Buyers opt to wait for Bank of Canada policy shifts
British Columbia’s housing market showed signs of a slowdown in March, with home sales falling 9.5% year over year, according to the BC Real Estate Association (BCREA).
The BCREA reported 6,460 residential home sales through the Multiple Listing Service (MLS) last month.
The average price of a home in BC defied the sales slowdown, rising 6.5% from March 2023 to $1.02 million.
While March figures showed a decline, BC’s overall first-quarter performance was positive. Sales dollar volume was up 13% year-to-date to $15.8 billion, and residential unit sales increased 6.4% to 15,938 units. The average MLS residential price also rose by 6.5% to $995,149 for the first three months of 2024.
BCREA chief economist Brendon Ogmundson suggested that potential buyers are waiting for the central bank to lower interest rates before entering the market.
"March capped off a slow start to the first quarter of 2024," Ogmundson said. "Despite a steep decline in fixed mortgage rates, buyers appear to be waiting on the Bank of Canada to lower its policy rate before jumping back into the market."
In a separate report, BCREA forecast that the BoC would begin cutting rates as early as April.
“Although financial markets clearly got ahead of themselves toward the end of 2023, pricing-in an unlikely six rate cuts by the Bank of Canada, it remains overwhelmingly likely that the Bank of Canada will begin lowering its policy rate this year,” the association stated.
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“There is also little mystery as to how much the Bank will eventually cut, with a consensus forming around the bank stopping at 2.5%, or 250 basis points lower than today. The only open question is when the bank will implement its first rate cut. Probabilities from financial markets are strongly tilted toward the bank cutting by 25 basis points at its June meeting, with about more than 90% probability of 100 basis points of cuts by the end of December.”
The report noted that the BoC has indicated it will need to see core inflation drop below 3% before implementing any rate cuts.
“Given that core inflation dropped dramatically in February, and given the sluggish pace of the Canadian economy, it would seem that an April rate cut is not out of the question and, if not April, then almost certainly June,” BCREA said.
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