Rising Home Prices in 2024

Date Posted: October 23, 2024

 

 

 

 

As 2024 progresses, first-time homebuyers in Canada are facing an increasingly challenging housing market. Rising home prices, particularly in urban centers like Toronto and Vancouver, have made entering the housing market more difficult than ever. However, with the right strategies and a clear understanding of market trends, first-time buyers can still achieve their dream of homeownership. Here's a closer look at the current housing situation and how buyers can adapt to succeed.

 

 

The Current Landscape: Rising Prices and Tight Supply

Canada's housing market has been experiencing persistent price growth throughout 2024. According to the Canadian Real Estate Association (CREA), the national average home price increased by 6.2% year-over-year as of September 2024. This is partly due to limited housing supply, increased immigration, and higher construction costs​.

Urban areas have been hit hard, with prices in cities like Toronto, Vancouver, and Montreal continuing to rise.

For first-time buyers, this means that homes are becoming increasingly unaffordable. The combination of higher interest rates and escalating prices is pushing many potential buyers to reconsider their timelines or expand their search to less competitive markets.

 

 

Government Incentives and Support

Despite the challenges, there are several government programs and incentives available to help first-time buyers enter the market:

1. Home Buyers' Plan (HBP)
   Under this plan, first-time buyers can withdraw up to $65,000 from their RRSP tax-free to put toward a down payment. For a couple, this doubles to $120,000, providing significant relief when saving for a home. This program can be particularly beneficial in high-priced markets, where every bit of savings helps.
2. Tax-Free First Home Savings Account (FHSA)
   Newly introduced in 2023, the FHSA allows individuals to contribute up to $8,000 annually (with a lifetime limit of $40,000) toward their first home purchase. Contributions are tax-deductible, and withdrawals for the purpose of purchasing a home are tax-free. This is a great tool for building up a down payment over time.
3. 30-Year Amortizations for Insured Mortgages
   Previously, most insured mortgages in Canada were limited to 25-year amortizations. Starting in December 2024, first-time homebuyers and buyers of new builds will have the option to extend their amortizations to 30 years. This change will allow borrowers to stretch out their mortgage payments over a longer period, reducing monthly payments and improving affordability, especially in high-priced markets. (Effective December 15^th 2024)
4. Increased Mortgage Insurance Cap
   The second major change is the increase in the mortgage insurance cap. Currently, the cap sits at $1 million, meaning buyers purchasing homes above this amount are not eligible for high loan-to-value mortgage insurance. As of December 2024, this cap will rise to $1.5 million. This is particularly important for homebuyers in expensive markets like Toronto, Vancouver, and other major cities where the average home price often exceeds the $1 million mark​. (Effective December 15^th 2024)

 

 

Strategies for First-Time Buyers in 2024

Given the challenges posed by rising home prices, here are a few strategies that first-time buyers can use to navigate the market effectively:

1. Expand Your Search to Suburban or Secondary Markets
   Urban centers like Toronto and Vancouver have seen the steepest price increases, but suburban areas and smaller cities are becoming more attractive alternatives. Communities within commuting distance of major cities often offer more affordable housing options. Buyers should consider areas that offer good value for money, access to public transportation, and strong long-term growth potential.
2. Get Pre-Approved for a Mortgage
   In a competitive housing market, getting pre-approved for a mortgage is crucial. Pre-approval not only gives buyers a clear idea of their budget, but it also positions them as serious buyers when making offers. With interest rates fluctuating, securing pre-approval early can help lock in a better rate.
3. Consider Co-Ownership or Co-Investment
   As prices rise, co-ownership is becoming a more viable option for first-time buyers. Friends or family members can team up to purchase a property together, sharing both the mortgage and the down payment. While this approach requires clear agreements and legal advice, it can open the door to homeownership in otherwise unaffordable markets.
4. Be Prepared for Bidding Wars
   In high-demand markets, bidding wars are common. First-time buyers should set a maximum budget and be prepared to walk away if the price exceeds their limit. Working with an experienced real estate agent can help navigate these situations and avoid overpaying for a property.
5. Leverage Technology and Real Estate Tools
   In 2024, buyers have access to numerous online tools and platforms that make the home buying process easier. Virtual tours, automated market analysis tools, and mortgage calculators can help first-time buyers make informed decisions without physically visiting dozens of properties.

 

 

Looking Ahead

While the housing market in 2024 remains challenging, the federal government’s upcoming changes to mortgage rules—such as longer amortizations and higher insured mortgage caps—may provide relief to buyers later in the year. Extending amortizations to 30 years, for example, could reduce monthly payments, making homeownership more accessible to first-time buyers.

First-time homebuyers should remain patient, stay informed about market trends, and work closely with real estate professionals to make strategic decisions. With the right approach and careful planning, owning a home in 2024 is still possible despite the market's obstacles.

 

 

Conclusion

Rising home prices are creating significant barriers for first-time homebuyers in Canada, but they are not insurmountable. By leveraging government programs, considering alternative markets, and employing smart financial strategies, buyers can still find success. As the market evolves, staying flexible and informed will be key to navigating this challenging environment and securing a place to call home.