2024 Predictions and New Years Resolutions Suck…

Economists expect the chilly conditions to continue into 2024, but with interest rate cuts finally on the horizon, a turning point may not be that far off. Robert Kavcic, senior economist at Bank of Montreal, identifies the key questions for the housing market heading into 2024.

Will prices bottom for real this time?

Yes, Canadians have seen the housing market plunge at the beginning of 2023, then revive when the Bank of Canda (BOC) reduced rates briefly in late winter / early spring and then slump again as BOC paused and restarted rate hikes in late spring and into summer.

BMO (and so do I) expects prices will remain under pressure until the spring of 2024 at the earliest, but once the BOC begins to cut rates, that, combined with pent-up demand, will mean prices will not just flatten out but start to slowly increase.

Adding to that the easing of interest rates will also do wonders for market confidence.

There is a caveat, however. This will only be true if the economy unfolds as expected. All bets are off if we sink into a deep recession with widespread job losses. Now we are expecting to see ‘normal’ after Christmas job losses as the seasonal employment comes to and end.

We also know that some markets will recover more quickly than others. “The path back to the 2022 price peak will be a long one in Ontario (think years, not months),” said Kavcic. For us in the Hamilton/Niagara regions we are very dependent on the GTA market. Before we see an uptick in our market, we need to see the GTA start to pick up. The most important thing to watch in the GTA is the 905. Think Markham, Mississauga, Richmond Hill, Brampton, etc. Once those bedroom suburban communities start to pickup in both number of sales and prices, we will start to see our local market pickup shortly thereafter.

Have mortgage rates peaked?

Borrowing costs may have already peaked, said Kavcic. After three holds in a row, the Bank of Canada appears at the end of their hiking cycle.

Governor Tiff Macklem said in an interview in December that he expects to start cutting interest rates in 2024 but needs to see several months of sustained downward momentum in core inflation first. This falls inline with my prediction that prices will stay flat until we get well into spring.

BMO predicts the central bank will cut rates by 1 percentage point mostly in the second half of next year, bringing the policy rate to 4 per cent. In my opinion this is optimistic at best. I believe we will start to see interest rates come down starting Q3 at the earliest and I expect to see 0.5% over two reductions of a quarter point each. I think we will see a full 1% reduction, but I believe the BOC will stretch that over the next year and a half to two years. The last thing the BOC wants to see is a quick spike in home prices. Slow, very slow growth in house prices is ideally what the BOC wants, and they will play with the Interest rates to achieve that. The only thing that will change that is if the US drastically cuts their rates. If that happens, we will have to follow suit.

Home price drops and interest rate drops: can they co-exist?

In a recent survey by Dye & Durham, 24% of respondents are holding off buying a home until home prices drop, and another 23% are waiting on interest-rate drops. I’ve said it before, and I’ll say it again…You marry the house…You date the rate. This is the cheapest house prices will be and if you are in the market to buy a property get in now while prices are down and select a short-term mortgage so you can improve your rate when they come down in the future.

We’ve all seen the gov’t announcements regarding the record high numbers of new Canadians from both immigration and refugees. What this means is that pressure on housing supply will not ease and we will stay in a supply and demand crunch which will keep prices on the higher side.

Does all of this impact the market evenly?

No. The smaller lower priced starter homes are still seeing a fairly strong market. The larger family homes which are priced over $750k have seen a big decrease over the last year and half. Also, luxury homes or in more exclusive neighbourhoods have seen the biggest decrease. So the best ‘deal’ you will get in the next few months will be in those two markets. So if you have a starter home your prices are fairly strong and you can upgrade to a larger home for a lower price than you may think. Marry the House, Date the Rate.

In summary, the prices have hit bottom, rates will start to go down later this year. When that happens the pent-up demand plus the increase in immigrations will start to force prices higher. SO, if you are looking to get a new home the next few months will be the best time.

New Years Resolutions Suck!

You know what would be great? If I weighed 30 pounds less, worked more efficiently, had more patience with my kids, spend less money, and never experienced sadness, anger, frustration, or temptation.

Hey, I know what I’ll do! I’ll just resolve to make that happen! First, I’ll decide that I’m going to change, um, everything about myself, and second, I’ll decide on an arbitrary day to begin — oh, hell, call it January 1.

To start, if I want to lose 30 pounds, I’ll get a wearable health device and join a gym. Unfortunately, this means I’ll need to break my resolution to spend less money. To compensate, I’ll work harder to make more money. To make up for it, I’ll double down on family. We’ll have board game nights and family dinners and meaningful experiences and throw our phones into the river.

See how really great this is all going?

Okay, look, I’m not saying it’s pointless to try to improve yourself or your life. What I’m saying is you are not actually broken. Your money, your parenting, your weight, your emotions, your vices — these are not defective things that need to be fixed or optimized or tamed into submission. They are part of being a person.

And right there, friends, is why New Year’s resolutions suck: They do not benefit you so much as they reinforce the idea that you are not enough. But they do benefit larger forces that you did not create and have no control over — the same forces that convinced you that you were broken in the first place.

Now, there are always things we can do for ourselves. For me, I started in October to lose a little weight. I have a simple program that I stick to and a reasonable goal of 5lbs per month. It doesn’t impact my time with family or the time I spend with clients. So far so good and I’m proof you can start improving your situation at any point of the year. It doesn’t have to be New Years.

In other words, New Year’s resolutions are a trap, and I’m calling them out!

I hope you had a wonderful Christmas and New Years with family and friends. Now let’s get into what we expect to see in 2024 so you can make informed decisions when it comes to your home.