A Perfect Storm for Buyers: Lower Mortgage Rates and Falling Real Estate Prices on the Horizon

Is Now the Time to Buy? Why Fall and Winter Might Be Your Best Bet for Real Estate Deals

As we move toward the colder months, real estate prices, which soared during the pandemic, have seen a gradual decline. However, they remain significantly higher than pre-pandemic levels. The question on many prospective homebuyers' minds is: when is the right time to jump into the market?

Experts believe that the ideal buying window may be approaching sooner than you think. If you're one of the many Canadians waiting on the sidelines for a better deal, keep a close eye on the upcoming fall and winter months. This could be the opportunity to buy in a slower market with more reasonable mortgage rates.

Why Now Could Be the Time to Act

According to mortgage brokers, realtors, and financial experts, the timing for a market shift is hard to pin down. However, some believe that a combination of falling mortgage rates and cooling real estate prices could make late 2024 and early 2025 a prime time for buyers. This potential sweet spot comes after the Bank of Canada began cutting interest rates in the spring, reducing them by 75 basis points so far, with more cuts expected.

Despite this, the housing market hasn’t yet seen a dramatic resurgence. Canadians are grappling with high inflation and economic uncertainty, which has tempered the usual excitement that follows a rate-cutting cycle. This uncertainty is why some experts recommend keeping a close watch on the market in the next few months.

What Do the Numbers Say?

NerdWallet’s calculations reveal that the average down payment required to purchase a home in Canada has steadily decreased. In August, the national average down payment was around $41,732 for a home priced at nearly $670,000. This is a significant drop from the 2022 peak, where the average down payment reached $45,396, the highest in recent years.

Yet, the struggle for homebuyers continues. Despite falling home prices, elevated interest rates have made it difficult for many would-be buyers to pass the government’s mortgage stress test, keeping them on the sidelines. According to NerdWallet spokesperson Clay Jarvis, the real estate market won’t likely take off again until rates drop further, with a target of 50 to 75 basis points for fixed-rate mortgages and at least a full percentage point for variable rates.

Buyer Interest is Growing

While the exact timing is uncertain, inquiries from potential buyers are on the rise. John Pasalis, president of Realosophy Realty in Toronto, notes that he has seen more interest from buyers gearing up for their home search. Similarly, pre-approval requests from prospective homebuyers have picked up after months of stagnation, according to Ron Butler of Butler Mortgage.

However, the market recovery may not be uniform across all property types. Larger homes that saw a dip in demand due to higher interest rates are expected to gain interest soon, while the condo market remains sluggish, with little hope for a quick recovery.

Don’t Wait for the Absolute Lowest Rate

One common mistake homebuyers make is waiting too long in hopes of securing the lowest possible mortgage rate. As Pasalis points out, holding out for the perfect rate might not always be the best strategy. “You’re dating the interest rate, but you’re marrying your home,” Pasalis says, suggesting that it might be worth paying a slightly higher rate now to secure a home you love before the market heats up again.

As the fall and winter months approach, now could be a great time to get pre-approved for a mortgage and position yourself for success. With fewer bidding wars and more choices available, buyers might find this slower period to be their best opportunity to buy.

Ready to Start Your Home Search?

If you’re ready to jump into the market, don’t wait for the spring rush. Get a mortgage pre-approval, stay informed on rate trends, and keep an eye on real estate listings in your desired area. While predicting the market is tricky, the current trajectory suggests that your moment to buy may be closer than you think.

What are your real estate goals this season? Let’s talk strategy and find out if the fall or winter market is the right time for you to make your move!