Higher interest rates have been impacting prospective homebuyers and even sellers who are interested in listing their homes for sale to acquire another residential property. With the Bank of Canada (BoC) potentially finished raising rates, resulting in six per cent fixed-rate mortgages across the country, elevated borrowing costs have slowed sales activity nationwide. However, some regions have been more pronounced than others.
In the Hamilton and Burlington real estate markets, demand has softened.
In October, residential property sales tumbled more than 12 per cent year-over-year to 408 units in Hamilton, according to the REALTORS® Association of Hamilton and Burlington (RAHB). They also slumped nearly 20 per cent year-over-year to 137 units in Burlington.
Despite the lack of transactions, the trend has not impacted prices this year. The residential average price for a home sold in Burlington advanced at an annualized rate of six per cent to $1.159 million. The average selling price in Hamilton was flat at $789,040.
Higher lending rates are likely weighing on homeowners, with an increasing number of them choosing to list their home. While new listings have risen across all property types and price ranges, we are seeing larger inventory gains in the higher price points of the market.
Indeed, housing stocks are improving in Hamilton and Burlington. In October, inventory levels ballooned to their highest levels since 2011, recording close to five months’ worth of supply available for potential homeowners with more than 2,100 new listings.
Additionally, new housing construction activity levels have been impressive in 2023. According to the Canada Mortgage and Housing Corporation (CMHC), housing starts skyrocketed 237 per cent, totalling 1,197 units. In the first ten months of 2023, there have been 3,000 housing starts, up roughly 20 per cent.
But what does this mean for next year?
Looking at the Hamilton – Burlington Housing Markets in 2024
According to the RE/MAX Housing Market Outlook (HMO) report, the Hamilton real estate market and the Burlington housing sector are expected to be robust in 2024.
In Hamilton, prices are forecast to rise by 3.5 per cent to just below $832,000. Home sales are projected to jump by two per cent. The city will slip into a balanced housing market next year.
In the neighbouring Burlington area, home prices are anticipated to surge four per cent to just below $1.148 million. Sales activity will also be solid, with housing transactions predicted to rise by three per cent. The Burlington real estate market will turn into a balanced one.
Meanwhile, Conrad Zurini, a broker and the owner of RE/MAX Escarpment Realty Inc. says a unique trend formed in 2023 and could persist next year.
An increasing number of first-time homebuyers are pursuing alternative homeownership options such as buying with friends or family in order to get a “foot in the door” for home ownership,” said Zurini in the RE/MAX HMO report. “We anticipate this trend to continue in 2024.
One corner of the Burlington real estate market that could record notable demand could be condominiums.
Local real estate association data show that the condo market was mixed in October.
In Burlington, sales for apartments fell 41.5 per cent year-over-year, but benchmark prices rose three per cent to top $622,000. In Hamilton, condo sales swelled nearly 19 per cent, but benchmark prices tumbled six per cent to about $490,000.
By contrast, it is single-family homes that are expected to drive growth in Hamilton, the RE/MAX HMO noted.
Detached home sales in Hamilton fell more than 18 per cent and slipped one per cent to $816,300, according to RAHB data for October. In Burlington, single-family home sales fell about ten per cent, but benchmark prices tacked on three per cent to $1.322 million.
Are Interest Rate Cuts Coming?
The Bank of Canada (BoC) has signalled that high interest rates will remain until policymakers are convinced that inflation is returning to the central bank’s two per cent target rate, which they say might not happen until 2025.
However, the futures market believes that monetary authorities could begin slashing rates in early 2024, which would offer relief for the Canadian real estate market. While vanquishing inflation from Canada’s economy is the object, some economists believe that a cooling housing market could push the Bank of Canada to start loosening monetary policy.
Renewed house price declines are another reason to expect the Bank [of Canada] to cut its forecasts for economic growth and inflation in its October Monetary Policy Report later this month. All this reinforces our view that the Bank will pivot to interest rate cuts sooner than markets are pricing in.
Of course, the real estate market represents approximately 40 per cent of the nation’s GDP, making it the largest industry in Canada. Despite studies showing that millennials and Generation Zers are hoping for a sharp downturn in the housing sector, any crash could impact the broader economic landscape.
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