Maybe you are someone who is looking to purchase their first home or they are looking to “right size” their property. Right sizing is simply real estate speak for someone either increasing the size of their home due to family size or moving into a smaller home because they are empty-nesters or have mobility concerns.

While there are still people who are buying homes regardless of interest rates there is something that could be a much bigger barrier to people’s ability to purchase a home. This issue is a large gap between the supply of new homes, whether you are talking about listings or new builds, and the demand.

Building permits lead housing starts, so based on the above graph you can reasonably expect construction activity to fall sharply going forward. The difficult part is that it is already low to being with as in Q4 2023 (October-December), there was ONE new single-family home for every TWENTY-FIVE people added to the population. In fact in December, Canada saw building permits decrease 14% nationwide where Ontario was down 15.1% (Click here if you want to see the December data).

What the data and above graphs tell you is that demand exceeds supply. When demand is greater than supply then prices will increase as laid out in both economic theory and practice. The concept of pricing increases seems odd given what we have seen in the last 24 months since the rate hiking cycle started. However, as the talk of the Bank of Canada cutting rates has become more common we are seeing a intense rise in buyer confidence. With higher confidence and a growing belief around interest rate cuts the result has been a surge in sales activity.

Now does this mean you should run out and go buy a house? NO (see my video below)

The truth is you should buy a house when you feel ready to do so! You may get lucky and get a percent or two off of prices while you wait but I wanted to present you with some data so you can make an informed decision. At some point, demand will normalize, and it will do into a woefully undersupplied market.

To wrap – with higher demand and an undersupplied market there will be an increase in home prices, reigniting the affordability conversation. If you are ready to buy then it may be the time to adopt the adage of “marry the house, date the rate.”