The other day, I was out on the golf course, and they paired me up with a financial controller.
As it often happens these days, we got to talking about the real estate market.
He told me he’s a very conservative person—never one to jump into real estate.
He was waiting for the perfect moment when high interest rates would force homeowners to sell at bargain prices.
He was hoping for a flood of discounted properties from people who couldn’t handle their mortgage payments anymore.
Essentially, he was waiting for prices to drop from where they are today.
But here’s the thing—his whole plan pretty much collapsed last week.
A few days ago on October 23, 2024, the Bank of Canada cut the interest rate by 0.5%, and that was it.
The moment he had been waiting for? Gone.
We are also expecting another 0.5% cut by December 11.
Instead of homeowners flooding the market with properties they can’t afford, we’re likely about to see the opposite.
So, what does this mean for the housing market?
Buyer confidence is rising, and if we see a couple more rate cuts, as many are predicting in December, January, March, and April, I think the spring market is going to heat up.
Let me break it down for you in two key steps that will bring the housing market back to life.
Step 1: Shrinking Supply
Let’s start with the basics. Many homeowners locked in ultra-low mortgage rates before the pandemic, and now, a lot of them are facing mortgage renewals in the next 12 months.
If rates had stayed high, many of those homeowners would’ve been in trouble.
They’d be forced to sell because they just wouldn’t be able to handle the higher payments.
That’s exactly what the financial controller was banking on—cheap properties hitting the market.
But with this latest rate cut, and potentially more cuts on the horizon, these homeowners are getting some much-needed breathing room.
Mortgage rates are slowly creeping back down towards pre-pandemic levels.
And what does that mean?
People can afford to stay in their homes. They won’t be forced to sell at a loss, so we’re going to see less inventory on the market.
Historically, this pattern isn’t new.
Think back to 2020, when the Bank of Canada dropped the overnight rate to 0.25% during the pandemic.
Homeowners held onto their properties, and inventory shrank.
Less availability propped up home prices because there wasn’t enough supply to meet demand.
That’s exactly what’s about to happen again.
Phase 2: Growing Demand
Now, the key here is buyer confidence.
It’s not just about rates dipping a little—it’s about rates getting close to the ‘neutral’ point, which is around 2.75% to 3%.
Right now, after four rate cuts this year, we’re sitting at 3.75% for the overnight rate. If the Bank of Canada cuts rates again in December, January, March, and April, we could be looking at rates hovering near that neutral point by spring.
That being said, keep in mind the Bank of Canada only cuts rates when the economic outlook is shaky.
But when rates get closer to neutral, people start feeling like they’re back in control.
They think, ‘Okay, borrowing money is affordable again.
I can make this work.’
And that’s when buyer activity starts to pick up.
We saw this after the 2008 financial crisis.
The Bank of Canada slashed rates to nearly zero, and by 2010, buyer confidence came back.
Prices in markets like Toronto and Vancouver surged because suddenly, borrowing was cheap, and nobody wanted to miss out.
By spring next year, with supply tightening and rates getting closer to neutral, we’re going to see a wave of FOMO hit the market.
Buyers who’ve been sitting on the sidelines will start jumping in, afraid that if they don’t act now, prices will climb out of reach.
It’s a classic pattern—everyone waits until they’re convinced the bottom has passed, but by the time they realize it, the deals are gone.
Another factor driving buyers back into the market is the combination of government incentives and the stock market hitting all-time highs.
When the stock market is peaking, people start looking at alternatives for their investments. And what’s a better opportunity than real estate—especially when prices are turning around from a lower point.
In my view, the first segment of the market to see a rebound will be low-rise homes.
With the rate cuts providing relief, fewer homeowners will feel pressured to sell, and the supply of low-rise homes will shrink quickly.
When supply goes down, prices go up.
Condos, on the other hand, have a lot more inventory, so their rebound will take longer.
But here’s where things get interesting: as the price gap between low-rise homes and condos grows, condos will start to look more attractive to buyers again.
Once that gap becomes too wide, we’ll see increased demand for condos as well.
So, What’s My Prediction?
The resale market is going to heat up by spring or summer.
Just like that financial controller on the golf course, many people are waiting for the ‘perfect moment.’
They want proof that the market has bottomed out before they buy.
But by the time they recognize that moment, prices will have already started to rise.
When prices go up by 5%, they’ll think it’s too high and wait again. And that cycle just keeps repeating.
So here’s my advice:
Sellers: If you can afford to hold off, don’t sell right now. We’re on the verge of some significant changes, and by spring, you could be looking at higher offers than you’d get today.
Buyers: This is your window of opportunity.
Right now, you still have some negotiating power, especially deep in winter time, but that’s going to change. By next year, we could be looking at a much more competitive market, with prices potentially rising by 5% or more by year-end.
If you’re in a position to buy now, I’d say go for it while you can still negotiate a bit on the price.
Because once confidence returns and everyone jumps back into the market, sellers will adjust their prices.
That’s where things stand.
The rate cut is here, buyer confidence is growing, and the market is about to get very interesting.
Keep an eye on the next few rate cuts—they’re going to be the final push that brings this market back to life.
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