Planning the best time to buy or sell a home has never been easy, but with turbulent inflation and rising interest rates dominating headlines in 2023, you might be wondering what will the housing market look like in 2024? We gathered the data and chatted with the experts to bring you our housing market predictions for 2024 in Canada.
TL;DR: 5 Things to Do Now to Prepare for 2024
Whether you’re a buyer, seller, or owner, here’s what you need to know for 2024:
- Buyers: 2024 may be the best time to buy a home in over five years as cities across Canada shift to a buyer’s market.
- Sellers: Expect homes to stay on the market longer and to make concessions to buyers.
- Mortgage Holders: Mortgage rates are expected to fall, but they will not return to pandemic levels. If your mortgage renews in 2024, prepare for a higher mortgage payment.
- Owners: Expect home insurance rates to rise, and review your coverage to ensure you’re prepared for natural disasters.
- Renovators: 2024 is a good year to pursue your renovation dreams. The cost of materials and availability of skilled labour have stabilized after the pandemic.
But first, let’s look at what happened in 2023.
Economists widely predicted a recession this year, but it didn’t materialize. Instead, we saw a year of high inflation that was a bit sticky (which means it didn’t respond to rate hikes as quickly as some hoped), and the Bank of Canada raised rates by 0.25% three times. Today, the current policy interest rate is 5%, and the posted five-year fixed mortgage rate is 7.04%.
Inflation was the talk of the town in 2023, starting at 5.9% and dropping to 2.8% in June, only to rebound back up to 4% in August. Finally, at the end of 2023, inflation has fallen to 3.1%, which is not far from the Bank of Canada’s 2% target rate.
We’re sharing these statistics because it’s important to understand the economic climate going into 2024 and because these factors directly affect Canada’s housing market.
Home Prices in Canada are Increasing, But Slowly
2023 was the year of moderation in home prices. While we didn’t see the dramatic increases of 2021 or the price declines of 2022, prices are increasing, albeit slowly. According to the Canadian Real Estate Association (CREA), the national, not seasonally adjusted average home price in October 2023 was $656,625, up 1.8% from the previous year. Major cities like Toronto and Vancouver saw bigger gains, along with cities growing in popularity like Calgary.
Source: CREA
With all of this in mind, we asked our trusted real estate professionals to share their expert opinions on what to expect in 2024 and asked them for advice on how to prepare your finances as a homebuyer, seller, or owner. Here are their housing market predictions for 2024 in Canada.
Homebuyers Should Expect a Buyer’s Market in 2024
Yes, prices are up slightly in 2023, but Canadians planning to buy a home in 2024 may find themselves in a buyer’s market for the first time in a long time. We have interest rates to thank for that. In particular, mortgage rates are higher than they have been since the 2008 financial crisis and are much higher than the lows seen during the pandemic. In 2022, the posted rate for a conventional 5-year fixed mortgage was 4.79%, and now, in 2023, that rate has risen to 7.04%.
Higher mortgage rates translate to smaller mortgages and less buying power for Canadians. According to real estate investor and podcast host Daniel Foch, 2024 may present an opportunity for Canadians looking to buy.
“Homebuyers should keep in mind that a change in interest rates can often save them just as much money as a change in price,” says Foch. And he’s right. Higher mortgage rates generally lead to lower prices, and if you can afford your home at today’s rates, you’ll be able to afford it at renewal when mortgage interest rates may be lower.
In fact, 2024 might be the perfect time to buy a home, especially for first-time homebuyers. “I would expect the market to be in a buyer’s market for most of 2024 in Canada,” says Foch. His advice stems from the fact that interest rates are not expected to return to the lows of the early 2020s anytime soon, which means there will be less competition for available homes.
Less competition for homes is good for buyers and means fewer bidding wars and more opportunities to include conditions on your offer, like a home inspection or financing, both of which help protect buyers.
“2024 will likely prove to be one of the best times in the last five years to purchase a property in Canada.”
The Breakdown: If you can afford it, 2024 could be an excellent time to buy a home. If you make an offer on a home, consider adding a home inspection or financing condition.
What to Know About Selling a Home in 2024
In 2022, selling a home in Canada was almost reality television-worthy. Biding wars, bully offers, and lineups for open houses were typical in many parts of the country, and sellers often had their pick of offers (many of them often tens of thousands over the list price).
These circumstances weren’t normal, and in 2023, they became less common in many parts of the country. According to President and COO of Zolo, Mustafa Abbasi, Canadians can expect more of the same in 2024.
Abbasi advises sellers to let go of the expectation that their home listing will generate bidding wars and bully offers and to expect the buyers to hold the power, at least until spring. “Sellers should anticipate a buyer’s market, with potential shifts toward a more balanced market from Q2 to Q4 if interest rates decline.”
