Are Interest Rates Dropping?

Yes, interest rates are expected to go down by 2027, but the decrease in 5-year fixed rates is likely to be just 0.20%. This small drop might not make up for the extra costs of waiting to buy a home. Variable rates are expected to drop by about 1.75%. This might sound appealing, but it’s crucial to consider whether you’re comfortable with paying a higher rate right now compared to fixed rates.

• Fixed Rates: These rates stay the same for a set period, usually 5 years. This means your monthly payments won’t change, making it easier to budget. Right now, a 5-year fixed rate is around 4.64%.
• Variable Rates: These rates can go up or down with the market. They usually start higher than fixed rates but are expected to decrease until 2027. Currently, an insured variable rate is approximately 6%.
  
  *Rates are for illustrative purposes only. They are subject to change without notice. This is not a commitment to lend, pre-approval or approval. 

Real Estate Market Trends

The Canadian real estate market is strong, with home prices expected to rise by over $100,000 by 2027. Waiting for lower interest rates could mean paying much more for the same home in the future.

Let’s Compare Your Options

Here’s a look at the different choices you have:

1. Buy Now with a Fixed Rate
   • Pros: You lock in today’s rates, so your payments stay the same.
   • Cons: You might miss out on future rate drops.
2. Go with a Variable Rate
   • Pros: Expected to decrease until 2027, potentially saving money if rates drop further.
   • Cons: Initially higher than fixed rates, impacting the immediate budget.
3. Wait for Lower Fixed Rates
   • Pros: Rates might drop slightly.
   • Cons: Home prices are likely to go up, which could cost you more in the long run.

“The best time to buy a home was 20 years ago, the second best time is today.” –  Unknown

How I Can Help

Figuring out interest rates and market trends can be confusing. As your mortgage broker, I simplify the process and help you explore all your options. I will prepare all your options laid out next to each other so you can make an informed decision. Together, we’ll calculate your potential savings and find the best plan for you. 

Take Action Now

Don’t let uncertainty about rates stop you from buying a home. Contact me today to discuss your options. Whether you prefer fixed or variable rates, I’m here to help you make a smart decision.

In Conclusion,

Buying a home is a big decision. It’s not just about interest rates—it’s about securing your future in a growing market. Understanding the differences between fixed and variable rates, and knowing the trends in home prices, can help you make the best choice.

Get in touch today to start planning your home purchase with expert advice and personalized support. Let’s make sure you have all the information you need to make a wise decision in today’s real estate market.

New Homes Market

Supply and Demand Dynamics

The new home market in Canada is expected to experience a moderate increase in supply. However, this increase may not be sufficient to meet the rising demand, particularly in major urban centers. The supply-demand imbalance is driven by several factors:

• Population Growth: Immigration and urbanization continue to drive population growth in metropolitan areas, increasing the need for new housing.
• Construction Costs: Rising construction costs, driven by labor shortages and material price increases, are slowing down new housing projects.
• Regulatory Environment: Stringent zoning laws and lengthy approval processes are also contributing to the slow pace of new housing developments.

Regional Insights

• Toronto: The Greater Toronto Area (GTA) remains a hotspot for new home construction, but affordability remains a significant concern. Expect to see a continued focus on high-density housing solutions like condos and townhouses.
• Vancouver: In Vancouver, limited land availability and high construction costs will keep new home prices elevated. Efforts to increase supply through rezoning and high-rise developments will be critical.
• Montreal: Montreal is experiencing robust demand for new homes, particularly in suburban areas. The city’s relatively affordable prices compared to other major metros make it attractive for first-time buyers.

Resale Market

Trends and Projections

The resale market in Canada is poised for a dynamic year, with several key trends shaping its trajectory:

• Price Stabilization: After years of significant price growth, many markets are expected to see a stabilization or even a slight decline in home prices, providing some relief to buyers.
• Interest Rates: The direction of interest rates will be a crucial factor. Lower rates could spur more buying activity, while higher rates might cool demand.
• Inventory Levels: Resale inventory levels are anticipated to remain low, which will keep competition high among buyers, particularly for desirable properties.

Regional Insights

• Calgary and Edmonton: Alberta’s major cities are expected to see more balanced market conditions, with steady demand and a reasonable supply of resale homes.
• Ottawa: The nation’s capital is likely to experience continued demand driven by stable employment in the public sector, although price growth may slow compared to previous years.
• Halifax: Halifax is emerging as a strong resale market, with increased interest from both local and out-of-province buyers looking for more affordable options.

Rental Market

Key Factors

The rental market across Canada will remain tight in 2024, influenced by several factors:

• Affordability Challenges: High home prices continue to push more Canadians into the rental market, increasing demand.
• Supply Constraints: Despite efforts to increase rental supply, new units are not coming online fast enough to meet demand.
• Economic Conditions: Economic uncertainty and potential job market fluctuations could impact rental affordability and availability.

Regional Insights

• Toronto and Vancouver: These cities will continue to face high rental demand and low vacancy rates. Rent prices are expected to rise, albeit at a slower pace than in previous years.
• Montreal: Montreal’s rental market is also tight, with increasing demand outpacing the addition of new rental units.
• Smaller Markets: Smaller cities and towns may see a rise in rental demand as more people seek affordable living options outside major metros.

Affordability and Policy Considerations

Affordability remains a critical issue across all segments of the housing market. Governments at various levels are implementing policies to address this, such as:

1. Incentives for First-Time Buyers: Programs designed to assist first-time homebuyers with down payments and other costs.
2. Affordable Housing Initiatives: Investments in affordable housing projects and subsidies for low-income households.
3. Regulatory Changes: Efforts to streamline zoning laws and reduce barriers to new housing developments.

Conclusion

The Canadian housing market in 2024 will be shaped by a complex interplay of supply and demand dynamics, economic conditions, and policy interventions. For potential buyers, sellers, and renters, staying informed about these trends and regional nuances is crucial for making sound housing decisions. Keep an eye on market reports and local developments to navigate the year ahead successfully.

For more detailed insights and forecasts, visit the Canada Mortgage and Housing Corporation’s Housing Market Outlook.