Here we are again, at the start of a new year! It’s time to interpret real estate trends and whimsical hunches in an attempt to predict how real estate in 2024 will unfold in Toronto. Predicting real estate or the future, in general, can at best be called an educated guess. It’s more akin to a weather forecast – easier to see in the near future but tougher to predict further out.

As we kick off 2024, Toronto’s real estate market will be gearing up for a much-needed shake-up after a rather stagnant year. 2023 was mostly stagnant, particularly toward the end of the year. We witnessed far fewer transactions in 2023 compared to decades prior. Buyers were hesitant, sellers were cautious, and transactions decreased significantly. Many individuals regularly involved in real estate opted to stay on the sidelines, observing interest rate movements before making any moves. Consequently, we ended 2023 with a rare buyer’s market, where inventory had accumulated to the point favouring buyers.

However, turning the page from December to January won’t immediately unstick the market. January will likely mirror December, albeit with a hint of promise, in my opinion.

Let’s elaborate on how this “unsticking” will occur in Toronto in 2024:

Snap Out of It!

The spell of rising interest rates will break in 2024! Rising rates heavily influenced real estate in 2023, making property purchases more expensive and slowing down price increases. While low inventory was often blamed for pushing prices higher in previous years, 2023 saw higher interest rates leading to increased inventory. It seems safe to assume that the upward trend in interest rates might cease, although there’s always a possibility of their return. Rates might remain stubbornly stable, yet I find it unlikely.

The hold that interest rates had in 2023 won’t be as strong in 2024. Although interest rates will still influence real estate in Toronto and much of the country, they should now potentially stimulate more transactions and higher prices by gradually decreasing. I predict two drops next year, possibly three.

The B is Back!

Buyers might return to the market sooner than expected. There’s been a buildup of pent-up demand in 2023 as buyers awaited the halt in rising interest rates. Now that this seems likely, they may feel more comfortable entering a market where rates have stabilized, potentially increasing their willingness to make purchases.

Buyers will likely aim to enter the market before rates fall and prices rise. It’s better to buy at a lower price with a higher rate. If rates decrease, you can benefit down the road, either when your term ends or with a variable mortgage.

The first interest rate drop might occur as early as March, though we might have to wait until mid-year.

Prices Should Rebound in 2024, But Not Immediately

While pent-up demand may drive prices up, the increased inventory at the beginning of the year needs to be absorbed first.

Some real estate brokerages estimate a return to the price heights of 2022 for Toronto’s real estate, possibly towards the end of the year. Some predict prices might even dip further in the beginning of the year, but I’m uncertain if that will persist in Toronto. Overall, I expect prices to increase next year. However, there are factors that could suppress prices. With numerous mortgage renewals due in 2024, more people might need to sell their homes due to updated mortgage payments at higher rates, especially investors. This might lead to more listings and better prices for buyers. Homeowners might opt to hold onto their homes at higher rates and delay selling until it becomes more advantageous.

Bye Bye Buyer’s Market

January may see a buildup in inventory, but I anticipate that buyers and sellers will return in larger numbers. In my business, I’ve noticed increased buyer activity in December compared to previous months, in anticipation of the new year. They’re in a good position, given the abundant inventory available. Hence, we won’t swiftly exit our buyer’s market. I predict it might last until spring, although it could dissipate sooner.

Affordability

The government has become increasingly focused on addressing the housing affordability issue and the lack of housing supply. However, solutions won’t materialize quickly—certainly not in 2024. We’re still producing only half the necessary housing in this city. Additionally, much of the new housing will likely consist of rental units. Until we ramp up housing construction to match our city’s growth, prices will stubbornly remain high in the long term. It’s worth noting that many pre-construction projects were delayed in 2023, slowing down the creation of new homes. This delay will contribute to the impending inventory issue. As a growing city in a growing country, we’re not generating enough housing.

That sums up my vision for 2024. It will bring certain challenges depending on your position. For those renewing a mortgage, larger payments might be on the horizon this year. For property sellers, patience and resilience might still be required. Nevertheless, there’s a silver lining. For buyers, especially early in the year, this should be a favourable period with more options and less pressure to compete. And for everyone, the prospect of declining rates might bring a touch of joy. A little less inflation in our lives this year would certainly be welcome.