Affordability concerns are continuing for many buyers and borrowers
Prospective homebuyers across Canada appear to be staying on the sidelines for now, with new figures showing housing market purchase activity dipped last month compared to March.
The Canadian Real Estate Association (CREA) said on Wednesday that sales were down by 1.7% on a month-over-month basis, a possible sign that high interest rates are continuing to take their toll on affordability and homebuying intentions.
That muted activity marked a big contrast to the same time last year, according to the association’s senior economist Shaun Cathcart, who noted that the purchasing surge of April 2023 had been replaced by “less enthusiasm on the demand side” this time around.
Available inventory, meanwhile, jumped last month. The number of newly listed homes was 2.8% higher in April than March – and the overall number of available homes on the market increased by 6.5%, hitting the highest level since the pre-pandemic market.
James Mabey, the chair of CREA’s 2024-25 board of directors, said the April figures reflected “the most balanced market conditions seen at the national level” since before the arrival of COVID-19.
He said that while mortgage rates remained high, borrowers who were in a position to purchase could take advantage of the ability to shop around and exercise bargaining power in the current market.
Still, affordability issues remain a significant hurdle for many borrowers hoping to purchase a home, with prices skyrocketing across major markets in recent years and the Bank of Canada’s spate of interest rate hikes since 2022 having seen borrowing costs surge.
The central bank is expected to start bringing its benchmark rate lower before the end of the year – but has held that rate steady at a 23-year high of 5.0% in its past six decisions as it continues to monitor whether inflation and the economy are cooling sufficiently to justify cutting.
How can mortgage professionals best advice clients in the current climate?
For Natasha Bridgmohan (pictured top), president and chief visionary officer at the Bridg Group of Companies, it’s essential that mortgage professionals closely monitor news on those topics to be able to provide as detailed, accurate, and up-to-date information as possible to clients weighing up a home purchase or refinance.
She told Canadian Mortgage Professional last week that keeping informed on economic matters had been top of mind to her approach in a complex and challenging market.
“Make sure that you have sound data and sound subject matter experts; that you’re following key important trends, simple things like GDP, the unemployment rate,” she said. “Statistics Canada is a really good website to develop and gather information on how the industry is moving.
“The Bank of Canada overnight lending rate and the bond rate are really important. Mortgage-backed security rates… all of these things set the tone.”
Bridgmohan said developing that expertise starts with setting aside 15 minutes to half an hour each day to read, gleaning insights from different sources of key information to educate clients and underwriters and provide evidence-based advice.
“By getting more knowledge, you become a better negotiator. You like to have that in your approach when you’re dealing with very challenging, out-of-the-box-thinking situations,” she said. “And that’s happening more often today than ever before with all the circumstances – with people struggling day to day just to pay their bills.”
Canadian worries over housing continue to surge
Desjardins said long-term mortgage products should become much more widely available in Canada to help homeowners avoid crippling "payment shocks."https://t.co/52IvdpMraH#mortgage #mortgageindustry
— Canadian Mortgage Professional Magazine (@CMPmagazine) May 14, 2024
An Abacus Data survey in March shone a light on the extent of Canadians’ concerns over issues related to housing. The poll, which surveyed 1,500 Canadians aged 18 and above, showed 68% expected housing affordability and accessibility to worsen this year – with just 10% optimistic about chances of improvement.
Prospects are especially dim for the first-time buyer cohort, Abacus said. Seventy-four percent (74%) of Canadians believe the market will become even less affordable and accessible for those prospective buyers, with just 5% expecting conditions to improve and a huge 57% of would-be first-time buyers pessimistic about their chances of buying.
The poll showed that over half of Canadians (52%) have expressed feelings of personal financial insecurity – with an enormous 71% saying their household debt levels are on the rise.
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