As we navigate through 2024, statistics have emerged concerning the real estate market. The key takeaway so far is that the market has shown positive signs of recovery.
Specifically: The number of real estate transactions on the island of Montreal has increased by approximately 14% year-to-date, indicating a surge in demand.
Meanwhile: The supply side has also responded, with a 15% increase in new listings, giving buyers more choice, and stimulating market activity.
Despite this growth: Prices have remained relatively stable due to the symmetry between supply and demand. Median prices for single-family homes have risen by just 2%, while revenue properties have seen a 6% uptick, and condos reside in the middle showing a 4% increase.
With that in mind: Has the recent rate cut by the Bank of Canada fueled this activity? The answer is not quite so straightforward.
The Impact of Rate Cuts on Real Estate
The much-discussed rate cuts, initiated by the Bank of Canada, influence mortgage rates. Rates for variable hover around 6%. Rates for fixed remain more attractive at approximately 4.6%.
Because of this disparity: Many buyers continue to opt for fixed-rate mortgages, limiting the immediate impact of lower variable rates on the market.
Additionally: Often up to six months are needed for the effects of a rate cut to ripple through the economy; which means: We may only begin to feel the impact on the real estate sector later in this year, or early in next.
What Might Come Next?
If lower interest rates continue to stimulate the broader economy, enabling more buyers to enter the housing market, we could see a further increase in demand, and sales volume.
In this scenario: Should the number of new listings stabilize, this heightened demand could put upward pressure on prices. With fewer new construction projects on the horizon, if supply remains static, this price increase could establish itself as a long-term trend.
Conversely: If homeowners who have been holding off on selling due to the uncertainty of the COVID-19 pandemic and a softer 2023 market were to suddenly flood the market with listings, we could see the opposite effect.
In such a case we could expect: An influx of new properties might outpace demand, easing pressure on prices, and potentially cooling the market.
A Stable Outlook, For Now
Thus far: Despite abrupt interest rate changes, the market has remained in stable “balance”. The growth we’ve seen appears to be on solid footing. We will continue to monitor the trends, actions, and data, to observe and report how rate cuts influence the market over the coming months.
As always, we’ll keep you updated as these changes unfold.