Last week we presented a recap on the Edmonton real estate market performance for 2023. In that article we saw a promising second half of the year that showed signs of recovery despite the rising interest rates and increased inventory levels compared to 2021 and 2022.
Now looking ahead, some of the main points for 2024 that should have the largest impact on the marketplace will include interest rates, and migration from BC and Ontario as they did last year.
As this article is written, there are talks in the media that we could start to see rates drop as early as spring 2024 and continue to drop throughout the calendar year. With that in mind, some savvy buyers have already begun circling the market which may result in an early start to our busy season which is often referred to as the “spring market”.
The question is why do interest rates have such a direct impact on the top tier marketplace?
- Buying Power - When interest rates are low, buyers can stretch their budget further. This will directly impact the top tier markets simply because those buyers can see their home budgets increase by 20% which can move them from an entry level detached home to a mid size luxury home. This is the same for buyers currently looking at a mid size luxury home and being pushed into a $1M+ home.
- Increase in Qualified Buyers - As many buyers got comfortable on the sidelines in 2023 because of the high interest rates, we can expect to see a large amount of those buyers coming into the market for 2024. These are buyers that either couldn’t get approved for the home they wanted, couldn’t move up in the market from their current home, or simply did not want to pay 6.5% on their mortgage. With signs of these rates dropping, buyer confidence is on the rise in 2024 and with that comes more serious contenders for your home.
Inter Provincial Migration
The second point that will have a noticeable impact on the Edmonton real estate market is how much migration we see from other provinces in 2024. Mainly from Ontario and British Columbia, we saw record highs of population increases in Alberta in 2023. While the market showed signs of struggle, this migration helped keep it rolling. We expect that 2024 will be no different. As interest rates drop, those major markets will see higher increases in demand as well and force many out of the province, seeking affordable housing in Alberta or a better quality of life. The main focus for these buyers is affordable housing. With a rate decrease that is going to be felt across Canada, the hopes of these buyers making purchases in those markets may be just as unlikely as the last few years. With their focus turned to Alberta, Calgary has been the star of the show. The majority of the migration ended up in Calgary but with that market seeing major increases the idea of affordable housing might not exist there either. Now affordable housing does not mean entry level homes. Many of these buyers are capable of purchasing in Edmonton’s top tier market and see the added value in doing so. $1M in downtown Toronto compared to Windermere, Edmonton is an entirely different lifestyle.
What does this all mean for sellers in the top tier market?
Homeowners looking to sell their properties in 2024 can expect sale prices to be strong. With the anticipated decrease in interest rates and more buyers entering the market there is sure to be an increase in demand, we may even see a slight increase in pricing because of that demand. This all stems from an increase in buyer confidence. Something that was lacking in 2023 was buyer confidence. Many thought that the market would fall drastically or simply did not want to commit to a 5 year rate at 6.5%. Now that there are talks of those rates coming down, these buyers that have been circling the market are expected to move much quicker.
What does this mean for buyers moving into the top tier markets?
In 2023 we saw a significant drop in sales between 600-999K. This was mainly due to the large increase in monthly payments that these buyers would experience compared to the previous 24 months. Now moving into 2024, many buyers who are gaining buying power with reduced rates will be able to stretch their dollar further. We can expect the $600K-999K price range to especially take off and be more competitive. The $1M+ market may also see a slight increase in buyer traffic but this market overall should be balanced.
It is also important to note that something that isn’t measured with stats but noticed by our agents and clients is the amount of “good” inventory. These are good quality homes, good locations, and good value. These homeowners were reluctant to list their homes last year because they feared it woud be challenging to find something to replace it with. When sellers lack that confidence it sometimes stalls the market and forces buyers to circle until something good comes available. A bit of a chicken-egg scenario. Now that confidence is being instilled in these owners, we can expect better inventory in 2024.
Overall 2024 should prove to be a better performing market than 2023. While we may not see traffic as high as the peak 2 years ago, it will be more competitive for buyers. The best thing to do if you are considering making a transition in 2024 is to start early. Connect with our team at Ryan Debler & Associates to discuss the best plan of action for your specific situation.