2023 Real Estate Market Outlook (And What It Means for You)
Last year, one factor drove the real estate market more than any other: rising mortgage rates.
In March 2022, the Bank of Canada began a series of interest rate hikes in an effort to pump the brakes on inflation.1 And while some market sectors have been slow to respond, the housing market has reacted accordingly.
Both demand and home prices have softened, as the primary challenge for buyers has shifted from availability to affordability. And although this higher-mortgage rate environment has been a painful adjustment for many Canadians, it should ultimately lead to a more stable and sustainable real estate market.
So what can we expect in 2023? Will mortgage rates continue to climb? Could home prices come crashing down? While no one can forecast the future with certainty, here’s what several industry experts predict will happen to the Canadian housing market in the coming year.
MORTGAGE RATES WILL EVENTUALLY STOP CLIMBING
Over the course of 2022, we saw the benchmark rate rise at a record pace—a whopping 400 basis points in just nine months. Fortunately, there are signs that the central bank’s series of rate hikes may be coming to an end.2
After last month’s half-point rate increase, Bank of Canada officials struck a noncommittal tone about future rate hikes, prompting economists to speculate that the central bank may pause hiking rates by early spring, if not sooner.3
According to Stephen Brown, a senior economist at Capital Economics, the central bank is likely to hike rates at least one more time before it shifts gears.
“We would not rule out a final 25 basis point interest rate hike in January,” said Brown in a client note. “But the Bank is very close to the end of its tightening cycle.”3
What impact will this have on mortgage rates? Variable mortgage rates could finally stabilize. However, buyers hoping for a big drop later in the...