Happy New Year! The snow has finally arrived in the Waterloo Region, and a new year is upon us. As we settle back into our work routines, now is a great time to reflect on the past year's accomplishments and plan for a prosperous 2024. This past year brought a more balanced housing market in Kitchener-Waterloo and the surrounding areas, one of which we saw the hyperactivity of multiple offers settle down. Buyers were presented with a 'less panicked' approach to purchasing a home in our area. Of course, the Bank of Canada interest rate hikes significantly impacted the housing market here in Kitchener-Waterloo and, effectively, all housing markets across Canada. News of significant interest rate hike announcements is behind us, and 2024 could be the continuation of holding the line or perhaps some minor adjustments downward in terms of interest rates as dictated by the BoC. So, what's our prediction for the Kitchener-Waterloo housing market in 2024? Here are a few predictions we see happening in the months and year ahead of us:
- The Bank of Canada will start lowering interest rates later this year - Higher borrowing costs have caused a pullback in business investment, housing prices, and consumer spending, making way for lower inflation. As inflation currently sits just above 3%, the BoC is much closer to its targetted 2% inflation rate. The following rate announcement takes place on January 24th. It would be a surprise if a rate decrease were announced this early into the year. If a decrease is reported, expect a robust Spring housing market to come fast and hard. If not, most economists expect a rate decrease announcement in the Summertime.
- The return of the SBP (Sale of a Buyer's Property) condition - Notably, there were listings in Kitchener-Waterloo in the last quarter of 2023 that saw conditional offers that included an SBP condition. This often indicates a balanced/buyer's market in which the property did not receive a multiple offer frenzy, and buyers can offer on a property before selling their own. This doesn't speak to a property being less desirable; the price point is often higher, and the buyer pool is traditionally less crowded. SBP conditions will be more frequent in the Kitchener-Waterloo housing market this Spring and perhaps throughout all seasons 2024. It's worth noting that this condition is more likely to occur in offers on listings above the $1,000,000 price point.
- Continued outsider competition for single detached homes in the $500,000 - $800,000 price points - A few factors will maintain the robust competition for buyers in the Kitchener-Waterloo housing market in the 'first-time homebuyer' price range. Federal government annual immigration targets of 485,000 for 2024 will compound Canada's existing rental housing crisis. It's no secret that the rental housing crisis in Kitchener-Waterloo is real, and investors from outside our region are flushed with cash buying affordable detached homes to take advantage of out-of-control lease rates. The financially incentivized foreign students at Conestoga College and the University of Waterloo are accustomed to crowded accommodation conditions. Unfortunately, many seedy investor landlords have no shame in taking advantage of the crisis. Our affordable listings in Kitchener-Waterloo will continue to be attractive to these investors and add to an already crowded price point for buyers in Kitchener-Waterloo and surrounding areas.
- Move-up Listing Inventory Will Increase - Could this be the year buyers looking to move up into a larger home have some real choice without the flurry of multiple offer activity? Tepidly, yes. Even though interest rates have crept up well beyond the historic lows, many homeowners have longer terms at these rates and will want to take advantage and port their mortgages into the dream home or chase the desired extra space their family may need. These buyers should see inventory for larger homes priced in the $975,000 - $1,300,000 increase in 2024. Many homeowners in this price point must seriously consider long-term affordability. Although some buyers have longer terms at low rates, realistically, many homeowners will need to renew at rates that will increase their monthly housing costs beyond feasible affordability. There are also many empty nesters and senior homeowners in move-up neighbourhoods like Beechwood, Westmount, Colonial Acres, Deer Ridge, etc., which will profoundly affect their housing needs and potential desirability for right-sized moves. If these conditions pan out as predicted, the move-up listing inventory should increase in Kitchener-Waterloo.
- A Reality Check Is In Store for the Luxury Housing Market - It's no secret that the buyer pool for multimillion-dollar homes is smaller than most housing market segments. As economic conditions constrain spending, gone are the days of a relatively healthy luxury housing marketplace in Kitchener-Waterloo. Of course, some big spenders will keep the market active, but there are growing signs of a slowdown. Whether it's the increased time on the market for listings priced at $1,800,000 plus or sustained interest rates above and beyond the historical lows, luxury homeowners looking to list in 2024 must be realistic about achievable sales pricing. It isn't doom and gloom but rather an honest conversation with a local real estate professional and a strategic marketing plan to stand out.