2024 Market Outlook: Good News, Bad News
By Stefan Walther | January 6, 2024
“It’s a new dawn, it’s a new day, it’s a new life…And I’m feeling good.”
So sings Canadian crooner Michael Bublé in his excellent rendition of the classic show tune “Feeling Good.”
And both home buyers and sellers have good reason to feel good over the next year.
There’s good news — but also a bit of bad news — for real estate in 2024.
And there may be bad news even if you do not plan to participate in the real estate market. Read on.
The good news first.
For buyers, interest rates are expected to come down, for both variable and fixed mortgages, improving affordability for many. A welcome change after nearly two years of rising rates.
Indeed, already last month some fixed-rate mortgages began dipping below five percent, in anticipation of the Bank Of Canada lowering its key overnight lending rate in the months to come.
Also looking good for buyers, many more homes will likely be put up for sale and go on the market.
For sellers, many of whom sat on the sidelines the past two years, the market would look much more appealing to jump in — with the more favourable mortgage rates and enhanced buyer demand.
Also good for sellers, home prices are expected to remain strong and even tick upwards, especially for homes in the sweet spot of the local market, between $225,000 and $399,900.
For sellers of homes over $400,000 and $500,000, the market should also vastly improve with an increased pool of buyers in this higher segment.
More choice, more options, but supply is still expected to be very tight. Such is the case in Thunder Bay, and across the country, where we have many more people, more buyers, than we have houses and sellers.
And now for the bad news: We have to play the waiting game.
While the calendar flipped to a bright and exciting new year overnight on January 1, the reinvigorated real estate market will not happen in such a similar short time frame.
But, hang tight, the market will evolve — and vastly improve — in just a few months.
We here at ThunderBayHouses.com anticipate that things will spark up in the usual hot and active spring market, in April and May, as this is when the highest number of both buyers and sellers enter the market in any given year, regardless of other variables.
But things won’t really catch fire until the Bank Of Canada begins to bring down its key rate, in turn also bringing down both variable and fixed mortgage rates. The BOC has rate announcements scheduled for as soon as this month, on January 24, then on March 6, April 10 and June 5.
Every market watcher has their predictions, based on the same or somewhat different economic indicators, and so do we here at ThunderBayHouses.com. Remember, we’ve been doing this for 20 years now.
Our prediction is that the BOC will maintain its current rate of five percent, no change, in January and in March, with a decrease of 0.25 coming in April, likely another 0.25 decrease in June. Possibly more in June, possibly 0.5, as the BOC tends to act — or react (or, many would say, overreact) to market conditions — slow at first, before becoming quite aggressive.
Should the overall economy trend quite poorly come summer, a 0.5 drop could be in the cards for July 24’s rate announcement.
The overall cut for 2024 could amount to a full percentage point, dropping from the current five percent to around four percent. Expect an equivalent drop in mortgage rates.
Our prediction seems to be consistent with most economists. Although there are some who predict a full two-percent drop in rates by the end of 2024, which would be welcome for everyone involved in the real estate market, and beyond.
But it is anyone’s guess. It will depend mostly on inflation, which we predict will come in, in the very near term, just below three percent for the first time in three years, on its way to around 2.5 percent in the medium term (late winter, early spring). This is very close, close enough for comfort we think, for the Bank Of Canada and its desired target of two percent for a healthy and robust economy.
What’s for certain is there will be no return to the historic, ultra-low interest rates that everyone enjoyed during the height of the worldwide pandemic. Let’s face it, the Bank Of Canada’s key rate then, at 0.25, was not far off from zero.
The central rate will likely settle into the three percent range (3.0 to 4.0) by 2025, with mortgage rates a couple points above this.
While there are always some challenges in the market — there are also always some great opportunities.
For example, even though winter, right now, is generally a slow time of year for home sales, there are still buyers out there looking for homes to purchase. And it only takes one buyer to purchase any home.
Generally if someone is looking to possibly buy a home and move during any given year, they enter the market in January, right now, even if it is to only modestly start browsing possible options. If the right home comes up, they will jump on it.
Thousands are on the ThunderBayHouses.com website and social media, even in the cold dark days of winter. There is a housing shortage and many prospective buyers are checking for new listings on a daily basis.
So if you are a seller, right now you would have less competition, fewer other homes for buyers to choose from, than you would at most other times of the year. This could result in a quicker sale and perhaps a better, higher offer.
ThunderBayHouses.com sells many higher-end, higher-priced luxury properties during the winter.
Indeed, we have been in regular contact with our customers who currently have luxury homes for sale, and they are receiving frequent buyer interest and doing weekly showings.
Whether you plan to enter the real estate market this year, in 2024, either now or later, either as a buyer or a seller, there are some things you can do now to prepare.
Buyers, get ready! Improve your chances by getting pre-qualified or pre-approved for a mortgage. Then when you find that dream home to purchase, your offer will stand out as far more desirable to a seller, especially important if that seller has multiple offers, which is how things have been going the past few years.
For any mortgage questions or concerns, or to get pre-qualified or pre-approved, please reach out to Jessica Coley, mortgage specialist with RBC and ThunderBayHouses.com’s exclusive financial advertiser who has several decades of experience. Click or tap to connect with Jessica.
Sellers, get ready! Two great Market Insider articles to help:
You can put your home on the market now.
Buyers who are planning to take the plunge sometime in 2024 are already dipping their toes into the pool.
And even if you have no intention of actively participating in the real estate market this year, there still may be some bad news.
And that is if you have a fixed-rate mortgage that is coming due.
The Canada Mortgage And Housing Corporation (CMHC) says that since rate hikes began in early 2022, one out of three borrowers has seen mortgage payment increases. The CMHC estimates that over one million will face interest rate shock in 2024 and a further over one million in 2025, about 2.2 million total, about 45 percent of outstanding mortgages. Most of these borrowers are currently locked in at the record low fixed rates, but will need to be renewed at the higher rates.
Some mortgage payments could go up by hundreds of dollars a month, some higher mortgages by thousands of dollars a month.
If mortgage rates are stabilizing and on a downward trend, perhaps a better option is going with a variable rate on a renewed next term. Possibly locking in at a fixed rate later, if necessary.
Of course, you must do what is right for you and your family, and everyone’s situation is different. Once again, please connect with Jessica Coley to explore any and all options.
After setting off on a rollercoaster ride at the start of the pandemic, four years ago, the market is finally settling into equilibrium, a better-balanced scenario for both buyers and sellers.
Demand for, and supply of, homes are coming into a better balance in 2024.
And another bright spot for 2024 — ThunderBayHouses.com celebrates 20 years on February 29. Happy birthday to us.
Whether you need to sell fast and at a great price, or if you would like to just test the market, contact us today.
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