2024 Real Estate Crystal Ball: Unraveling Toronto’s Market Amid Mortgage Rate Turbulence

2024 Real Estate Crystal Ball: Unraveling Toronto’s Market Amid Mortgage Rate Turbulence

It’s about this time of year that I gaze into my crystal ball and predict what’s going to happen in Toronto’s real estate market.

It’s hard to be accurate at the best of times, but with the uncertainty around mortgage rates, it’s even more difficult. I do want to try though, so here goes.

Mortgage Rates

According to CMHC, there are 2.2 million mortgages coming up for renewal in 2024. Those who have variable rate mortgages won’t be surprised by their future payments, but anybody with a fixed rate just might be.

I don’t believe that mortgage rates will increase again, but I also think that they’re not going to go down significantly either. If your mortgage is up for renewal in the first six months of the year, it’s worth talking to your mortgage broker about a shorter-term option so that you can easily renegotiate when rates do go lower.

Though we all grumbled about the mortgage stress test, it is going to be that test that saves the market from collapse. I predict the majority of homeowners will find a way to absorb the extra costs of higher monthly payments and there will not be a tsunami of listings hitting the market which would ultimately result in a dramatic average-price drop.

Although I believe the single family home market will remain relatively strong, I do have a hunch we are going to see more investor-owned lower end condos hit MLS in the coming months and that market will be the most vulnerable. I don’t think it will be overwhelming, but even investors with fixed-rate mortgages are going to face an increase with their mortgage renewals, and unless the current rent covers the new mortgage, they may look to sell the unit.  (What’s that? You want to learn more about the complications of selling a tenanted unit? Click here.)

More lower-end condo listings will most likely result in further softening of prices for studio and one bedroom condos, which is good news for first time buyers, but with fewer rentals on the market, I predict we’re going to see rental prices increase, despite the latest news that in November, the average rent in Toronto decreased by .2% compared to October, when rents were at a record high.

Will prices go down?

We definitely will continue to see more listings on the market, and those properties will take longer to sell. The more inventory there is, the more there is going to be a softening of prices, especially if rates don’t come down and people can’t afford to buy.

That said, if mortgage rates do go down, even by a single percentage point, we will see the market roar back to life. On a $500,000 mortgage, the difference is almost $300 a month.

As always, there are key neighbourhoods in the city that will defy the odds and that won’t be affected by whatever happens with mortgage rates.

Do you agree? Disagree? Let me know!