🍂 Fall real estate market activity
✂️ Interest rates—yes, they’re still a hot topic
📉 Decrease in rental prices
👨⚖️ Policy changes affecting real estate
10-Second Summary
The region's home sales are up 7.1% from last year but still fall below the 10-year average. While detached prices have dipped, townhouse values have climbed, offering an advantage for those considering a move up. Upcoming rate cuts might make borrowing more affordable, attracting more buyers—but there's more to the story.
Waterloo Region Market Recap
Home sales in the Waterloo Region are up 7.1% from this time last year but remain 14.2% below the 10-year average. Average Prices as of October 2023:
Detached: $885,587 (down 0.6% since October 2023, down 2.9% since September 2024)
Semi-detached: $650,098 (down 1.2% since October 2023, down 0.7% since September 2024)
Townhouse: $643,382 (down 0.2% since October 2023, up 7.8% since September 2024)
Condo Apartment: $484,429 (up 1.8% since October 2023, down 0.2% since September 2024)
The gap between townhouse and detached home prices has narrowed a bit over the past year, making moving up in the market more affordable. This shift means you won't need to stretch your budget as much if you're looking for that extra space or yard that a detached home can offer.
Fall came late...
This fall has brought unusually warm weather, but an equally cool start to the fall real estate market. Typically, real estate peaks in spring and fall, but rate speculation from the Bank of Canada paused some buyers earlier this year. After four consecutive rate cuts since summer, key lending rates have now dropped by 1.25%, with the current rate at 3.75%. Financial experts are keeping a close watch, with further cuts potentially on the horizon. In the last couple of weeks, we've finally seen that uptick of activity we anticipate in the fall real estate market.
Inflation and Interest Rates
In September 2024, inflation dropped to 1.6%, comfortably within the Bank of Canada’s target range of 1% to 3%—a generally positive sign. However, one factor to watch closely is how shelter costs impact the Consumer Price Index (CPI).
Unlike many countries, Canada’s CPI includes mortgage interest costs, which helps gauge the effect of rising borrowing costs on homeowners. This also means that each rate change by the Bank of Canada quickly affects inflation, as any rate reduction automatically lowers the interest burden for those with variable-rate mortgages. Further, rents are down 5.48% since October 2022. Some economists anticipate deflation, which could prompt additional rate cuts to boost spending.
Currently, fixed-rate mortgages are lower than variable rates and are impacted by bond yields rather than Bank of Canada rate adjustments. For most homeowners with fixed rates, recent changes by the Bank of Canada have less direct impact.
If variable mortgage rates drop below fixed rates, the Bank of Canada's rate cuts could have a more direct impact on real estate prices by increasing affordability in the market. Lower borrowing costs would improve buyer affordability, potentially driving more activity in the market.
Bonus reading
Several policy changes could affect the market:
Foreign Buyer Ban: Extended to 2027 with expanded exceptions
Increased Capital Gains Inclusion Rate: Increased to 66.67% (up from 50%)
Increased Cap on Insured Mortgages: Raised from $1M to $1.5M
Longer Mortgages: Now up to 30-year amortization for some buyers
Comments