The Canadian Real Estate Association is downgrading its housing market forecast for the remainder of the year again, saying the Bank of Canada’s interest rate cuts haven’t spurred the gradual improvement it previously anticipated.
CREA said Tuesday it now thinks the national housing market will remain in “more of a holding pattern” until next spring with 468,900 properties forecast to trade hands this year.
That would mark a 5.2 per cent increase from 2023, down from its July prediction of a 6.1 per cent bump and its April outlook of 10.5 per cent.
The revised forecast came as CREA reported the latest national home sales and pricing data for September.
It said the average price of a home sold last month amounted to $669,630, up 2.1 per cent from September 2023. The association said it is now forecasting just a 0.9 per cent annual increase for 2024 to $683,200, down from its previous outlook of a 2.5 per cent annual increase.
On a year-over-year basis, the number of homes that changed hands in September rose 6.9 per cent, but CREA said sales ticked up just 1.9 per cent month-over-month from August after the Bank of Canada’s third straight rate cut.
Toronto-based real estate agent Davelle Morrison called it somewhat surprising that buyers “aren’t jumping in with both feet yet.”
“I’m certainly living that with my clients in terms of trying to sell their condos for them. It’s certainly taking a little bit longer than one would like,” said Morrison, a broker with Bosley Real Estate Ltd.
“It would be one thing if we had lots of buyers and multiple offers and lots of showings, but the buyers are just taking their time.”
There were 185,427 properties listed for sale across Canada at the end of September, up 16.8 per cent from a year earlier but still below historical averages of around 200,000 for this time of the year.
New listings grew 4.9 per cent month-over-month in September due to broad-based gains across most of the country’s biggest markets.
The association said a “sharper rebound” is expected by next spring.
“Sales gains are now three for three in the months following interest rate cuts, which is a trend even though the increases weren’t headline-grabbing,” said CREA senior economist Shaun Cathcart in a press release.
“That said, with the pace of rate cuts now expected to be much faster than previously thought, it’s possible some buyers may choose to hold off on a purchase for now. This could further boost the rebound expected in 2025 at the expense of the last few months of this year.”
The Bank of Canada began its rate-lowering process in June and has cut its key rate by a quarter-percentage point a total of three times so far this year, bringing it to 4.25 per cent.
The central bank faces its next interest rate decision on Oct. 23. Governor Tiff Macklem has said it is reasonable to expect more cuts are coming given recent progress made on lowering inflation.
With expectations of more aggressive easing, including a potential half-percentage point cut, Canadians “could be presented with mortgage rates by next spring that start to make things make more sense,” said BMO senior economist Robert Kavcic in a note.
“All told, the resale housing market still hasn’t responded meaningfully to early Bank of Canada rate cuts, which was entirely expected,” he said.
“We’re moving further down the rate-relief path, but it’s still going to take more to get the market moving again.”
CREA said Tuesday it anticipates national home sales will climb 6.6 per cent in 2025 as interest rates continue to decline and spark renewed demand, while average home prices are forecast to rise 4.4 per cent to $713,375 next year.
Morrison said that while lower interest rates are sure to lead to higher prices in the market, she suspects buyers may prove to be more cautious than in years past.
“I feel like they’re not drunk on money anymore. I think that this (economic environment) has kind of taught them something … and now they’re trying to protect themselves for what may or may not happen later,” she said.
“So I’m not sure that we’re going to go back to the good old days where people are going crazy and throwing money at the housing market.”
This report by The Canadian Press was first published Oct. 15, 2024.
