2025 Market Outlook: Let The Good Times Roll!
By Stefan Walther | January 1, 2025
After soaring high, then plummeting low and bottoming out, the real estate market is now levelling off and stabilizing — and this is welcome and fantastic news for both buyers and sellers in 2025.
We started to climb out of a big dip over the last year, we can now see the light at the end of the tunnel. Good times are straight ahead.
It took a while but mortgage rates, along with inflation, have settled down, the real estate market is now entering a period of equilibrium, a more level playing field for both buyers and sellers.
And — even better news — market conditions should only improve further in 2025.
Pop the champagne and release the confetti.
ThunderBayHouses.com is already seeing a more favourable scenario, with more sellers entering the market, more homes going up for sale. We saw an improvement of three percent for all of 2024, and a whopping 25 percent for the last three months of the year, setting the stage for a far better and far brighter 2025. Most of these homes sold quickly, several well over the asking price.
After sitting on the sidelines for a couple years, more sellers and more buyers are getting in the game.
Interest rates are the biggest driver of the market. They create demand from buyers by making borrowing money (mortgages) cheaper and more accessible. And they also affect sellers — as sellers are usually also buyers, who must find another home in order to move out of their current one.
Over this past year, the Bank Of Canada lowered its key rate by 1.75, resulting in corresponding decreases to mortgage rates. Further drops are predicted by analysts. We predict a further 0.75 drop in 2025.
It is well known that there has been a housing shortage in not only Thunder Bay, but in Ontario, across Canada, even south of the border. This shortage should improve somewhat in 2025 but will still persist. This will keep home values at a higher level.
House prices are like income taxes, they really only go up.
Prices may bob up and down here and there, but generally they steadily trend up over time, despite various market influences.
Sellers in the sweet spot of the market, between $225,000 and $399,900, continued to find good success and fast sales in the past two years, even while the market hit rock bottom. Moreover, most of these homes sold over the asking price, some by $20,000 over, several $50,000 over. Because despite higher mortgage rates, the supply shortage drove strong and healthy demand.
However, those with higher-end homes, priced over $500,000 and especially over $600,000, have had challenges. You may have noticed some of these homes sat around a bit longer. These sellers have a far better outlook for 2025, with lower rates making bigger mortgages more affordable.
Analysts are predicting house values to rise by three to five percent in 2025, buoyed by robust demand.
Looking Back, Looking Ahead
The pandemic knocked the market out of whack five years ago.
Interest rates dropped to the lowest ever, causing the market to overheat, then they spiked to the highest in over two decades, doing the complete opposite and cooling things down.
In January 2022, exactly three years ago, the Bank Of Canada key interest rate was at its lowest 0.25 percent, with mortgage rates also at a record low. Inflation was a high five percent, and would continue rising to peak at eight percent by mid-year, so the BOC responded by cranking up rates — all the way to five percent, the highest in 23 years. Mortgage rates rose commensurately.
In last year’s Market Outlook, ThunderBayHouses.com’s prediction was off, but in a good way, conservatively so. We predicted the BOC would slash its key rate by one percent, but it went further to 1.75. We expected a better, and more immediate, impact in the marketplace. That’s occurring now.
Our prediction for inflation was spot on, though, steadily dropping over the year, below three percent, to 2.5, and now we are sitting just below two. We think it will remain stable around two percent for 2025.
The wild card for 2025 will be geopolitics, particularly possible Trump tariffs. If they happen, while they may not affect you directly, they will affect all Canadians to a certain degree — with devastating effects to the overall economy.
Selling Or Buying In 2025?
New buyers are now entering the market and things are starting to heat up, as December and the holidays are behind us. Anyone who is looking to buy a home in 2025 will enter the market, at least by starting to actively browse, come January 1.
So sellers who list a home in January, February or March tend to have a quick and smooth sale, as buyers have fewer homes with which to cross shop.
Remember, if a home sells now, it doesn’t mean the new owners move in right away. Possession can be immediate, especially if a home is vacant, but it could also happen in a month, two months, three months, or even later. This can always be negotiated between the buyer and the seller.
If looking to sell in the spring, ThunderBayHouses.com recommends listing a home by at least the end of April. This way a seller gets a leg up on the competition, which, in this case, is all other sellers.
Many sellers wait until the snow melts and the grass greens up, which is why May is the busiest month for real estate, when the greatest number of both buyers and sellers are active in the market.
But this also means buyers have more homes to choose from, more competition, which can result in a slower sale, lower offers, and a lower final sale price.
Two great Market Insider articles to help sellers plan:
Buyers can improve their chances, make any forthcoming offer more attractive to a seller, by getting pre-qualified or pre-approved for a mortgage.
For any mortgage questions or concerns, or to get pre-qualified or pre-approved, please reach out to Jessica Coley, senior mortgage specialist with RBC and ThunderBayHouses.com’s exclusive financial advertiser who has several decades of experience. Click or tap to connect with Jessica.
Sell fast, with no commission, click or tap here for full info on our excellent marketing service — tried, tested and true for over 20 years. Call or text ThunderBayHouses.com at 807-344-9393 or E-mail info@ThunderBayHouses.com.
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