As expectations for interest rate cuts grew and affordability challenges mounted, many prospective homebuyers opted to wait on the sidelines this year. As a result, spring home sales were sluggish, and enthusiasm for the market waned. However, following four interest rate cuts by the Bank of Canada this summer and fall—most recently bringing the overnight lending rate down to 3.75%—optimism is gradually returning. Could this set the stage for a more active spring market in 2025?
It has been several years since Canada’s real estate market experienced a traditional spring surge, with sales peaking between March and June and inventory rising to meet demand. But that could change next year.
“Canadians can expect an energized spring market as early as March,” says Haw. “With interest rates stabilizing and strong pent-up demand, we are likely to see a return to the typical seasonal uptick in real estate activity.”
According to CREA, national home sales in May 2024 were the lowest for the month since 2021. However, new listings were near the highs of 2021 and 2022, giving buyers more choices and reducing competition.
By spring 2025, buyers may face increased competition as many who had previously held off re-enter the market. At the same time, greater buyer activity could motivate more sellers to list their homes, further boosting inventory levels.
Mortgage Renewals Could Drive a Wave of Downsizing
Housing supply has steadily grown throughout 2024, with national months of inventory rising from 3.6 in January to 4 months in October. Meanwhile, buyer demand has remained softer than in previous years, helping maintain balanced conditions in many markets. In some of Canada's most competitive regions—such as Toronto, Vancouver, and Hamilton-Burlington—conditions have even shifted in favor of buyers.
In 2025, two key factors will shape market dynamics: the return of sidelined buyers driving demand higher and an influx of supply from homeowners renewing their mortgages.
“A significant number of buyers will be coming back into the market, increasing demand, while a wave of mortgage renewals may push some homeowners to downsize, adding to supply,” explains Haw.
Despite recent rate cuts, interest rates remain significantly higher than the record-low levels of 2020 and 2021, when many of these mortgages were originally secured. According to CMHC, 1.2 million mortgages will come up for renewal in 2025, with most homeowners facing much higher rates. In 2020 and 2021, five-year fixed-rate mortgages were as low as 1.39%, whereas those renewing in 2025 will likely see rates exceeding 3%. Given this, some homeowners may choose to sell and downsize to ease their financial burden.
Multiple Offers Could Make a Comeback
During the housing boom of 2020 and 2021, intense competition fueled by record-low mortgage rates drove homebuyers to act quickly, fearing they would miss out on an opportunity.
Many learned the hard way that increased competition led to soaring home prices. With mortgage rates expected to decline further in 2025, some buyers may once again feel the pressure to enter the market sooner rather than later to avoid potential price increases.
“Next year's sales will largely be driven by first-time buyers and end-users,” says Haw. “With mortgage rates dipping below 4% and the possibility of further reductions, buyers may feel motivated by concerns of rising prices—potentially reigniting a sense of FOMO (fear of missing out) in the market.”
A recent Zoocasa survey found that 42.3% of respondents cited rising home prices as their top concern when buying a home, followed by interest rates (25.6%) and economic uncertainty (14.9%). Fortunately, average home prices in British Columbia and Ontario have remained relatively stable in 2024, while condo prices in many markets have declined year-over-year, creating a potential window of opportunity for buyers.