Where is the housing market going for 2023-2024?

These are the important questions for 2023! I was lucky enough this week to take part in a talk with Sherry Cooper who is a well respected economist in Canada. If you don’t know her click here. Sherry covered many topics ranging from interest rate hikes, the housing market, employment and immigration. Below I highlight some of the takeaways from the talk.

Overall Sherry does not see a drop in interest rates this year. She does see an overall further decline in house prices but different communities in Toronto and the GTA will under perform or over perform the expected decline. Sherry does expect house prices to balance out as we move through 2023 and expects inventory to remain low (below average). I would like to note here that for January 2023 new listings year over year are down only 3.7%. Active listings in January year over year are up 124.6%. The reason for the higher active listings is because houses are selling slower. The sales for January are down overall by -44.6%.

Sherry does expect the housing market to pickup in 2024 as interest rates decline. She does not see a huge drop in interest rates overall moving forward. Immigration will create pent up demand for housing as interest rates and inflation decline. Immigration is playing a big role in housing shortages whether its owning or leasing.

In 2022, 60% of all mortgage originations were variable rate mortgages. In 2022, 31% of all mortgage originations were short term (under 3 years) fixed mortgages. Variable interest rates was one of the most interesting topics this morning. With many of the big 5 banks you are able to have a variable mortgage but with fixed payments. These fixed payments in most cases are not covering the interest payments each month and mortgage amortization has been increasing for many mortgages. 25-26% of all mortgages (TD/CIBC) have increased amortization to over 35 years! When it’s time to renew there is potential for lots of trouble unless bulk payments can be made and/or interest rates come down considerably. There are plans for the federal government to tighten up lending criteria in the future. No solid plans have been announced.

New immigration will hit 500,000 persons for 2025 in Canada with the majority of new immigrants moving to Toronto and the GTA

We are the fastest growing population in the G7 based on immigration. We are 7th in the G20. Immigration growth is important to the country because it helps to grow our economy and brings in skilled labour that we are currently lacking. 
Overall the housing market is a huge part of the economy. It is larger than the manufacturing economy! I do expect the housing market to pick up as the weather warms up and we will see house prices stabilize. There are many buyers out there waiting to see what will happen with the economy and house prices. I believe that the housing market will heat up again as soon as we see interest rates stabilize/decline. Are we heading back to an overheated housing market? I would say yes because there is pent up demand for housing and with high immigrations targets this will increase the demand for housing.