Market Update

Steady Growth in the Spring Market: An In-Depth Analysis

 

Overview

We have experienced a steady Spring Market, with momentum continuing from the first quarter of the year. The Bank of Canada confirmed in April that they are satisfied with the economic data and anticipate lowering rates between June and September. As we move past the ultra-low-rate era, consumers are becoming more comfortable with today’s reality. This year might not see record-breaking sales volumes, but it will be a year of growth.

Market Performance

The Toronto Regional Real Estate Board (TRREB) has recorded an 11% growth rate in unit sales so far this year. While year-over-year price comparisons show a modest 1% increase, there has been a solid 12.6% gain in prices from January to April. This indicates a healthy and sustainable foundation for growth, marking the beginning of a new cycle in the real estate market.

Market Cycles and Predictions

Today’s market shares similarities with previous real estate cycles that follow periods of rapid and unsustainable growth. These cycles, driven by various factors, often behave similarly. We can predict with some confidence that the market will grow over the next 24 months. This prediction is based on expectations of declining rates over the next twelve months, continued population growth, and a stable economy under the current monetary policy of the Bank of Canada.

The Role of Interest Rates

The past 24 months have been a time of market recalibration due to the extreme pricing and sales pressure from unsustainably low interest rates and record population growth. Interest rates remain a crucial factor in consumer sentiment. With the Bank of Canada keeping rates steady and inflation fighting headlines persisting, this narrative will continue to influence the market. Once there is clear direction on rates, or enough time has passed for the market to embrace today’s rate reality, consumers will move forward with more consistency in their real estate decisions.

Strong Market Fundamentals

Our market fundamentals are robust. Canada is the fastest-growing country in the G7, has a strong economic base, and a well-informed Bank of Canada aware of market dynamics. Decades of experience with market corrections will help the Bank make better decisions and allow for smoother transitions from highs and lows. While rates seem high now, it is unlikely they will remain this way for long. We can anticipate 5-year fixed mortgage rates to settle in the 3.75% – 4.25% range as a new normal over the next 18 months.

Long-Term Perspective

It’s essential to maintain a long-term view of real estate. With constant information and opinions on social media, seeking out facts and confirming sources is crucial. TRREB data shows that home values rise on average by approximately 6.8% annually. Relying on factual data for monthly charts and annual analysis helps clients make informed decisions. Real estate has historically been an exceptional long-term investment, and we can be confident that healthy, sustainable growth is returning.

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