Having been a real estate Broker and Market Value Appraiser for over 20 years, people regularly ask me, “how’s the market?”  Given today’s economic environment that question has perhaps never been more important and relative as it is today heading into 2024.

Over the years including prior to entering the real estate profession, I have lived through the highs and lows in terms of housing sales and pricing.  During my life I have owned 9 homes including one in the U.S. outside of Chicago where I lived from 1992 to 1996.   Much of the time it has been almost impossible to make accurate predictions about what’s ahead especially when it comes to real estate.   In recent years we have clearly become a “global” economy and given the many challenges the world seems to facing right now doesn’t make it any easier to predict where the economy and housing market is headed in these uncertain times.  That being said, with all the data that we as Realtors® and consumers have at our disposal, we may be in the best position ever to make some reasonable assumptions as to where Canada’s housing market is going in 2024 and beyond.

Through 2020 and 2021, the real estate market across much of Canada reached a new pinnacle in terms of sales and pricing.  With Buyers lined up to purchase homes often resulting in multiple offers with properties selling for well over their asking price, there was no such thing as a Seller “asking too much.”  This was very much the case everywhere including the Southern Georgian Bay region.  Driven by record low mortgage rates, the dream of owning a home, moving up to a larger one or buying a recreational property was well within the grasp of many.

In addition, the COVID-19 pandemic brought about a shift in the way we work with many people in a position whereby they could or were asked to leave their office and work from home.  My wife and I both fell into that category although I do go into my office as needed.  This workplace shift had a profound impact on many and combined with low mortgage served to help drive real estate sales and prices higher.  Many that were able to, chose to move outside places such as the Greater Toronto Area.  Who wouldn’t want to be able to live and work in the same location where they had in the past spent weekends and summer holidays be it at their cottage, ski chalet or recreational condo etc.  The Southern Georgian Bay region was certainly one of those markets that was impacted by this shift.

That was then this is now.  During the booming real estate sales we saw in 2020 and 2021, I routinely told my clients, “…these market conditions cannot last nor is it healthy if they do.”  With mortgage rates at 2% or less, consumers in many cases appeared to be buying more house than they needed or could realistically afford if mortgage rates were to increase and they have.  Taking on another $200,000, $300,000 or more in mortgage debt above what they would ordinarily feel comfortable with seemed easy when all you looked at was your ability to make the monthly payment.  Most agreed with my prognosis but deep inside I suspect many thought or hoped we would ride the crest of this real estate wave indefinitely if for no other reason than to justify their purchase while expecting to see their home or other real estate appreciate in value.

As covered in a prior post titled “Unlocking the Facts: A Comprehensive Overview of Southern Georgina Bay Real Estate Sales in 2023” I summarized the 2023 real estate market across Southern Georgina Bay.   The market today is vastly different .  Both Buyers and Sellers are facing significant changes.  Inflation has hit virtually everything thereby increasing the cost of living which eats into our monthly budgets.  More importantly it’s the cost of borrowing money.  Gone are the 2% mortgage rates and they are not likely to return anytime soon.  As of this post, Canada’s major banks have 5 year fixed rate mortgages of roughly 5% and a 5 year variable rate mortgage is just under 7%.  How has this affected consumers real estate buying power?  Below are a couple of examples:

Back in 2020 or 2021, a $500,000 mortgage at 2% yielded a monthly mortgage payment of roughly $2,100.  Today that same monthly mortgage of $500,000 at a 5% borrowing rate would have a monthly payment of $2,900, that’s $800 or 38% more.

At a 6.9% for a variable rate mortgage that $500,000 loan now has a carrying cost of $3,470, an increase of $1,370 (65%) per month.  Combined with perhaps having overpaid when they bought in 2020 or 2021, many consumers today may now find themselves facing a financial reality that could be difficult to fulfill and or adjust to.

Over the last several years when talking about Canada’s housing market, the media focused their attention on sales and in particular “average” sale prices.  Seldon if ever did the media mention Canada’s mortgage debt.  As of January 2023, Canada Mortgage and Housing estimated that Canadian consumers had $2.08 trillion in mortgage debt which was up 6% from January 2022.  NOTE: Mortgage debit does not include credit cards, lines of credit or car payments etc.

Based on this information, it is abundantly clear that Canadian consumers that own mortgaged homes have some major hurdles facing them with respect to said ownership.  While the desire among Buyers to own a home or to acquire a second property such as a cottage, a condo for weekend use or other type of recreational property may still exist, it has now become a question of affordability.  From a Seller’s perspective, asking too much for their home or other property in order to attract a willing Buyer has now become a reality.  There is in fact a ceiling when it comes to real estate prices.  This affects not only the Southern Georgian Bay real estate market but elsewhere in Canada as well.

Those consumers wishing to purchase a home or second property are not the only ones facing a dilemma brought about by higher mortgage rates.  Many current home owners, those that bought in 2020 and 2021 with a 3 or 5 year mortgage are facing mortgage renewals in 2024 or 2025.  Many of those that got caught up in the market frenzy of 2020 and 2021 may and often did overpay for the home, condominium or other property they purchased.   At record low interest rates and with the mindset that prices will only continue to increase, it was very easy for Canadian consumers to get caught up in the euphoria that “nothing can or will go wrong.”  They suffered what is often referred to as the “fear of missing out” (FOMO).  This lead them to think we better buy now or we will never be able to afford to.  Once again that was then, this is now.

As with most things in life, there is always a day of reckoning and that day appears to have come.  Today, the inventory of properties in the Southern Georgian Bay area including Collingwood, Clearview Township, the Blue Mountains, Municipality of Meaford, Grey Highlands and Wasaga Beach listed for sale on the MLS® System of Lakeland’s Association of REALTORS® is the highest it has been since 2016.  No longer can weaker real estate sales be attributed to the “lack of inventory” as had been the case in 2020, 2021 and early 2022.  Other factors are clearly at work the most significant of which is the increase in mortgage rates.

In Part 2 of this post I will address what the forecast for 2024 looks like based on what Canada Mortgage and Housing and the country’s major banks are predicting.  In the meantime please feel free to Contact Me if you have any questions or would like a no obligation consultation pertaining to your real estate selling or buying needs or objectives.