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Economic Outlook 2024

A look back at 2023 and what's ahead for 2024!


As 2023 draws to an end and a new year begins, let’s look back on Canada’s Economic Landscape and ahead to what the economists foresee in 2024.

The past year deonstrated Canada's economic resilience through robust job growth and increased investments at the beginning of the year. However, by year’s end, the current high-interest rates had contributed to a slowdown in business and consumer activities, leading to forecasts of weaker growth in the first half of 2024. Despite this, economists anticipate the economy to begin to rebound in the latter part of 2024.

In 2023, the inflation rate began at 5.9% and gradually decreased to 3.1% by November (December's report 3.4%). While the Bank of Canada doesn't anticipate inflation reaching its 2% target until late 2025, it aims for comfort within the 2.5% - 3% range. The evident impact of the Bank of Canada's rate hikes has resulted in prospective buyers feeling priced out of the market, impacting consumer confidence and leading to a 'wait-and-see' approach throughout 2023. Concurrently, the Bank of Canada's strategic rate adjustments have effectively moderated the housing market's pace, contributing to a gradual slowdown without significantly affecting property values in most parts of the country.

In 2023, Canadians also came to terms with the reality that rock-bottom interest rates are a thing of the past, and these new normal rates are now a permanent fixture. While we will see some modest decreases in rates in the coming year, many Canadians will no longer be able to delay their entry into the housing market in hopes of further rate drops.

Now, let's focus on what lies ahead in 2024:

There are emerging signs indicating the tangible effects of the Bank of Canada's (BOC) rate hikes are beginning to take root. Coupled with the anticipation of inflation dropping below 3%, we are finally witnessing movement in rates. Anticipated rate cuts from both the Bank of Canada and the US Federal Reserve have triggered a positive response in bond markets. This has resulted in lowered fixed rates, especially the 5-year rates, with some Insured rates dropping as much as 1%, fostering competition among lenders. As they gear up for the spring market, this competition benefits borrowers, especially first-time home buyers who have less than a 20% down payment.

There's a glimmer of hope on the horizon for Floating Rate holders (Variable or Adjustable). Most economists and markets are predicting a potential 1% - 1.5% rate cut to the current policy rate in 2024. However, the transition won't happen abruptly; the Bank of Canada (BoC) is likely to proceed cautiously, implementing gradual decreases while monitoring inflation and the economy. This will benefit Adjustable Rate holders with reduced mortgage payments and Variable Rate holders seeing a shift towards principal repayment.

With housing affordability and supply shortages pressing all levels of government, there will be a continued push for new construction developments aimed at bolstering the housing supply. Though this issue isn't something that will be swiftly resolved within a year or even a few, it remains at the forefront of all levels of government, underscoring the ongoing necessity of addressing the housing shortage.

What this all means for you, the consumer:

It’s estimated that about $251 billion in mortgages will come up for renewal in 2024, with another $352 billion worth in 2025. As a result, many Canadians will soon face a significant increase in their monthly mortgage payment—a major expense—and will have to adjust their spending. With that said, many lenders are going to be competing for your business. Working with mortgage professionals, with access to multiple lenders, is essential, allowing for better rates and products. It will also be important to get ahead of your renewal so you can adjust the family budget for a certain increase in your monthly mortgage payment.

For those dealing with high-interest debt, now is an opportune time to consider refinancing for debt consolidation, especially with declining rates, providing a chance to manage debt effectively. Consider this the “reset button” that can get you back on track and increase your monthly cash flow.

Finally, as there's a growing anticipation that the period of interest rate hikes might be coming to an end, this prospect will rekindle buyer interest in the market. With the expected decrease in fixed and variable rates, increased purchasing power could spur more demand in the housing market, causing an uptick in values. Choosing a variable rate or a short-term fixed rate now enables you to buy before the surge in demand while also positioning yourself to secure a potentially lower rate in the near future rather than waiting for rates to drop significantly.

While uncertainties remain, it's crucial for those planning mortgage transactions in 2024 to review their needs sooner rather than later. Together, we can determine the best course of action that suits your family’s budget and needs.

My team and I work with the top Mortgage Brokers in the country. We are here to assist whenever you're ready.


Kind Regards,

Chris Gregoris


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Hello and Happy New Year!  
 
I hope you have been able to enjoy the holiday season and found some time to rest and reflect on 2023.  
 
In reflecting on the Residential real estate market for 2023 the number of Greater Toronto Area (GTA) home sales came in at less than 70,000 due to affordability concerns brought about by higher mortgage rates. This number represents the lowest number of transactions since 2001.

Higher borrowing costs resulted in an unaffordable residential market for some households in 2023. However, relief looks to be on the horizon with borrowing costs expected to trend lower in 2024. Lower mortgage rates, continued population growth along and a positive outlook of our economy should see a rebound in home sales this year.  

There were 65,982 home sales reported through TRREB’s MLS System in 2023 – a 12.1% decline compared to 2022. Despite an uptick during the spring and summer, the number of new listings also declined in 2023. The trend for listings has been largely flat-to-down over the past decade, which is problematic due to a steadily growing population. 

The average selling price for all home types in 2023 was $1,126,604, representing a 5.4 per cent decline compared to 2022. 

The Toronto Regional Real Estate Board's Chief Market Analyst, Jason Mercer, stated recently that buyers who were active in the market benefitted from more choice throughout 2023, which allowed many of them to negotiate lower selling prices, alleviating some of the impact of higher borrowing costs. Assuming borrowing costs trend lower this year, look for tighter market conditions to prompt renewed price growth in the months ahead.  

Record immigration will continue to play a driving role in the GTA's residential real estate market.  There will be a perpetual need for real estate, rental or for purchase, as long as our population continues to grow at the pace in which it does. The development of new homes, freehold or condominium, will play a key role in providing the necessary housing supply required. Those with the means to invest in real estate will play a key role in replenishing the rental stock required to supply homes for those who rent.  Developers will not build unless they sell their product first. As 2024 kicks-off, expect to see some never seen before promotions by developers who are selling their current standing inventory. As a brokerage we have access to these never seen before opportunities, please do not hesitate to reach out to me should you be looking to expand your real estate portfolio.  

I wish you a fantastic 2024! Please know that I am here to assist you with all your real estate requirements throughout the year. If I can be a resource in any way, do not hesitate to contact me.  
 

I look forward to connecting with you soon.


Kind Regards,

Chris Gregoris

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This website may only be used by consumers that have a bona fide interest in the purchase, sale, or lease of real estate of the type being offered via the website. The data relating to real estate on this website comes in part from the MLS® Reciprocity program of the Toronto Regional Real Estate Board. The data is deemed reliable but is not guaranteed to be accurate.