‘Story of the Year’ is part of STOREYS' annual editorial year-end series. You can find the rest of our 2024 selections here as they're released throughout the week.
When your company is called STOREYS and you cover the real estate sector, there is no end to word play. But there's nothing playful about the consistent and highly impactful implications of this year's 'story' of the year: interest rates.
Of course, the dialogue and focus surrounding every Bank of Canada (BoC) announcement isn't new. In fact, it's already been three years since Tiff Macklem was named our 2021 'Newsmaker' of the Year, and just last year, the 'Rate Master' was listed as one of our Most Influential People in Real Estate. Like we said: consistency.
But given the years’ long, post-pandemic build up of housing market issues – from affordability challenges to a looming ‘construction cliff’ – which together have contributed to the sector experiencing a level of year-long stagnation not seen so far this century, the eight interest rate updates that pulsed through the background of 2024 (like an unwanted metronome, keeping the beat of a market desperately in need of a new tune) would not let us forget the grim reality faced by so many in the industry.
In short, near-monthly briefs from the BoC and the commentary surrounding them kept STOREYS' readers and authors engaged, enthralled, and (eventually) energized. Indeed, more than a few of the interest rate-related articles STOREYS published this year reached tens of thousands of readers, as everyone from real estate agents, brokers, developers, investors, and the simply real estate-interested kept close tabs on the money moves that wouldn't let them get comfortable.
After entering 2024 on the back of three consecutive holds, with the policy rate sitting at a 22-year high of 5% since July 2023, the country would endure three more holds throughout the winter and spring as Tiff and Co. insisted on lowering the inflation rate to its 2% target. In April, after the third hold, new data from BMO Economics revealed that a majority (72%) of would-be homeowners were waiting for interest rates to drop before they would consider buying, pushing a traditionally robust spring market toward summer.
Then, June.
For the first time in four years, the Bank of Canada lowered their policy interest rate, bringing it down to 4.75%. At the time, much to Cat Stevens' chagrin, BMO economist Douglas Porter said, "The first cut may not necessarily be the deepest, but it is the most significant, as it marks the official turning point after more than two years of restrictive policy." So, it was off to the races... only, it wasn't.
Despite the signal of intent from the Bank that a 'new era' was upon us, the real estate market, scarred by broken pandemic promises ("You can be confident rates will be low for a long time," anyone?) and 10 hikes across 2022-2023, didn't budge. A further 25-basis-point cut in July had the same effect, which is to say little-to-none, prompting BoC Governing Council to warn that rate cuts alone would not be a "magic solution" for the country's housing woes, instead choosing to highlight the supply-demand dilemma and record levels of immigration as important contributors that needed a larger overall plan. "It would be a mistake to pin all of our hopes on our housing imbalance on interest rates. Canadians need a more fulsome, more coordinated policy response than that,” said Senior Deputy Governor Carolyn Rogers at the time.
By the end of summer, Canadians were left to ponder the inherent semantics and mind games of questions such as: is something affordable if it doesn't actually feel affordable? While data released in August from the National Bank of Canada showed that 80% of major local markets were experiencing 'continued improvement' toward affordability, almost no one in the market felt that way. Numbers may not care about your feelings, but National Bank Economist Alexandra Ducharme seemed to as she sided with the latter; “Consumers comparing today's situation with that of a few years ago would rightly feel that current circumstances are worse,” she said.
Relying on data that showed inflation had slowed to 2.5% in July (a 40-month low), the Bank once again dropped the interest rate by another 0.25% in September; its third straight cut. Too late to impact the fall market, perhaps, but also setting up for an even larger cut come October. Still, 4.25% was higher than ideal for many – at a when time home prices remained high, the promise of future rate cuts was continuing to keep would-be-homebuyers on the proverbial sidelines, which was not necessarily a bad thing. A gradual increase in buyer activity would help to keep prices from skyrocketing, after all.
Enter October, and the largest cut since March 2020 (*shudders*), with commentary from the Bank that Canadians could expect further reductions: "If the economy evolves broadly in line with our latest forecast, we expect to reduce the policy rate further. However, the timing and pace of further reductions in the policy rate will be guided by incoming information and our assessment of its implications for the inflation outlook," read the statement released that morning. Industry sentiment (read: hope) seemed to change on a dime and it appeared as if the long-awaited spring market might have a chance of showing up by winter.
For many in real estate whose hopes and dreams (and debt) are riding on the outcomes of these updates, Christmas came early. The final announcement of the year saw the BoC double-down with a double-double – in other words, they delivered their second jumbo cut in as many reports, cumulatively bringing the interest rate all the way from 5% down to 3.25% in just six months and six days.
While many continue to believe that the rate will have to drop below 3% before substantial market changes can be seen, one thing has been true in 2024, these announcements have been appointment viewing for everyone with a yard of good sense.
The next interest rate decision is scheduled for Wednesday, January 29, 2025. We know where we, and our readers, will be.
With files from Zakiya Kassam, Teagan Sliz, and Erin Nicole Davis.
