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The Bank of Canada recently announced its decision to reduce the benchmark interest rate to 4.5% at the start of August, marking the second rate cut this year.
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Our real-time data allows us to track shifts in the property market as they happen, and we’ve been closely monitoring how this news has influenced home-mover activity.
In July, demand – measured by the number of buyers inquiring about homes for sale across the Toronto & GTA area – was up 9% compared to July 2023. However, following the interest rate cut announcement, we’ve seen demand surge further, currently sitting at 15% higher than the same period last year. This significant uptick reflects the optimism that the long-awaited rate reduction has sparked among potential home-movers, eager to reignite their plans.
Our property expert, Ross Talibov, notes: "The first two consecutive interest rate cuts have given buyer activity a significant boost as we transition from summer into fall. Although mortgage rates haven't decreased dramatically, the expected rate reduction and the overall trend toward lower rates are instilling confidence among homebuyers. As we emerge from the summer slowdown, the stage is set for a potentially more dynamic fall market."
How Have Mortgage Rates Responded Recently?
Since the start of August, we’ve observed a steady reduction in mortgage rates, with the lowest available 5-year fixed-rate mortgage deal (4.49%, for 65% LTV) being the most competitive offer since mid-2023. However, it’s important to note that mortgage rates remain significantly higher than in previous years, and further cuts to the interest rate may be needed before home-movers see more pronounced decreases.
Ross Talibov adds: "While there's justified optimism about the direction of mortgage rates, the reality is that they are still considerably high compared to a few years ago. Many buyers may find affordability challenging until we see more substantial reductions. Sellers should remain cautious and avoid overpricing, despite the uptick in buyer activity compared to last year, and should focus on setting a competitive asking price."
What’s Happened to Home Prices?
As expected, the typical seasonal slowdown has brought a slight dip in home prices. The average listing price for new properties across Toronto & GTA has decreased by .9% year-over-year, now standing at $1,106,617 (-$10,333). You can explore detailed changes in home prices within our next monthly Housing Market Report for August.
It’s common to see a decline in home prices in August, as many sellers and buyers pause their plans during the summer. Sellers often adjust their prices more attractively to capture the interest of a reduced pool of buyers. Our data indicates that homes not attracting inquiries soon after being listed are more likely to require price reductions later – making an appealing initial asking price crucial for a quick sale.
What Could Happen to Home Prices for the Rest of 2024?
At the end of 2023, we projected a 1% decline in home prices by the close of 2024. However, with inflation showing signs of stabilization and mortgage rates continuing their downward trend from their peak in July 2023, coupled with the boost in market activity following the rate cut, we now expect home prices to hold steady or even increase slightly through the remainder of the year. We anticipate ending 2024 with average home prices 1% higher than they were at the start of the year.
Ross Talibov concludes: "The positive response from home-movers to what we hope is the first of several rate cuts in the coming years, alongside other encouraging market indicators, has led us to revise our price forecast. We now expect a modest 1% rise in home prices by the end of 2024, a slight upward adjustment from our earlier prediction of a 1% decline."
