This article is the first in Global News’ Spring Housing Buzz series, where we will investigate a number of different areas related to the spring real estate market in Ontario.
As the days grow longer, real estate markets generally grow stronger across Ontario in what is known as the spring market.
Global News spoke to realtors and an economist in an attempt to explain what the spring market is as well as to look at recent trends which may help to discern what could happen with the spring market in 2024.
Now, there is no hard and fast rule as to when the spring market actually arrives as it is not marked on the calendar and there are a number of variables involved.
“We usually see a slow build from early February, in through March,” Guelph realtor Beth Waller said. “And then I would say after March Break is maybe the time.”
Kingston realtor Matt Lee shared that view but noted that the warmer-than-expected weather created some early action in the Kingston housing market.
“March 15 is what I tell my clients. I think that you’re starting to kick off then is the norm,” he explained in mid-February, noting that the early warm spell in his area caused the market to warm up as well.
“If we get six inches of snow, you might see it taper a bit and then it will pick back up.”
Generally, most realtors will tell you that the market then slows down in July and August before things pick up again in September for the fall market.
“People are taking vacations a bit and they’re starting to taper off a little bit,” Lee said. “But then you get a bump between September and December.
“So I would say that the busiest market is spring, and that’s where we’re going to come into.”
Is spring a good time to sell?
Realtors say the spring market is considered the best time to be a seller followed closely by the shorter fall market.
Toronto realtor Rahim Jaffer said the spring and fall markets are definitely a good time to be a seller rather than the winter and summer when there are lulls in the market.
“Sellers typically have a greater pool of buyers out there interested in their properties and usually end up with better sale prices,” he explained.
For buyers, the time to get a better deal might be in August or November and December, but while they will have less competition, there will also be less inventory available.
“In terms of the best time to be a buyer, I mean, it’s a great question because you’re so limited with inventory in the summer and the winter,” Jaffer explained. “But a lot of your competition is not paying attention to the market as well.”
Hamilton realtor Rob Golfi explained that depending on the year, there are deals to be had in the offseason, although during the early stages of the pandemic, there was no offseason.
“You buy in November, December,” he offered. “You sell in March, April or February, March or whatever you sell then.”
The Hamilton market has cooled off from its Apex in 2021 and early 2022 but Golfi said there were options to turnover a home quickly for strong profit if things fell right.
“You could literally buy a house in let’s say Burlington for $950,000, which that house, it should have been sold for maybe $1,000,050,” he explained. “And you could literally buy that house at 950, close on the deal in probably March, put it up for sale five days later and probably make $150,000.”
Those were the volatile days early on in the pandemic as there were incredibly low interest rates but prices have fallen since the federal government began to raise interest rates.
When spring has sprung, what might we see across Ontario?
The last few months have been a tale of two markets as realtors say November and December were pretty quiet, while others saw things pick back up in January.
“It has picked up. In the Hamilton area, unit sales are up five per cent from December and it’s going to continue climbing,” Golfi said.
In Toronto, realtors are painting a similar picture as interest rates have dropped.
“It seems like buyers are returning to the fold in a big way,” Jaffer said. “What I think has somewhat prompted that has been some of the major lenders out there lowering their fixed interest rates over the course of December.”
Those sentiments were echoed by the Canadian Real Estate Association, which reported that national home sales were up 22 per cent year-over-year, with much of southern Ontario leading the charge.
That said, realtors in other Ontario markets are seeing a different start over the first couple of months of 2024.
“The January market is on track to be equal to or slightly less than, the number of homes sold last year,” said Ryan Waller of the Guelph market. “And definitely a decline, almost a 50 per cent decline, from the prior three years.”
It is a somewhat similar story down in London, where prices have levelled off over the past 18 months.
Local realtor Marcus Plowright said that it is somewhat of a buyer’s market in the Forest City but it all depends on what you are looking to buy.
“It really depends on what price point you want to buy in. So if you’re looking for affordable housing, there’s limited inventory,” he explained, noting that there are a lot of higher-end homes available on the market.
Lee believes it is going to be a busy time going forward in Kingston.
