Monthly Market Update - February 12, 2024

Housing and mortgage market activity is picking up. With interest rates levelling off, buyers are returning to the market.

The Bank of Canada held rates unchanged at their scheduled announcement on January 24. They have not changed rates since July 2023. The Bank was less hawkish in their accompanying notes to this rate decision. They remain cautious about persistent inflation pressures but their language was softer about more potential rate hikes. This is good news and is the best indicator from the Bank that the rate hiking cycle is over for now.

After declining significantly from October to December, five-year bond yields have risen by over 0.50% since the start of this year. This has paused the decline in fixed mortgage rates and many lenders have started to increase their fixed mortgage rates this week. This may be a sign that fixed rates will fluctuate within a range for the time being. No significant reductions in fixed rates are being forecast in the near term. The lowest insured, fixed mortgage rates remain below 5%. 

Variable rates remain high and will stay there until we see the anticipated rate reductions by the Bank of Canada.

Housing sales in January rose again, a second consecutive month of gains. This signals increasing activity in the housing market and industry participants are feeling more encouraged about an active and healthy spring housing market. 

Mortgage Market

• The prime rate remains at 7.20%
• Fixed mortgage rates declined in late Jan but have moved slightly higher this week. Five-year insured mortgage rates below 5% remain available with some lenders

• The five year government bond yield is 3.68% today, which is 0.51% higher than the end of 2023. It peaked at 4.42% in October 2023
  
  

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Mortgage Market Headlines

Housing Market

Housing Sales rose 3.7% month-over-month in January 2024. Actual (not seasonally adjusted) sales were up by 22% over the prior year, January 2023.

Housing Market Headlines

• New listing activity in January was up 1.5% month-over-month - CREA
• Nationally, there were 3.7 months of housing inventory for sale at the end of January 2024. The long-term average is closer to five months - CREA
• The actual number of transactions were 22% higher than January 2023, the largest y-o-y gain since May 2021 - CREA
• Following a weak second half of 2023, home sales over the last two months are showing signs of recovery - CREA
• Price declines have been predominantly located in Ontario markets, particularly the Greater Golden Horseshoe and, to a lesser extent, British Columbia. Elsewhere, prices are mostly holding firm or in some cases (Alberta and Newfoundland & Labrador) continuing to climb - CREA
• Investors account for 30 per cent of home buying in Canada - Globe & Mail
• 87% of respondents feel more comfortable investing in real estate compared to publicly traded stocks - Valour Group survey
• BoC's Macklin suggests that a housing market rebound is in store for this year
• House resale activity is set to rebound in the second part of the year - RBC
• Housing market to stabilize but affordability remains strained - BMO
• Housing supply shortage the cause of housing crisis, not interest rates - Bank of Canada
• Average national housing price to increase by 2.3% in 2024 - CREA
• The Federal Government extended the foreign buyer ban until 2027
• Housing supply gap is worse than thought - five million new homes needed by 2030 - CIBC

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