What’s Ahead For 2024

We have officially closed the chapter on 2023 and as we look back at the real estate landscape in Waterloo Region, we see a tale of deceleration and indecisiveness. So what will this new year bring? Before, I dive into my thoughts about what lies ahead in 2024, let’s take a quick look at what went on this past year.

Quick Review of 2023

 

Interest Rates:

• In 2022, there were 6 interest rate hikes, and 2 in 2023
• In January 2022, the key rate was 0.25%, and in January 2023, it was 4.5 percent
• By end of 2023, the Bank of Canada held it’s key rate at 5 percent which was set in September

Inventory:

• Yearly New Listings: In 2023, 11,528 new listings were added to the MLS® System, a 14.4% decrease from 2022
• Days to Sell: The average number of days to sell 2023 was 19 days
• Kitchener, Waterloo and Cambridge aimed to start building 5,133 homes last year, but altogether were only able to achieve 56% of the target goal

Impact:

• Annual Sales Declined: The total number of homes sold through the Multiple Listing Service® (MLS®) in 2023 in Waterloo Region witnessed a 14.8% decrease compared to 2022, marking a significant 23.2% decline from the previous 5-year average.
• Average Sale Prices Declined: The average sale price for all residential properties in 2023 was $786,033, a decrease of 7.7% year over year
• Housing continues to be less accessible to too many people in our region, whether it be a lack of inventory, high interest rates or timing, it all impacts the market

The Mindset for the Year

I believe that 2024 holds the potential for a transformative year.

This will be a year of strategizing, a year where you will do your homework, work on establishing good habits and just exercising that muscle and to make the change you desire.  I am a big believer in having a growth mindset, but let me be clear, growth can come at different intensities and paces depending on where you are at. So perhaps you have a goal of buying your first home, downsizing or upsizing, whatever goal you have, this year is about what it takes to get you to the final destination.

The Housing Market this Year

For 2024, I see a lot of what we saw in 2023.  Last year was a year of testing and recalibrating and then doing that again in an attempt to get to a point of comfort, which we found ourselves in by the end of the year.

Now that we are in a more comfortable position, I feel like this is the year to prepare.  In the first half of the year, I anticipate little change to interest rates, demand will pick up in the spring as it typically does and the news outlets will report that “the market is rebounding”. But in the background are 2.2 million homeowners needing to renew very low interest mortgages at almost double the rate.  This will hedge the worry that plagues the market and will become the new topic of conversation.

The Bank of Canada already knows if they don’t address the interest rates there will be very costly and consequential impacts, so by the last half of the year I believe rates will start to drop.  We have already started to see some lenders advertise promotions of lower rates to incentivize homeowners to renew, thus reducing the impact the lenders have coming with so many renewals to do on the horizon.

Lenders are leveraging a marketing concept known as loss aversion, which targets people who are motivated by the fear of losing something, rather than gaining it.  The idea that this promotion is only good right now and I better renew quick because who knows what will happen with the rates next month. This is the kind of thinking that’s happening already and we will see more of it this to come this year.  What happens with this sort of thinking though, is that the pessimistic outlook causes consumers to make hasty and irrational decisions.  They are motived by fear, and whenever they sense something uncomfortable they want to prevent it from happening. It’s important to talk to a knowledgeable mortgage broker to help you understand your options and who will help set you up for success.

Additionally, as mortgages come up for renewal, homeowners will undoubtedly re-evaluate whether to renew and stay, or move.

Canada currently has a population of over 40 Million, nearly 39% of those people live in Ontario (15,606).

Recent trends have been a migration of Ontarians out of the province, and the loss is balanced by new immigration.  Therefore, demand within Ontario will remain consistent year over year.  With interest rates anticipated to begin dropping as soon as Q2, we will likely begin to see a lot of market activity.  Since inventory is still low, and despite the region coming up short on housing starts, they are continuing to work towards their 2031 goal of 70,000.  The lower interest rates will help encourage development and with new motions brought forward by the City of Kitchener and the City of Waterloo to champion the creation of a multiplex zoning bylaw for low-density areas both municipalities may reach their targets.

Final Note: The Pathway to Progress

To quote my Royal LePage CEO and one of Swanepoel Power 200 most powerful and influential leaders, he is dubbing 2024, the year of the “Great Adjustment“. Minor interest rates will fuel the national aggregate home prices and consumers will settle in to the idea of tolerable mid-single-digit borrowing costs.

How I would dub 2024 is the “pathway to progress“.  Soper is spot on with the sentiment of adjustment, but what I think he left out is that this adjustment will lead us to a better tomorrow.

So, what’s the purpose of all this progress? It’s to continue to help our communities thrive and grow, it’s to provide basic needs for living, and housing is at the top of the list for me.  We are getting there, and that growth mindset I began this piece with, is alive and well – 2024 is the year of the pathway to progress.