Optimism surges as homebuyers seize the moment in a softening market
The Canadian housing market is experiencing a resurgence as buyers scramble to enter before anticipated rate cuts by the Bank of Canada.
A December sales rally has sparked speculation that the market is poised for further heating. With prices still relatively soft and the central bank signalling a pause in rate hikes, Canadians are eager to secure their homes before increased competition drives prices out of reach.
The shift in market sentiment is evident. Canadians are growing more optimistic about home prices, with this trend steadily rising in recent months, as revealed in a poll by Nanos Research conducted for Bloomberg.
A shortage of affordable properties, coupled with record immigration, has made entering the market challenging. Realtors are witnessing multiple offers and homes selling above asking price, signalling a shift from just a month ago when the market appeared more subdued.
“We’re seeing multiple offers again and houses selling for over asking price, which is very, very different from a month ago,” Teia Eagar, a real estate agent in Toronto, told Bloomberg. “They’re trying to time the market. They’re starting to feel like the bottom of the market was hit.”
A pent-up demand, coupled with anticipation of the Bank of Canada's next move, is driving this resurgence. Economists predict rate cuts to begin before mid-year, with traders betting on immediate cuts thereafter. Similar forecasts last year prompted a price rally, pushing values up nearly 6% between February and August.
Economist Stephen Brown of Capital Economics anticipates a significant uptick in prices in the coming months as buyers rush to secure properties ahead of the competition. Longer-term bond yields have also dropped in response to rate cut expectations, lowering costs for homebuyers.
“You have this wave of pent-up demand from all those people who weren’t able to make that decision last year. Suddenly, they can afford to do it,” said Brown. “In the next few months, there is a pretty good chance we’ll see a pretty decent pickup in prices as you see this wave of buyers come in that want to get ahead of everyone else.”
Speculation about rate cuts in 2024 is already generating excitement in the housing market. Mortgage brokers report increased interest, with some buyers even considering floating-rate mortgages in anticipation of savings once the central bank lowers its benchmark rate.
“All the speculation of rate cuts in 2024 has already created a bit of a buzz in the market,” Vancouver-based broker Reza Sabour said. “That sentiment is going to drive madness into the market, I think. I’m fully expecting a very busy spring market with multiple offers in Vancouver and Toronto.”
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