Navigating Canada's Housing and Economic Landscape: A Mid-2024 Update

As we move through 2024, it’s essential to understand the evolving dynamics of Canada’s economy and housing market. Here’s a snapshot of where we stand and what to expect in the coming months.

Mild Recession and Tepid Recovery

Mortgage Professionals Canada's (MPC) latest projections indicate that Canada’s GDP growth for 2024 has been revised upward to 0.2%, thanks to a robust expansion in the first quarter. However, it anticipates a shallow downturn in the upcoming quarters, primarily due to the delayed effects of past interest rate hikes on consumer spending, housing, and business investment. The good news is that a gradual recovery is expected to begin in the fourth quarter as interest rates ease and government spending lends support.

Inflation and Monetary Policy

While inflation has slowed, it remains above the Bank of Canada's 2% target. In response, the central bank has started cutting interest rates, but it will proceed cautiously, closely monitoring the data for any signs of resurgent inflation. MPC anticipates further rate cuts to 4.25% by December 2024, contingent on economic performance and inflation trends.

Rising Unemployment

The unemployment rate is on the rise, driven by slower hiring and continued strong population growth from immigration. MPC expects this trend to continue, with the unemployment rate projected to reach 7.5% by the end of the year. This weakening labour market could further dampen consumer spending and overall economic activity.

Housing Market Under Pressure

Higher interest rates and mortgage payment shocks are putting significant pressure on the housing market. Prices are expected to fall further in the near term, though they will likely remain unaffordable for many. The recent interest rate cuts and the prospect of further reductions offer some relief to borrowers, easing the financial pressure on households.

Home Construction and Resale Market

While the pace of new home construction has slowed, a potential pickup in housing starts is anticipated later this year and into 2025. The resale market, although sluggish, may be nearing a bottom. Sales volumes have increased slightly, but a sustained price recovery is expected later this year or early next year.


Overall Outlook

Looking ahead, improvements in the macro environment should pave the way for a more stable and sustainable market in the years to come. However, affordability will remain a key challenge, and the path to recovery is likely to be gradual and uneven across different regions. Despite recent upticks in inflation, our forecast remains for it to slow to the Bank of Canada's 2% target by mid-2025, as economic slack builds and global prices stabilize.

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Regional Insights:

Ontario’s economic outlook is currently overshadowed by significant challenges. Consumer spending is expected to contract this summer due to high interest rates, mortgage renewals, falling house prices, and job losses, particularly in the manufacturing sector. The shutdown of Ford Motor’s Oakville plant until 2027 will likely result in more layoffs, further impacting the region’s recovery.
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In conclusion, while Canada faces economic and housing market challenges, there are glimmers of hope for stabilization and recovery. By staying informed and adapting to these evolving conditions, we can navigate this complex landscape and work towards a more sustainable future.

Stay tuned for more updates and insights as we continue to monitor these developments.

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