Written by Miguel Fernandez Morales | Published on February 7, 2025
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.
"Canadians can expect an energized spring market as early as March. 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.
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. 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.
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. 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.
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%). 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.
Contact me at 647-985-0348 or miguel@yourfamilyrealtor.ca