Job vacancies increasing is the market slowing down?

Ottawa Market Report - October 2024

Market reports - 2024

October 01, 2024•5 min read

Less and less homes are getting built meanwhile our population keeps growing.

Decline in Housing Starts: Housing starts in the Ottawa area fell by 21% in the first half of 2024, reaching their lowest level in nearly a decade. This is due to rising interest rates, increased construction costs, and diminished demand for new homes.

Resilient Rental Market: While rental apartment construction has decreased, it remains the primary driver, accounting for one-third of housing starts. Demand is buoyed by high immigration levels and government support.

Condominium Market Struggles: Condominium starts dropped by 51%, with builders facing profitability challenges, particularly in central areas where demand has declined due to high prices and smaller unit sizes.

Zoning Changes: Anticipated zoning reforms in 2025 will allow up to four units per lot and aim to increase densification, potentially alleviating supply issues. I think a lot of smaller developers / investors should be focusing on this as it can allow for some great opportunities.

Increased Development Charges: Starting October 1, 2024, development charges will rise, potentially offsetting benefits from tax exemptions for rental projects, this is not a step in the right direction.

Mortgages in arrears have significantly declined, indicating that more homeowners are able to manage their mortgage payments, with fewer falling into default. This positive trend can be largely attributed to recent reductions in interest rates. With forecasts suggesting that rates will continue to decrease, this is a welcome relief for homeowners, especially those who opted for variable-rate mortgages in recent years.

Initially, I anticipated that the wave of mortgage renewals expected next year might mirror the previous two years, when many homeowners faced difficulties and were forced to sell due to payment issues. However, it appears I may have underestimated the situation. The government's recent decision to eliminate the stress test for mortgage renewals allows homeowners to more easily shop around for the best rates, further improving their financial flexibility. This shift not only stabilizes the housing market but also boosts overall confidence among homeowners.

September marked a significant rebound in home prices, signaling a vibrant start to the fall market following a notably slow summer.

Throughout the summer, we noticed a downtrend in activity, as many people seized the opportunity to travel and enjoy outdoor activities. It appeared that buyers were stepping back, possibly waiting for interest rates to stabilize.

However, with rates now showing signs of easing, the renewed momentum in home prices reflects a positive shift in buyer sentiment.

Looking ahead to next spring, I anticipate a ramp-up in activity similar to previous years. Rates are likely to settle in the 3% range, and with lagging housing starts, inventory will continue to be a challenge.

While I don’t foresee a repeat of the explosive spring seasons of 2021 and 2022, I do believe we will see a healthy increase in both home prices and sales.

Additionally, the Government of Canada has introduced two significant incentives for home buyers:

First-Time Home Buyers: Those purchasing with less than 20% down will now be eligible for 30-year amortization rates.

New Construction Homes: All buyers with less than 20% down can qualify for 30-year amortization rates for new builds.

I’ve had four buyers take advantage of this in the past few months, and it has been a game changer. While extending the mortgage term from 25 years to 30 years does increase the overall duration, it can significantly enhance your approval. Many of my clients who were initially approved for the $550k to $600k range found that the 30-year amortization bumped their approvals to approximately $600k and $650k, respectively, providing them with much greater flexibility in their home search.

Incentives like these, combined with lower interest rates, will enable many buyers to enter the market.

For Buyers:

If you’re considering purchasing a home, start the conversation early! Talk to your broker and get pre-approved, even if your purchase is still a while away. Understanding your approval amount and receiving feedback on your file can help you stay ahead of the curve. Securing pre-approval before you begin your search is crucial. Think of it like shopping: it’s always wise to check your bank account before heading to the mall!

For Sellers:

If you’re planning to sell in the spring, reach out now to schedule professional photos of your home. Showcasing your property at its best during the prime season can significantly impact your sale. Additionally, consulting with your realtor early for feedback on potential improvements will allow you ample time to make enhancements without feeling rushed. Small investments can lead to a substantial return on the sale of your home.

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Quick snapshot

Sales are creeping up but so is inventory.

In September, we saw a notable decrease in the average days on the market, down 10% from August—24 days to just 22 days.

The average sale price also experienced a positive shift, rising by 5.2% to $645,000 compared to August.

Additionally, transaction activity is up significantly from last year, with 1,054 sales recorded versus 956, marking an increase of nearly 10%.

New listings remained relatively stable, with 2,385 compared to 2,319 in Sept 2023, reflecting a slight increase of about 3%.

Interest Rates - Showing good signs

Some of the top rates that we are seeing today are:

Fixed
3-Year Fixed: 4.49% (less than 20% down payment)
4-Year Fixed: 4.69% (less than 20% down payment)
5-Year Fixed: 4.39% (less than 20% down payment)
5-Year Fixed: 4.49% (20% down payment or more)

5-Year Fixed: 4.49% (35% down payment or more)

Variable
5-Year Variable: 5.40% (less than 20% down payment)
5-Year Variable: 5.60% (20% down payment or more)
5-Year Variable: 5.40% (35% down payment or more)

Contact for a free pre approval.

Preferred Lenders:

Chris Allard

Allard Mortgage
[email protected]

Cell: (613) 324-2389

Carlos Mora

TD BANK

[email protected]

Cell: 587-434-7696

Edward Dahan

RBC [email protected]

Cell: 613-261-1847