“I think we’re going to have a busy market,” he said, noting that people have adjusted their expectations with prices having steadied.
“In Kingston, we’ve seen the median sale price level off in our area so people feel comfortable that there’s not going to be this dramatic drop.”
Waiting for the rate announcement
As the heart of the real estate market moves closer in time, it is not easy for realtors to paint a clear picture of what to expect.
“We’re only in the second week of February, so it is a little too early to tell whether we’re going to see this continue,” Jaffer said on Feb. 16. “But the market certainly has shown signs of picking up in 2024 already.”
Robert Hogue, assistant chief economist for RBC, said the pace of the real estate market in early 2024 was somewhere in the middle of what the realtors have seen over the past few months.
“If you look beyond just the normal seasonal flows, on a seasonally adjusted basis, things have picked up a little bit, but they’re still slow,” he said. “The whole market is still slow. You know, affordability is a huge issue.”
Hogue said that the problem remains the relatively high Bank of Canada rate that was put in place to tame inflation although some banks have begun to lower interest rates.
“Still, we’ve seen since December and into January some slight declines in fixed mortgage rates that probably cracked the door open for some buyers,” the economist said. “So that’s why probably you’ve seen a little bit more activity.”
The Wallers warned sellers to be more cautious in their expectations as prices remain stagnant in the Guelph area.
“I think that sellers need to sort of tame their expectations,” Ryan Waller said. “Unless it’s a really unique house, you’re going to find potentially one or two offers, but they’re not going way over the asking price.”
It will be interesting for those in real estate to see how the spring market does play out as it appears that there are plenty of potential buyers sitting on the sidelines.
“From what I’m hearing from mortgage brokers, there have been a lot of people that have had pre-approval done that haven’t done anything yet,” Lee said. “That tells me that they’ve held off just to see how the market is shaping up.”
“It has allowed some more inventory to get on the market, but we are still very short in regards to inventory.”
While some of the realtors are anticipating a stronger market this spring, Hogue believes things will truly not pick up until the feds lower the interest rate.
“We all are looking at this kind of slow, small uptick we’ve seen the last couple of months whether that’s going to be sustained or built on, going forward,” the economist said. “We think until you get the Bank of Canada cutting rates, which we think is going to start in mid-year, you’re unlikely to see the market really pick up from a meaningful perspective.”
He said the prices have continued to drift lower as affordability remains an issue and the expectations are that the interest rates will not fall during the spring market.
And while some might expect that drop to be quick, Golfi thinks the feds will slowly ratchet them down.
“I think they’re just going to do a quarter point at a time, just little bits and pieces, just so that we don’t stir up the market too much,” the Hamilton realtor explained.
The Bank of Canada will make its next interest rate announcement on March 6.
A not-so-perfect time to renew
While the higher interest rates will keep some out of the market, they will also have a dramatic effect on those that currently have mortgages.
The higher interest rates can not only cause issues for those looking to buy but also for those who purchased back in 2020 and 2021.
There is a cohort of homeowners who purchased at that point who will face a dramatic shock when renewal arrives as prices were at their peak and rates were at their lowpoint.
“One of the things that we monitor very closely is sellers and the kind of sellers that may be a bit more desperate,” Hogue explained. “The mortgage renewal shock is huge for many and the concern is that there might be a certain number of those experiencing this shock who may not be able to continue owning that property.”
He noted that the higher interest rates might lead to a wave of sellers although RBC has not seen that happen just yet.
“We’re continuing to keep an eye on (it) because that mortgage renewal shock can be massive,” Hogue said.
“Now, it’s not just 100 bucks more a month. In some cases, it is $1,000, if not more, a month and that’s huge for many people.”
But realtors have been getting calls from clients who are already experiencing the pinch from higher interest rates.
“They’ve been trying to hold on as long as they can, and they’re getting to the point where it’s getting a little bit uncomfortable for them,” Ryan Waller said.
Golfi said that some of his clients have also looked ahead to the horizon and are trying to get ahead of the issue.
“People can’t afford the interest rate on the mortgage that’s coming,” the Hamilton realtor said. “Some people, if they know the renewal is coming, they’re getting out before it happens.”
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