Now that the 2024 has begun, a lot of people are curious about how the housing market will unfold. A lot will depend on several factors.

These factors are:

• The level of interest rates. Will they go up, stay the same or go down? Demand for housing
• Economic factors. Will we go into a recession? Will we have a soft landing?

Interest Rates

In my blog I said that rates will remain the same throughout 2024. The last inflation number came in higher than expected for November. The inflation number came in at 3.1%. The expected number was 2.9%. The number is still higher than the 2% benchmark and thus I feel the inflation numbers will remain around the 3.1% range. Whether rates will go down or not is dependent on how the numbers come in. The experts feel that rates will decrease in 2024. Some feel that rates will start to come down starting in Spring. (Poshnjari 2023)

Some feel that rates will start to decline in the third quarter of 2024. (Cousins 2023) The bottom line is that the Bank of Canada will not be so quick to lower rates because they do not want to lose credibility by having to raise rates immediately after dropping them. The Bank of Canada wants to make sure it has inflation in check before lowering rates.

Demand for housing

I see a lot of clips on social media saying that a lot of people are choosing to leave Canada. However, a lot of people are still coming to Canada, which will create an insatiable demand for housing. The shortage of housing has not changed, and all levels of government are trying to solve this problem. The municipal government says it needs more money from the Federal government. However, it seems like the focus is on building more social housing and not regular housing. The fact that it takes a long time to get all of the permits before you can start building will not make housing affordable. Thus, I do not think social housing will help make Toronto affordable because we still will have the same problem.

The economic factors

The economy was contracting in the last half of 2023. Here is what happened to the GDP last year. It is from an article on BNNbloomberg.com. (Thanthing Knight 2023)

“The economy is now on track to expand at a 0.5 per cent annualized rate in the fourth quarter, if December output is flat. That’s faster than the 0.2 per cent consensus estimate in a Bloomberg survey, but still weaker than the Bank of Canada’s forecast of 0.8 per cent. The economy unexpectedly shrank 1.1 per cent in the third quarter.”

Most economists anticipate a soft landing, which means the economy will slowdown but will not go into a recession.

So, what does this mean for Real Estate?

It all depends on what happens. If the Bank of Canada decreases rates, and we have a soft landing, the markets could see an increase demand for real estate as buyers may start buying again. This will cause prices to rise again and increase bidding wars. I do not see the crazy days that happen during the pandemic as rates will not go down to near zero again. However, real estate markets will rebound.

On the other hand, if rates stay the same and we have a soft landing, buyers may remain largely on the sidelines while they wait for rates to decline. We will see some activity but not to the same extend as the first scenario.

If the Bank of Canada decreases rates, and we go into a recession, housing prices may decrease as buyer demand will back off until better economic conditions come back. Bidding wars will decrease, houses will take longer to sell, and sellers may take their houses off the markets until better conditions come back. Moreover, even though housing prices will decrease, I do not see housing market crash because the problem of housing shortages remain.

The next Bank of Canada meeting is January 24th. I do not see any change in rates. Rates will remain the same. If the inflation number comes in higher than expected like the last time, rates could go up. Call or dm me and lets have a conversation.