3 things prospective homebuyers can look forward to in 2024

Entering into 2024, Canadians have several reasons to be cautiously optimistic, given the shifting economic landscape. With rates held relatively steady since July 2023, there is a sense that rate increases could finally be easing, with the potential for modest declines on the horizon. Further, home prices have been dropping across many cities, as the market eases towards a more tempered pricing environment.

So, there may be a lot more that Canadians could look forward to this year, especially first-time homebuyers who have been waiting on the sidelines.

A POTENTIAL CORRECTION IN THE MARKET

Over the last two years, the Canadian housing market has experienced consistent interest rate hikes, in an effort to combat inflation. With the rising cost of living, it’s been difficult for Canadian buyers and homeowners to come up for air.

The good news is that we could be looking at a potential easing in the market this year. With most central banks pausing rate hikes across the board, this could offer some relief to existing homeowners whose mortgage rates have skyrocketed, as well as a ray of hope for new buyers.

The high interest rate environment has left many prospective buyers unable to enter the market due to higher borrowing costs. While it is unlikely that rates will return to the lows they once were, even modest rate cuts will level the playing field for first-time homebuyers and create a more suitable entry point for a home purchase.

VARIABLE RATE MORTGAGES MAY BE AN OPTION AGAIN

Going into this new year, variable-rate mortgages might be a worthy consideration for homebuyers, especially if interest rates begin to lower.

Variable rate mortgages were appealing when rates were low and offered greater savings compared to fixed rates. However, as rates increased, the predictability of fixed rates became almost a necessity for Canadians to manage the continual interest rate increases. Now, with the potential for rates to decrease, the variable option could be back on the table.

If you’re comfortable with some uncertainty and can handle a potential increase in rates, a variable mortgage could be beneficial. We are not expecting dramatic shifts in rates like we experienced during the COVID era, but rather gradual declines. For potential buyers, it’s worth keeping an eye on these shifts. Should rates start to decline, a variable rate mortgage could be beneficial depending on your circumstances.

FURTHER DECLINES IN HOUSING PRICES

Homebuyers have plenty of reasons to be optimistic going into 2024. The trend in dropping housing prices is a significant factor. There’s already been an 18-per-cent decrease in prices since the peak in March 2022, as reported by the Canadian Real Estate Association. But that’s not all – this trend appears to be more than just a short-term dip. In 2023, we saw home sales fall by 11 per cent from the previous year, marking the lowest level since the 2008 financial crisis.

Additionally, the Bank of Canada has maintained its prime rate at five per cent. This combination of a steady interest rate and the ongoing decline in housing prices suggests that buying a home could become more accessible this year.

Heading into 2024, Canadian homebuyers can anticipate more accessibility in the market, marked by potentially easing interest rates and a continued downward trend in housing prices. This offers a ray of hope for first-time buyers and a welcome relief for those affected by the rising rates, setting the stage for a more promising year.