For this reason, it’s essential to price your home accurately. Abbasi suggests choosing a price point slightly below the current market to beat your competition and draw in potential buyers. Making an effort to present your home in the best possible light will also help draw buyers in.
Is 2024 a Good Time to Sell a Home in Canada?
Whether 2024 will be a good time to sell a home is one of the most important housing market predictions for 2024 in Canada – but it’s not a simple question to answer.
Going into 2024, sellers can expect more challenges when selling their homes. Right now, many markets in Canada are in a buyer’s market. That means you’ll need to work to get your home seen by the right people. Expect your home to take longer to sell than in recent years.
These market conditions may not persist throughout 2024, however. It all depends on mortgage interest rates. If interest rates decrease in 2024, Abbasi predicts buyer activity will pick up. “The early part of 2024 may pose challenges for sellers,” says Abbasi, “but a potential shift could occur in late spring or early summer if interest rates decrease, drawing in sidelined buyers.”
The Breakdown: Expect a buyer’s market in 2024. Your home may take longer to sell, and you may need to make concessions to buyers. This could change in the later part of the year if interest rates drop.
Mortgage Rates May to Drop in 2024
The biggest factor our experts use to make housing market predictions for 2024 in Canada will be interest rates. The Bank of Canada has been raising interest rates since March 2022. These higher rates have had a widespread impact across Canada. Some effects have been positive (like lowering inflation), and some have been negative (like making mortgages more expensive).
That said, the high interest rates we’re seeing going into 2024 won’t be around forever. Mortgage interest rates are directly influenced by the Bank of Canada’s policy interest rate. So we asked mortgage broker and author of The Mortgage Code, Angela Calla, whether the Bank of Canada will hike rates in 2024, lower them, or hold them steady.
Calla believes that as long as inflation continues to trend close to the Bank of Canada’s 2% target rate, Canadians should expect mortgage rates to fall in mid-2024. But, since no one can accurately predict what will happen, it’s best to take a cautious approach. “In terms of time and how much,” Calla says, “plan for the worst and hope for the best.”
How Will 2024 Rates Affect My Mortgage?
Many borrowers took advantage of low mortgage rates in the early 2020s, buying a home when money was cheap and locking in their rate for several years. Now that rates have risen from those low levels (the lowest discounted rate was 1.38% in January 2021; today, the lowest rate is 5.19%), many Canadians will renew their mortgages at higher rates with higher monthly payments.
Between 2024 and 2025, 2.2 million Canadians are expected to renew their mortgages. That’s almost half of all mortgage holders. These renewals will happen at higher rates, which could increase mortgage payments between 30 to 40%.
To help prepare for these rising costs, Calla recommends that you research and shop around for the best mortgage rate instead of signing your lender’s first renewal offer. “This will ensure you gain the lowest cost of borrowing and protect your credit score.”
Suppose you’re due to renew your mortgage in 2024 and find yourself unable to cope with the higher payments. In that case, you have options, like adding rental income, extending your amortization, or considering a reverse mortgage.
Should You Choose a Fixed or Variable Rate in 2024?
Choosing a fixed or variable-rate mortgage is a personal choice, and depends on your goals and risk tolerance. Fixed-rate mortgages have the benefit of stability. The rate doesn’t change throughout the term, and you’ll always pay the same amount each month. But they are more expensive to break if you plan to sell your home before your term ends.
“Breaking such a mortgage for market or lifestyle changes can incur an interest rate differential (IRD) penalty,” says Calla. This penalty can be in the tens of thousands of dollars for some mortgages. So, it’s an essential consideration if you plan to sell your home before your mortgage term ends.
Variable-rate mortgages, on the other hand, are more flexible. That said, your mortgage rate is subject to change. That means your principal payment and, in some cases, the entire monthly payment itself could change.
“When Canadians are at the crossroads of choosing between a fixed or variable-rate mortgage, a critical step is to weigh the risks and benefits of each option,” Calla says. If you aren’t sure, talking to a mortgage specialist is an excellent first step.
The Breakdown: Mortgage rates may fall in 2024. If your mortgage is renewing in 2024, prepare to renew at higher rates. Shop for the best rate with a mortgage broker.
Expect Higher Insurance Costs and Check Your Coverage
2023 was markedly different for home insurance renewals. Instead of the usual slight or inconsequential increase to monthly premiums, Canadians across the country saw home and mortgage insurance rates rise.
The Consumer Price Index (CPI) tracks the cost of shelter in Canada, including home insurance. According to the CPI, the average cost of home and mortgage insurance increased by 7.7% compared to the previous year.
