Housing supply has been a hot-button issue since the COVID-19 pandemic, when the Bank of Canada slashed its overnight rate to .25% and Canadians pivoted to a home-buying frenzy, taking advantage of low mortgage rates. It’s been a great run for sellers, but most markets in the country are starting to favour buyers, with new listings and cooler overall demand helping nudge the pendulum back in their favour, reports Canadian Mortgage Professional (CMP). The July report from the Canadian Real Estate Association (CREA) showed the number of properties for sale was below historic averages, however on a year-over-year basis, listings increased 22.7% from July 2023. Additionally, CREA said the sales-to-new-listings ratio eased to 52.7% in July, a sharp contrast from the red-hot market of the COVID-19 pandemic: in February 2022, when homebuying activity was still strong, that measure had shot as high as 89.4%, reports CMP. Janna Dawdy, a Waterloo-based broker and owner of JCMortgages.ca, told CMP many buyers are now able to take advantage of a more favourable climate when it comes to purchasing a home. Dawdy said recent weeks had seen a “notable uptick” in sellers willing to make concessions in the sale of their homes in her region, something that didn’t exist in the pandemic-era market. “Sellers are seemingly open to accommodating financing conditions, which could be a benefit for buyers navigating the market,” she said. “Additionally, there appears to be a growing interest and confidence from first-time homebuyers.” “They’re not only taking advantage of lower interest rates and falling home values, but their buying power has also strengthened since the rate at which we stress test has decreased.” That improving outlook where rates are concerned has arrived with borrowing costs ticking downwards over the summer on both the fixed and variable front, says CMP. A drop in the rate of inflation, as well as declining five-year Government of Canada bond yields have contributed to a drop in fixed rates, while the two interest rate cuts by the Bank of Canada, one in June and another in July, have contributed to variable rates falling. While more homes are being listed for sale, Dawdy said there still hasn’t been a sizeable shift in the mortgage landscape even though many first-time buyers are more confident about making a move in the market and home prices have ticked downwards in some markets “The rate outlook also hasn’t improved enough to cause a big change in how borrowers are approaching the fixed-variable question,” she said. “Based on my personal observations, clients are still showing a preference for fixed-rate mortgage options, especially since prime lending rates are still high.” “For the individuals who have experience with variable-rate mortgages and still want to explore options, they seem to be leaning towards shorter-term fixed-rate mortgages with the plan to reevaluate in the near future.” In an August report, Robert Hogue, assistant chief economist at RBC, wrote many potential buyers are likely waiting on deeper interest rate cuts by the Bank of Canada before taking the plunge and entering the market. The bank’s cuts to date created a turning point for housing markets across the country, he said, but more reductions are needed “to meaningfully reduce ownership costs and stimulate homebuyer demand more broadly.” The Bank of Canada has three more rate announcements on its schedule this year, the next on September 4, with another in October and again in December.Dawdy expects an increase of new listings during the fall home-buying season although that won’t necessarily see the value of most properties drop. “Some properties may see some slight further decreases while others in different price ranges may become more competitive as more buyers come to market,” she said. “I’ve noticed that luxury homes haven’t seen the full impact, since these buyers aren’t as dependent on mortgage rates.” In his report, Hogue pointed out that in Toronto, owners of many newly-built condos appeared anxious to offload their properties, with some distress also potentially arising because of the rapid upswing in interest rates over the past year. Not all markets are expected to swing deeply into buyers’ territory, said Hogue “Conditions in Calgary, Edmonton and to a lesser extent Montreal favour sellers,” Hogue said. “It’s the opposite in the Toronto area where buyers have the upper hand and a tenuous equilibrium holds in Vancouver.”
