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Navigating the Canadian Housing Market: Insights on Interest Rates and Home Buying Intentions

The past two years saw 51% of Canadians delaying their home buying plans, responding to the rise in borrowing costs. This surge led to a significant reassessment of intentions among millions of Canadians. Since March 2022, when the Bank of Canada began raising its key lending rate, over a quarter of the adult population (27%) actively participated in the housing market. However, more than half of them (56%) postponed their property search due to escalating interest rates, according to a recent survey by Royal LePage and Leger.

As inflation inches closer to the desired 2% target, expectations are high for the Bank of Canada to make its first cut to the overnight lending rate later this year. This anticipated reduction is poised to bring relief to variable-rate mortgage holders and those who deferred their home buying plans. Among those who delayed their purchase, 51% are ready to resume their search if interest rates drop. Specifically, 10% await a mere 25-basis-point drop, 18% anticipate a cut of 50 to 100 basis points, while 23% seek more than a 100-basis-point reduction before reconsidering their search.

Though 20% of sidelined buyers have abandoned their plans altogether, another 12% are poised to re-enter the market if the Bank of Canada's key lending rate remains steady. Among those aiming to re-enter once rates decrease, 44% prefer a four-year or five-year fixed-rate mortgage, the most favoured mortgage type and term in Canada. This number doubles the respondents intending to opt for a variable-rate mortgage (22%), while another 12% plan to secure a short-term fixed-rate mortgage.

Despite the challenges posed by rising interest rates, 65% of respondents remain actively engaged in the home buying process. This engagement spans from casual browsing of listings (39%) to continuing to save for a down payment (19%), applying for a mortgage pre-approval (12%), or already having obtained one (7%). However, 26% of respondents have temporarily disengaged from the home shopping process.

Ready to make your move in the housing market? Don't let rising interest rates hold you back! Whether you're ready to buy, actively browsing listings, or just considering your options, now is the time to stay informed and prepared. Let's take the next step together!

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Ottawa's Real Estate Market: Spring Surge and Shifting Dynamics

Early signs of a vibrant spring real estate market are evident in Ottawa's MLS® data. In March 2024, the Ottawa Real Estate Board recorded 1,165 home sales, marking a 10% increase from the same period last year. However, despite this surge, sales remained 21.5% below the five-year average and 15% below the ten-year average for March.

Year-to-date figures also depict a positive trend, with 2,678 homes sold in the first three months of 2024, reflecting a 13.1% increase from the corresponding period in 2023. Curtis Fillier, President of OREB, highlights the overall health of Ottawa's real estate market, anticipating an active spring and summer. Fillier notes the growing confidence among sellers, as indicated by the rise in new and active listings, coupled with increased showing activity. However, he observes a cautious approach from buyers, likely due to concerns regarding affordability and limited supply.

Fillier suggests a shift is imminent in the market dynamics, driven by post-pandemic adjustments in housing needs. This includes trends such as downsizing, urban migration, and seeking properties better suited to evolving requirements. Consequently, there's mounting pressure on the mid-range property market in Ottawa, which traditionally faces tight inventory levels. Fillier advises both buyers and sellers not to delay their decisions in this evolving market landscape.

In terms of pricing, the MLS® Home Price Index (HPI) reveals consistent growth. The composite benchmark price reached $636,700 in March 2024, reflecting a 2.7% increase year-over-year. Single-family homes saw a benchmark price rise of 2.6%, reaching $719,000, while townhouse/row units and apartments experienced modest gains as well.

The average price of homes sold in March 2024 was $682,078, up 5.1% from the previous year, with the year-to-date average price showing a 3.2% increase. Overall, the dollar volume of home sales in March 2024 surged by 15.6% compared to the same month in 2023.

In terms of inventory and new listings, March 2024 witnessed a 13.5% increase in new residential listings compared to March 2023, totalling 2,074 new listings. However, this figure remained slightly below the five-year average and significantly lower than the ten-year average for March. Active residential listings also rose by 18.3% year-over-year, with 2,543 units on the market by the end of March 2024. Despite this increase, months of inventory only saw a slight uptick, indicating a persistent imbalance between supply and demand in the Ottawa real estate market.

Take Charge of Your Real Estate Journey Today!

Whether you're looking to buy or sell in Ottawa's dynamic market, now is the time to act. Don't wait on the sidelines as opportunities unfold and market conditions evolve. Reach out and we can guide you through every step of the process. Seize the moment and make your move in Ottawa's buzzing real estate scene!

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Bank of Canada Holds Steady: Balancing Inflation and Stability in Economic Policy

The Bank of Canada has opted to maintain its overnight lending rate at 5% for the fifth consecutive occasion, as announced in its scheduled interest rate declaration on March 6th. It affirmed its commitment to keep the policy rate steady at 5% and to continue the process of normalizing the Bank’s balance sheet.

Despite a drop in the annual inflation rate to 2.9% in January, the Bank cited underlying inflationary factors like shelter costs as grounds for maintaining the current interest rate level. It expressed the desire to witness further easing of inflation and the establishment of price stability before considering rate adjustments.

Economists anticipate potential rate reductions later in the year, possibly in the June announcement, should inflation continue to decrease toward the central bank’s target of 2%. The Bank of Canada's next announcement is scheduled for April 10th, 2024.

Today, the Bank maintained its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%, while also continuing its policy of quantitative tightening.