Some provinces saw bigger increases than others.
Average Home and Mortgage Insurance Cost Increase
Source: Consumer Price Index, monthly percentage change, Shelter
Will home insurance increase again in 2024? Our housing market predictions for 2024 in Canada expert John Shmuel, Director of Content Strategy and PR at RATESDOTCA, weighs in. Shmuel points to factors like climate change, the rising cost of materials, and inflation as culprits for the upward trend in home insurance rates.
“There is no running from the fact that the home insurance industry is being hit extremely hard by larger forest fires, stronger winds, and the evolution of tropical storms and hurricanes now routinely hitting the East Coast of Canada.” Shmuel points out that insurance companies are receiving more claims and making more payouts due to these extreme weather events. “And to keep up, the industry has to raise premiums.”
Insuring homes in Canada is indeed getting more expensive. In 2022, insurance companies paid out $3.1 billion for insured damages like floods, rain and snow storms, and hurricanes like Fiona, a record-breaking storm that battered the East Coast.
On top of increased damages, inflation has led to more expensive materials costs. Consequently, when repairs are needed, insurance companies pay out more than in the past. “The cost of materials and labour are still much higher this year than they were before the pandemic,” says Shmuel. “As costs rise for home repair, so too do insurance premiums.”
One bright spot on the home insurance horizon for Canadians is inflation. “If the downward trend in inflation continues and holds, the increase in these costs may slow as well,” says Shmuel. “But for now, consumers are feeling this in the form of higher premiums.”
Should You Change Your Home Insurance Policy in 2024?
As climate change-related weather events become more common, ensuring your home is protected with the right insurance coverage is essential.
For areas prone to flooding, Shmuel says to consider overland flooding coverage and to take the time to understand your water coverage. “Your base policy only covers certain kinds of water damage.”
You can also take steps to protect your home so that you won’t need to make an insurance claim. For example, sump pumps and backflow valves will help protect your home from flooding. Finally, many municipal, provincial, and federal rebates are available to install equipment.
The Breakdown: Expect insurance rates to continue rising in 2024. Take the time to review your policy and ensure you have appropriate coverage in the event of a natural disaster.
2024 May Be a Good Time to Renovate Your Home
Not all Canadians plan to buy or sell a home in 2024. For those planning to stay put, home renovations or maintenance may be on their horizon. While the pandemic put a heavy strain on material supplies (the most famous example was the cost of lumber, which tripled in price) and the availability of contractors, homeowners should have an easier time finding the professionals and materials they need for renovations and repairs.
Rebekah Higgs, owner of Matriach Design Co, shares her advice for homeowners looking to upgrade their spaces in 2024.
Higgs says Canadians looking to stay put in their homes should consider prioritizing renovations that make the most of their space. “Rather than purchasing larger homes, families are asking me to create custom built-ins and storage solutions to enhance organization and reduce clutter.”
Energy-efficient renovations are also gaining popularity as Canadians look to offset rising utility costs. Upgrades like heat pumps and solar panels are available for rebate programs, which help offset the cost of these upgrades.
Should You DIY Your Renovation?
Doing upgrades to your home yourself is an excellent way to improve your enjoyment of your space while saving money. Higgs says homeowners should consider sprucing up their nests by focusing on paint, art, and decor. For bigger projects, contractors should be easier to book than in years past.
The Breakdown: 2024 is a good year to pursue your renovation dreams. The cost of materials and availability of skilled labour have stabilized after the pandemic.
Prepare for Rising Utility Costs with Energy-Efficient Renovations
2023 was the year of rising prices, and utility costs were not exempt from this phenomenon. Energy prices in Canada rose 5.4% year over year as of September 2023. We expect this trend to continue into 2024. Major utilities are proposing rate increases, such as BC Hydro at 2.3% and Nova Scotia Power at 6.9%.
The result? Energy in Canada is more expensive. While we don’t see aggressive fluctuations due to greater stability in the global economy, for many Canadians, heating and cooling their homes in 2024 will be more expensive.
The federal government has already stepped in to help Canadians impacted the most, pausing the federal price on pollution for rural homes. This change should result in an average reduction in costs of $250 for families who qualify.
To help prepare for rising utility costs, Canadians can access grants and 0% interest funding. The Canada Greener Homes program for energy-efficient upgrades like:
- Home insulation
- Air-sealing
- Windows and doors
- Thermostats
- Space and water heaters
- Solar panels
These upgrades should not only offset rising energy costs but also reduce them.
The Breakdown: Expect costs to rise. You can offset them by taking advantage of grant and low-cost financing programs for energy-efficient upgrades.
