REAL TIME Podcast: Housing Market Update, Canadian Economists Weigh-In

On June 5, the Bank of Canada announced its first rate cut in four years. This could be the sign many were waiting for to come off the sidelines and step into Canada’s housing markets. But what does that look like across the country and how do other economic factors play into consumers’ decision making process?

On the latest episode of REAL TIME, we hear from Shaun Cathcart, Director and Senior Economist, Housing Data and Market Analysis with the Canadian Real Estate Association (CREA), Ann-Marie Lurie, Chief Economist with the Calgary Real Estate Board (CREB), and Jason Mercer, Chief Market Analyst with the Toronto Regional Real Estate Board (TRREB), as they share insights on the current state of Canada’s housing market from a national, provincial, and local level, exploring everything from the need for more supply to interprovincial migration and pricing.

Why are interest rates dropping now?

After months of anticipating rate decreases, one of the first questions on people’s minds is, “why now?”.

“The reason it happened now is because the Canadian economy is not doing that well. Inflation and the Bank of Canada’s favourite BFFs, CPI-common, CPI-trim, CPI-median have been well-behaved, as they say, for four months and it just seemed like the right time,” said Cathcart.

Each of our guests continue to watch the Bank of Canada, while it monitors various economic indicators to make a decision about what happens next. “I do believe that if we continue to see slower growth in the economy and moderate growth in the employment market, then I think there is, at least, a chance that [the Bank of Canada] could bring on another cut as we move into July. It’s probably 50-50 at best at this point,” said Mercer, at the time of the recording, in June. The Bank of Canada will make its next scheduled interest rate announcement on July 24, 2024.

There was some speculation about these rate decreases potentially being more psychologically motivating. As hopeful buyers see positive indications about affordability, the Bank is hoping they’ll come off the sidelines and enter the market.

Supply, supply, supply

Something on each of the economists’ minds is the available supply in their respective markets. “We’ve got a housing supply deficit that’s built-up over time,” explained Mercer. While the exact situation may differ depending on the local market, supply is certainly one of the main factors affecting housing affordability nationwide.

“When we were advocating for more supply, it was more of everything. You can choose the number you want to look at, whether we need an additional 1.4 million homes per the PBO (Parliamentary Budget Officer) just to catch up by 2030, or whether we need another 3.5 million per CMHC (Canada Mortgage and Housing Corporation) by 2030,” said Cathcart. “I think our more recent submission does encourage the government to look at a modular housing of factory-built “panalization”, mass timber, and some of those new technologies where there may be some really big opportunities going forward to do things better, more energy efficiently, faster.”

Mercer further pointed out, to get housing built, there needs to be more education about what different types of housing will look like in existing neighbourhoods to mitigate opposition to new builds.

Interprovincial migration

In response to several factors, including the rise of remote work and housing affordability, interprovincial migration has been on the rise. Lurie was able to speak to her local market in Calgary, Alberta which has seen a rise in popularity due to their comparatively lower home prices. “I think our relative affordability has been a draw because when we look at our interprovincial migration; the majority of people have been coming from Ontario, followed by B.C.,” she said.

Cathcart, speaking to the national trends, said, “there is even some evidence in the demographic data that the 65-plus boomer parents are following their kids and grandkids out West because what’s the point of having your big Toronto home if no one’s going to visit you? Another trend is the older Gen Xers moving out East for their retirements.” He further clarified, “we have a tendency to blame COVID for a lot of these. Certainly, COVID was a turbocharger of a lot of [trends], but up and out [of your neighbourhood] to be able to afford a home has been going on for a very long time.”

Housing markets in Canada are continuing to shift every month. To get the most up-to-date information, be sure to visit CREA Stats. Check out Living Room to find market updates you can share with your clients.

Dawn Faithfull is a Communications Advisor at CREA. Find her BTS of the REAL TIME podcast, on socials, or writing content for CREA and Dawn has previously worked in marketing, communications, and event management everywhere from national restaurant brands, to international events and entertainment companies. If she isn’t working, you’ll find her practicing yoga, reading, or outside enjoying everything from water sports to cycling.

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