The global economic landscape saw a slowdown in growth in the fourth quarter, with the US experiencing a slight deceleration but maintaining robust and broad-based GDP growth. Meanwhile, the euro area's economic growth remained stagnant after a contraction in the third quarter. Inflation in both the US and the euro area continued to ease, while bond yields rose and corporate credit spreads narrowed. Equity markets showed strong gains, and global oil prices were slightly higher than previously projected.

In Canada, fourth-quarter GDP growth exceeded expectations, driven by exports, although overall economic growth remained below potential. Despite a modest increase in consumption, final domestic demand contracted, primarily due to a significant decline in business investment. Employment growth continued to lag behind population growth, and there were indications of easing wage pressures. Overall, the data suggest an economy operating with modest excess supply.

CPI inflation eased to 2.9% in January, mainly due to a moderation in goods price inflation. However, shelter price inflation remained elevated and remained the primary contributor to overall inflation. Underlying inflationary pressures persisted, with year-over-year and three-month measures of core inflation remaining in the 3% to 3.5% range. Although the proportion of CPI components growing above 3% declined, it remained above historical averages. The Bank anticipates inflation to stay close to 3% during the first half of the year before gradually easing.

The Governing Council's decision to maintain the policy rate at 5% and continue the normalization of the Bank’s balance sheet reflects concerns about inflation risks, particularly regarding the persistence of underlying inflation. The Council aims to witness further and sustained easing in core inflation while focusing on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behavior. The Bank remains steadfast in its commitment to restoring price stability for Canadians.

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Ottawa's real estate market is on fire!

In February 2024, the Ottawa Real Estate Board reported a total of 886 homes sold through the MLS® System, marking a notable 15.2% increase compared to the same month in 2023. However, these sales figures fell 13.8% below the five-year average and 5.7% below the 10-year average for February.

OREB President Curtis Fillier emphasized the robust and active nature of the Ottawa real estate market despite higher prices and stable interest rates. Metrics across various indicators showed positive growth from the previous year, indicating significant activity among both buyers and sellers. Fillier, however, acknowledged the ongoing affordability challenges, with many individuals still unable to participate in the market.

The recent report from the Municipal Property Assessment Corporation (MPAC) revealed a scarcity of communities with homes under $500,000. A decade ago, 74% of Ontario residential properties had a value estimate below $500,000, but this has dwindled to only 19% today. Fillier advocated for impactful measures, such as allowing four residential units on property lots and eliminating exclusionary zoning, to address the lack of affordable housing.

Examining price trends, the MLS® Home Price Index (HPI) showcased a 2.8% increase in the overall composite benchmark price to $628,500 in February 2024 compared to the previous year. The benchmark prices for single-family homes, townhouses/row units, and apartments also exhibited varying gains. The average home price for February 2024 was $651,340, showing a 2% uptick from the same month in 2023. The dollar volume of all home sales surged by 17.5%, reaching $577 million in February 2024.

OREB cautioned against relying solely on the average sale price as an indicator of specific property value changes, emphasizing the variability across different neighbourhoods.

In terms of inventory and new listings, February 2024 witnessed a substantial 29.5% increase in new residential listings, totalling 1,539. Although these new listings were 10.3% above the five-year average, they remained 3.3% below the 10-year average for February. Active residential listings at the end of February 2024 numbered 2,158, marking a 16.3% gain from the same month in 2023. However, they were 59.6% above the five-year average and 17.7% below the 10-year average for February. The months of inventory stood at 2.4, remaining unchanged from February 2023, indicating the time it would take to sell current inventories at the existing rate of sales activity.

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Ottawa Real Estate Sees 16.5% Surge in January Home Sales!

In January 2024, the Ottawa Real Estate Board reported a total of 629 homes sold through the MLS® System, marking a 16.5% increase compared to January 2023. Despite this positive trend, home sales were 10.7% below the five-year average and 3.9% below the 10-year average for the month.

OREB President Curtis Fillier noted that while there is increased showing activity, the market remains relatively quiet compared to pre-pandemic standards. Buyers are cautiously approaching the market, taking advantage of the slower pace to find their ideal property. Fillier advised sellers to adjust their expectations and carefully consider pricing and timing strategies with guidance from their REALTOR®.

Brandon Reay, OREB’s policy and external relations manager, emphasized the impact of low supply on market conditions. He advocated for meaningful policy changes, including streamlining processes at the Ontario Land Tribunal, eliminating exclusionary zoning, and permitting four units on residential lots to address the housing crisis.

On the pricing front, the MLS® Home Price Index (HPI) showed a 3.2% year-over-year gain in the overall composite benchmark price, reaching $621,600 in January 2024. Single-family homes saw a 3.7% increase to $703,500, while townhouse/row unit prices decreased by 2.1% to $462,200. The benchmark apartment price rose by 3.7% to $418,500. The average price of homes sold in January 2024 was $631,722, a 1.8% increase from the previous year.

The dollar volume of home sales in January 2024 amounted to $397.3 million, representing an 18.6% increase compared to the same month in 2023. OREB cautioned that while the average sale price is useful for tracking trends, it may not accurately reflect specific property values, which vary across neighborhoods.

Regarding inventory and new listings, there was a 7.3% increase in new residential listings in January 2024, totaling 1,271. Active residential listings at the end of the month numbered 1,961, reflecting a 4.5% increase from January 2023. Despite being 57.4% above the five-year average, active listings were 16.6% below the 10-year average for January. The months of inventory decreased from 3.5 in January 2023 to 3.1 in January 2024, indicating a measure of the time it would take to sell existing inventories at the current sales rate.

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The trademarks REALTOR®, REALTORS®, and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are member’s of CREA. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by CREA and identify the quality of services provided by real estate professionals who are members of CREA. Used under license.