In a January 2024 report released by the Toronto Regional Real Estate Board (TRREB), it has been highlighted that the housing market in January 2024 showcased tighter conditions compared to the same period in the previous year. With an increase in home sales and new listings, coupled with the expectation of lower borrowing costs in the near future, the real estate landscape is poised for potential renewed price growth as we transition into the spring market.
According to TRREB President Jennifer Pearce, the positive start to 2024 can be attributed to homebuyers benefiting from lower borrowing costs associated with fixed-rate mortgage products. This, combined with an increase in new listings, albeit at a lesser annual rate compared to sales, has led to tighter market conditions. Pearce emphasized that the Bank of Canada's expectation of receding inflation throughout the year could support lower interest rates, ultimately bolstering confidence among homebuyers to re-enter the market.
The data from TRREB's MLS® System for January 2024 reveals a significant increase in home sales compared to the same period in 2023, with over one-third more sales reported. Similarly, new listings saw an uptick, albeit at a lower annual rate of approximately six percent. This disparity between sales and listings indicates tighter market conditions for buyers compared to the previous year.
TRREB Chief Market Analyst Jason Mercer predicts that once the Bank of Canada begins cutting its policy rate, likely in the second half of 2024, home sales will further accelerate. With heightened competition among buyers and constrained supply of listings, upward pressure on selling prices is expected over the next two years.
However, despite the positive outlook, TRREB CEO John DiMichele highlights the need for addressing policy issues at various levels of government. He calls for reflection on the application of the Office of the Superintendent of Financial Institution (OSFI) mortgage stress test, particularly concerning its impact at different points in the interest rate cycle. Additionally, he emphasizes the importance of addressing housing supply issues at the provincial and municipal levels, including building new homes and providing support for first-time homebuyers.
In conclusion, as TRREB prepares to release its 2024 Market Outlook and Year in Review report, it's evident that the GTA real estate market is undergoing significant shifts. While tighter market conditions and potential rate cuts by the Bank of Canada may present opportunities for homebuyers, addressing policy challenges remains crucial to ensuring a sustainable and inclusive housing market for all.
Effect of Possible Rate Cut by BOC Soon:
The anticipated rate cut by the Bank of Canada in the second half of 2024 is expected to further stimulate the housing market. Lower interest rates would make mortgages more affordable for prospective buyers, thereby potentially increasing demand and putting upward pressure on housing prices. As competition among buyers intensifies and supply remains constrained, the impact of a rate cut could contribute to accelerated price growth in the coming years. However, it's essential for policymakers to monitor these developments closely and implement measures to ensure a balanced and sustainable housing market.
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