Have the Bank of Canada’s Interest Rate Cuts been enough to stimulate the Fall Market?

As we move into the final quarter of 2024, the Greater Toronto Area (GTA) real estate market remains dynamic, with signs of both stability and uncertainty. While home sales have shown a modest increase year-over-year and new listings are flooding the market, the anticipated impact of recent interest rate cuts has yet to fully materialize. Buyers are benefiting from more inventory and a slightly more favorable mortgage landscape, but sellers face challenges in pricing homes effectively amidst longer days on market. In this recap, we'll explore key market trends, the evolving mortgage environment, and what these changes mean for buyers and sellers as we approach the end of 2024.

Market Summary

• Sales Momentum: Sales in September 2024 saw an 8.5% increase compared to September 2023 and remained relatively stable month-over-month, with just a 0.42% uptick.

• Listing Dynamics: New listings jumped significantly, increasing by 10.5% year-over-year and an impressive 44.2% from the previous month.

• Active Listings: Active listings surged by 35.5% compared to September 2023, and by 13.1% from last month, signaling more homes are entering the market.

• Price Trends: While average home prices dipped by 1% year-over-year, they rebounded with a 3.1% rise from August, indicating some short-term price recovery.

• Market Status: With five months of inventory available, the GTA remains in a buyer's market. The sales-to-new-listings ratio remained steady compared to last year but dropped by 12% from last month due to the influx of new listings.

• Time to Sell: On average, listings spent 28 days on the market, but properties took an overall average of 44 days to sell, reflecting the need for strategic pricing.

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Impact of Interest Rates & New Mortgage Rules

New Mortgage Rules:

The Canadian government introduced new mortgage rules that will extend amortization periods to 30 years for first-time homebuyers and buyers of new builds, reducing monthly payments but increasing long-term costs. Additionally, mortgage insurance qualifications now apply to homes priced between $1 million and $1.5 million, lowering the down payment requirements. 

Read more on how the new rules work and the pros and cons here.

Bank of Canada Rate Cuts & Fixed Rates:

On September 4th, 2024, the Bank of Canada lowered its policy rate by 0.25%, marking its third consecutive reduction, bringing it to 4.25%. A further rate cut, expected to be up to 0.50%, is anticipated on October 23rd. 

Fixed Rates which aren’t tied to the BoC policy rate but to Bonds have been trending down which have helped lower fixed-rate mortgages below 4% in some cases. This is a result of competition amongst the lenders according to Canadian Mortgage Trends. Recent fluctuations in the bond yield may change this. While interest rates continue to evolve, fixed rates remain more attractive than variable rates at present, offering buyers some stability.

The question remains not will they but when will variable rates get below fixed rates?

For buyers and sellers, these rate adjustments highlight the dynamic nature of the housing market. As more rate cuts are expected, more buyers could be incentivized to enter the market, but the landscape remains complex and ever-changing.

What Does This Mean for Buyers and Sellers?

For Buyers

Buyers can take advantage of increased inventory, particularly in the condo market, and the prospect of better mortgage rates. However, it’s essential to stay vigilant, as competition may increase when the market reaches its lowest point. Working closely with a knowledgeable agent who can assess market trends and a lender who can navigate the shifting mortgage landscape will help ensure you secure the best deal.

For Sellers

For sellers, effective pricing is critical. The extended days on market, averaging 44 days, suggest that many homes are not being priced appropriately. This often leads to reduced investment in marketing and staging, which can further lengthen the selling process. Pricing your home strategically, based on current market data, can help attract serious buyers more quickly and avoid long listings and multiple price adjustments.

In Conclusion 

Despite the Bank of Canada's recent rate cuts, their immediate effect on the GTA real estate market has been limited, with sales and buyer activity yet to significantly pick up. The market remains in a buyer's territory, characterized by high inventory and longer selling periods. However, as interest rates continue to decrease and recent changes to mortgage qualifications and extended amortization periods begin to take effect, we anticipate a more substantial shift heading into late 2024 and into 2025. Both buyers and sellers should remain informed and ready to adapt to these evolving conditions, ensuring they make well-timed and strategic decisions in the months ahead.

Get the Help You Need:

Ready to buy or sell in the GTA? Contact us today for expert guidance and personalized support to navigate this evolving market and make the most of current opportunities.

Call Ben at 905-995-23372 or Jim at 905-409-9967

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