CREA Forecasts National Home Sales to Climb 6.6% in 2025
The Canadian housing market is heading into a pivotal period as the Canadian Real Estate Association (CREA) revises its national home sales forecast for 2025. With an anticipated 6.6% increase in national home sales, market conditions are expected to change significantly over the coming year. This prediction comes as the pace of interest rate cuts accelerates, reshaping expectations for both home buyers and sellers.
Interest Rate Cuts: A Game-Changer for the Housing Market
CREA’s summer forecast for 2024 and 2025 had originally anticipated a slow but steady return of buyers to the market, following the first set of interest rate cuts earlier this year. However, the market response has been more cautious than expected. Many potential buyers, particularly those opting for three-year fixed-rate mortgages, are holding off, waiting for better mortgage rates that seem imminent. This shift in behavior has prompted a revision of market activity predictions.
Economists and analysts now expect the Bank of Canada to reach a “neutral” interest rate by spring or summer 2025, a significantly faster timeline than previously anticipated. This revised outlook is reshaping the housing market forecast. Instead of a gradual increase in market activity, the CREA now projects the market will remain relatively flat until the spring of 2025, at which point a sharp rebound is expected.
Sales Forecasts for 2024 and 2025
The new forecast expects approximately 468,900 residential properties to be sold via Canadian MLS® Systems in 2024, marking a 5.2% increase from 2023. However, this upward revision is modest in comparison to the momentum anticipated in 2025. The CREA predicts a 6.6% increase in home sales for 2025, bringing the total to 499,800 units.
This forecasted surge reflects both the anticipated drop in interest rates and the pent-up demand from buyers who have been waiting on the sidelines. As rates continue to decline, we can expect a strong influx of buyers to re-enter the market, pushing demand and sales figures higher.
Housing Prices: Modest Growth Ahead
Alongside the increase in sales, the CREA also forecasts moderate growth in home prices. The national average home price is expected to rise by 0.9% in 2024, bringing the average price to $683,200. However, the real acceleration in price growth is expected in 2025, with prices forecasted to rise by 4.4%, pushing the national average to $713,375.
This price increase will be driven by renewed demand, which is expected to outpace the supply of new listings. While the rate of price growth is not expected to be as rapid as in previous years, the combination of stronger sales and rising prices could make 2025 a seller’s market.
What’s Next for Buyers and Sellers?
The next major event that could impact the housing market is the Bank of Canada’s interest rate announcement scheduled for October 23, 2024. All eyes will be on this decision as it will shape the trajectory of mortgage rates and, by extension, the housing market in the coming months.
For buyers, now may be the time to start preparing for the spring 2025 market, as the expected decline in interest rates could present more favorable mortgage terms. Meanwhile, sellers should anticipate stronger demand in the new year, potentially allowing for higher selling prices, especially if they time their listings strategically around the rebound.
Conclusion
With the Canadian real estate market poised for significant growth in 2025, both buyers and sellers should prepare for the changes that lie ahead. The forecasted 6.6% increase in home sales signals a return to a more active housing market as interest rates continue to fall and demand picks up. While 2024 may see moderate growth, 2025 is shaping up to be a pivotal year, setting the stage for new opportunities across the country.
