate cuts, which will likely lead to more activity and gradual price increases in the second half of the year. He does not anticipate a rapid recovery and expects the rate-cut process to be slow initially.
Real estate agent Anne Marie Lorusso believes that any rate cut will bring excitement and activity to the market. She expects a good spring market, where sellers will hold on to their prices, and buyers will need to carefully consider their options.
However, Hill advises his clients not to wait, even though borrowing costs are still high. He warns that once the market picks up, there will be a rush and increased competition among buyers.
Overall, economists are hopeful for a rebound in the Canadian housing market in 2024, especially if the Bank of Canada lowers interest rates.
Wrap Up
Economists are predicting a potential rebound in the Canadian housing market in 2024, following a year of caution and shifting expectations due to rising borrowing costs. The optimism is based on forecasts that the Bank of Canada may begin cutting its key interest rate from the current level of five percent in the second quarter of this year. However, softer market conditions have been observed since the end of last summer, with sellers and buyers staying on the sidelines. While price declines have been mainly seen in Ontario, there are also signs of softening prices in other regions.
The Canadian Real Estate Association expects a stable market that leans towards a soft-landing scenario. Some realtors are already seeing increased consumer confidence and modest price improvements. The decision on interest rates remains uncertain, as the central bank has held rates steady but could potentially raise them depending on inflation levels. It is anticipated that interest rate cuts could spur activity and small increases in prices in the later part of the year. Nonetheless, the recovery is expected to be gradual, and potential home buyers are advised not to delay their purchasing decisions.