New listings in many markets are giving homebuyers more choice
Scarce supply and feverish competition pushed many of Canada’s housing markets firmly into seller’s territory when purchase activity was booming – but a flood of new listings and cooler overall demand are helping nudge the pendulum back in buyers’ favour.
The number of properties for sale across all Canadian MLS systems last month remained below historical averages but jumped 22.7% compared with the same month in 2023, according to the Canadian Real Estate Association (CREA).
The sales-to-new-listings ratio eased to 52.7% in July, a sharp contrast from the red-hot market of the COVID-19 pandemic: in February 2022, when homebuying activity was still strong, that measure had shot as high as 89.4%.
Many buyers are now able to avail of a much more favourable climate when it comes to purchasing a home, according to Waterloo-based broker Janna Dawdy (pictured top), owner of JCMortgages.ca.
She told Canadian Mortgage Professional that recent weeks had seen a “notable uptick” in sellers willing to make concessions in the sale of their home in her region, something which barely featured in the pandemic-era market. “Sellers are seemingly open to accommodating financing conditions, which could be a benefit for buyers navigating the market,” she said.
“Additionally, there appears to be a growing interest and confidence from first-time homebuyers. They’re not only taking advantage of lower interest rates and falling home values, but their buying power has also strengthened since the rate at which we stress test has decreased.”
Lower rates prove cause for optimism for hopeful buyers
That improving outlook where rates are concerned has arrived with borrowing costs ticking downwards over the summer on both the fixed and variable front.
Declining five-year Government of Canada bond yields have contributed to a drop in fixed rates, while two interest rate cuts by the Bank of Canada – one in June, another in July – have seen variable rates fall.
Lower rates may have helped convince more Canadians to list their homes, but Dawdy said there still hasn’t been a sizeable shift in the mortgage landscape even though many first-time buyers are more confident about making a move in the market and home prices have ticked downwards in some markets.
CHBA CEO Kevin Lee highlights the need for substantial policy improvements, including changes to mortgage rules, zoning, and development taxes, to address the housing supply shortage.
— Canadian Mortgage Professional Magazine (@CMPmagazine) August 27, 2024
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The rate outlook also hasn’t improved enough to cause a big change in how borrowers are approaching the fixed-vs-variable question, she added. “Based on my personal observations, clients are still showing a preference for fixed-rate mortgage options, especially since prime lending rates are still high,” she said.
“For the individuals who have experience with variable-rate mortgages and still want to explore [those] options, they seem to be leaning towards shorter-term fixed-rate mortgages with the plan to reevaluate in the near future.”
Where do sellers still have the upper hand?
Writing earlier this month, Royal Bank of Canada (RBC) assistant chief economist Robert Hogue indicated that many potential buyers are likely waiting on “deeper” interest rate cuts by the Bank of Canada before taking the plunge and entering the market.
Its cuts to date represented a turning point for housing markets across the country, he said – but more reductions are needed “to meaningfully reduce ownership costs and stimulate homebuyer demand more broadly.”
Dawdy said a continued influx of new listings is likely to transpire in the coming months – although that won’t necessarily see the value of most properties drop. “Some properties may see some slight further decreases while others in different price ranges may become more competitive as more buyers come to market,” she said.
“I’ve noticed that luxury homes haven’t seen the full impact, since these buyers aren’t as dependent on mortgage rates.”
Hogue noted that in Toronto, owners of many newly built condos appeared anxious to offload their properties, with some distress also potentially arising because of the rapid upswing in interest rates over the past year.
Other markets are seeing a less favourable environment for buyers. “Conditions in Calgary, Edmonton and to a lesser extent Montreal favour sellers,” Hogue said. “It’s the opposite in the Toronto area where buyers have the upper hand… a tenuous equilibrium holds in Vancouver.”
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