The Canadian housing market is poised for a turnaround, according to Phil Soper, president and CEO of Royal LePage. Following the release of data by the Canadian Real Estate Association (CREA) showing that home sales in 2023 were the lowest since 2008, Soper believes the tide is about to turn. He highlighted a significant nine percent increase in home sales in December compared to November as an early indicator of this change.
Soper pointed to rising market sentiment indicators, such as an increase in home showings and listings. "We had a stronger December than anticipated," he said, noting that the anticipation of interest rate cuts by the central bank is likely prompting buyers to act early. He likened the situation to the stock market, where the expectation of a major change often leads to preemptive actions. This, he said, is driving a shift in activity levels, with the first quarter of the year expected to mark a tipping point.
A crucial factor in this anticipated market shift is the behavior of first-time home buyers, who have been largely absent in 2023. Soper explained that the biggest uncertainty lies in how much interest rates will drop and how this will affect home prices. For existing homeowners, the impact is less risky because they buy and sell within the same market. However, first-time buyers are more hesitant, fearing prices might decrease shortly after they purchase a home.
Overall, Royal LePage forecasts a gradual increase in market activity and home prices, with a predicted 5.5 percent rise nationally by the start of next year. Soper emphasized that the psychological impact of anticipated rate cuts plays a significant role in driving market dynamics. While the actual rate cuts may not drastically reduce mortgage payments, the expectation of lower rates is likely to spur more buyers into action, gradually boosting market confidence and activity.
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