Understanding the Impact of Interest Rate Cuts on Toronto's Real Estate Market 2024

 

Wondering how the Bank of Canada's rate cuts could impact your next move in the Toronto, GTA real estate market? what it means for homebuyers and sellers. From a shifting buyer’s market to the timing of your decisions, this episode is your go-to guide for navigating these changes. Whether you’re ready to act or still weighing your options.

 

https://calendly.com/reshmashaikmortgages/free-consultation?month=2024-08

 

Episode Transcript

(00:00):
Hey everyone, welcome back to the podcast. This is Reshma, your go-to mortgage advisor.
Today we're going to talk about a topic that's on everyone's mind right now,
the recent interest rate cuts by Bank of Canada and what they really mean for
real estate market, especially here in Toronto GTA regions.
This is going to be a really quick podcast episode.

(00:22):
So i am recording this on august
25th 2024 and as of
now we have had two rate cuts so
far and we might see at least another rate
cut by end of the year right now
we are sitting at 4.5 percent rate so i'm
going to be talking about what's happening in the market and most

(00:45):
importantly what it means for you all right
so we are seeing rate cuts because our economy
is not doing so well when central bank
cuts rates like this it's usually a sign that
the economy needs a bit of boost because all.
They are trying to do is they are trying to encourage people
to spend more or borrow more

(01:07):
on homes or for businesses
or for investments in fact
we are probably heading into a recession you
know like i have been saying this for a while now when you
see rate cuts like this it's often because
the economy growth is slowing down and the government is
trying to stimulate the economy but we

(01:30):
need to understand that these cuts take time to have an effect we are talking
like 12 to 18 months down the lane before we really start to see the impact
of these rate cuts on the economy so what does this mean for real estate so
i have been having a lot of.
Conversations with clients who have been sitting

(01:53):
on the sidelines to buy their first homes or
upgrade their current home to buy
a bigger home so like everybody has been like timing the market and as soon
as the rate cuts were announced like a lot of people are like trying to pull
the trigger but they're also a bit confused so here's what i have been having

(02:17):
having conversations with the client.
There is one part of it is interest rates are decreasing
but they also need to consider like
a bigger picture the market is not just
about interest rates it's also about supply and
demand and how people are feeling about the
economy again we hear these terms very

(02:39):
often in real estate it all comes to down to a metric called sales to new listings
ratio or snlr essentially what it means is it measures number of homes sold
compared to the number of new listings on the market in that month.
If the SNLR is below 40%, it means we are in a buyer's market.

(03:03):
If it's anything above 60%, it represents a seller's market.
Anything in between is considered to be like a balanced market.
So in july 2024
in ontario we had a
snlr of 39.9 percent
so we are still in buyer's market and also

(03:27):
we have had a active listings in
ontario was a 62 940
by the end of july 2024 24 which increased
by 42 percent year over year and this
has been like a highest number of listings in over
five years for the month of july right now

(03:49):
we have got a lot of inventory on the market and
when you mix that with potential recession
you get a situation where real
estate prices might not go up just because
the interest rates are down you know
like we all have been preaching reaching for like even
including me right saying that as soon

(04:11):
as the government announces rate cuts the real estate market will go crazy you
know the prices will go up but that's not what we have been seeing given like
we are already into two rate cuts so far the reason is because.
Of potential recession that's why

(04:32):
the market is still taking a bit
time to adjust right and the
prices might not go up at this point
so for someone who may be having more stable financial situation and are like
ready to buy a house these rate cuts could be like a really great opportunity

(04:55):
again it all comes down to your situation right so now i know that i have been,
talking on both sides here saying that it could be a good time to buy but also
maybe not see that's the reality of situation we are in right now the market
is so volatile and it's changing constantly we need to be on top of the things,

(05:17):
let's talk a bit about a longer term outlook if we do get into a recession.
It's likely that we'll see further rate
cuts maybe even down to like 3.5 percent
by early 2025 but again the
impact of these cuts won't be immediate right

(05:38):
and this is where it gets
sticky because of the because by the time
this this cuts start to
have an effect the market look look could look
like very different for example let's say
you're in a market to buy a condo in
Toronto right now we are seeing a lot

(05:58):
of new condo projects for completion in the
next year or two that's going to increase
the supply and that is going to have effect on
the prices in Toronto condo market right even
with lower interest rates so if
you're thinking about buying a condo it might be worth considering
timing your purchase carefully this is

(06:20):
where working with a experienced realtor.
Come into handy especially who is.
Really well researched and experienced
in a toronto condo market but uh
what if you are looking at a single
family home or maybe even you are thinking
about upgrading to a bigger place well that's where

(06:42):
like you could see that things could
be a bit more favorable in if you
are in a like a stable financial situation now i
want to touch on something that often gets
overlooked in these discussions job security
during a recession job security

(07:03):
can be a real concern and it's something
you absolutely need to factor
into your decision making if there is any
uncertainty about your job or income it
might be wise to hold off on making any
big financial commitments until things
stabilize or have that three to

(07:25):
six months of emergency funds saved up
before you pull the trigger right so i'm
going to wrap things up here if you're thinking about uh
you know making a move in the next few months let's have
a chat all right that's it for today's episode i hope this conversation has
given you some clarity on what's happening with these rate cuts and how they

(07:48):
might affect the real estate market if you found this episode helpful please
consider subscribing share it with a friend or leave a review.
It really helps others to find the show. Bye.