Pressing Questions for Canada’s Housing Market Going into 2024

Published December 28, 2023 by Real Estate Leads

Pressing Questions for Canada’s Housing Market Going into 2024

Here we are again with another year drawing to a close and with us having only seen for very small shifts in the housing market in Canada over the course of 2023. What we’re going to do with our last blog entry here for the year is to keep it a little shorter than usual and do what we did at this time last year and in 2022 as well. Meaning to have a look forward at what’s expected to be on the horizon starting next week as we move into 2024, and if there’s anything being foreseen as a pivotal change in the real estate market in Canada.

We’re going to take a slightly different angle on this, and come at it differently in the form of identifying 4 pressing questions for Canada’s Housing Market for 2024. Not every entry needs to be related to client prospecting in real estate, although we will take at least once chance to say how our online real estate lead generation system here at Real Estate Leads is highly recommended for any realtor who’s most pressing question at this same time is how do I build up my real estate client base effectively. Leads for realtors online can be a great opportunity.

We don’t need to put an additional light on how the market continues to be in a downturn, as most people who aim to buy or sell a home or the realtors who work with them won’t need to be appraised of that. Higher interest rates, a lack of affordability and economic uncertainty is definitely keeping buyers out of the market, and you have homeowners who are willing to be patient and hold out to get the price they envision for their home.

Negated Gains

Home sales have fallen 13% since last spring, and this means a near full negation of the gains seen with the rebound that occurred as the BoC paused their interest rate hikes. But remove the rise in mortgage costs resulting from previous interest rates hikes and inflation would by and large be on target.

The national MLS Home Price Index dropped 1.1% for November of this year, and that is its 3rd monthly drop in a row and the biggest seen since early 2023. The freeze resulting from it all should continue into 2024, but the hope is that before long the economy may benefit from interest rate cuts and that the housing market will benefit right alongside it.

So here are the questions that warrant asking at this time; first, will home prices bottom out for real this time? During this correction, Canadians have seen their housing market plunge, then come back to some degree of vitality before slumping again as Bank of Canada paused and restarted rate hikes. There is a widespread expectation that prices will remain under pressure in some markets until the spring of 2024. If rates do end up being cut though, those lower rates paired with pent-up demand could put a much-needed ‘floor’ under the market and restore some measure of buyer / seller confidence.

Some Markets Better Positioned

Some markets will recover more quickly than others, and it seems they won’t be the ones that have had the most dramatic sways going along with sustained buyer demand and supply vastly outstripping supply like it does in most major metro areas of Canada where the economy may be fairly strong but there simply isn’t enough housing available. So the next question is whether or not mortgage rates have peaked. Here the consensus is that borrowing costs may have peaked, and of course that is due to the BoC appearing to be at the end of their hiking cycle. The decision makers there are expected to start cutting interest rates in 2024 but a string of months features sustained downward momentum in core inflation is going to be required first.

The expectation is that the central bank will cut rates by 1 percentage point in the second half of next year, bringing the policy rate to 4%. Bond yields, which influence fixed mortgage rates, are also falling from their highs in early October. This has borrowers wondering if now is a time to lock-in with their mortgages, leading to question number 3 – should borrowers lock in?

The 5-year fixed is currently the lowest available for most borrowers, but the recommendation is to be mindful of the cost/benefit at what could soon be a turning point in the rate cycle. Moving right along to question 4, and whether or not investors will return to the market in significant numbers. Here we can see that expectations of price gains aren’t the enticement they used to be, and that the spread between cap rates and risk-free yields continues to be tight and that will be a dissuading factor.

Affordability Interests

The next question is can prospective homebuyers have any reasonable hope that affordability will improve? Despite prices slipping a bit lower, the last time housing affordability was this bad in Canada was the 1980s because of the rise in borrowing costs. Costs will continue to come down in 2024, but affordability is still a long way from where it was before the pandemic.

Keep in mind that back at the very start of this year home sales started slow with most major markets reeling under the cumulative 425 basis point hikes put in place by the Bank of Canada in less than a year. But buyers did rush back to the market once the rate hikes were paused.

But the rally in part caused the bank to resume hikes, and the interest rate rose another 50 basis points in the early summer and this lead to the third fallback phase that has lead us into where we are now with all of this as we move towards the start of 2024.


Sign up for Real Estate Leads here and receive a monthly quota of qualified, online-generated leads that can be the difference between a realtor who is struggling to get his business of the ground and one who is benefitting from growing their real estate client based more quickly. Make one of your ’24 resolutions that you’re going to put more effort and an investment into your success as a realtor who is new to the business but determined to be successful.