Continued affordability problems could weigh down on activity
The latest national home sales data shows growing optimism among Canadians about the prospect of lower interest rates down the line – but economists believe the recent market rebound may only be temporary, according to BNN Bloomberg.
The Canadian Real Estate Association (CREA) reported on Wednesday that home sales increased by 22% year-over-year in January, which was the largest jump since 2021. Daren King, senior wealth advisor and portfolio manager at National Bank Financial, said the home sales rebound coincided with a drop in fixed mortgage rates.
King said the recent stabilization of the Bank of Canada’s policy rate and the anticipated easing of monetary policy could be further motivating buyers to make a move, with homeowner optimism also growing.
“It should be noted that the proportion of listings cancelled during the month edged down, indicating that sellers are regaining some confidence in the current market,” said King.
Principal economist Marc Desormeaux of Desjardins also agreed the January sales figures showed Canadians were convinced interest rates would drop soon.
“Homebuyers may be responding to the reduction in bond rates seen earlier this year, which primarily reflected market bets that central bank policy rate cuts could come down in the months ahead,” he said.
However, King said the market rebound may only last for a few months because of issues such as strong population growth, persistent affordability problems, and a continuing labour market slowdown.
“Sales price growth was more modest, but generally tightening supply-demand balances across multiple major markets suggest stronger gains could be coming,” added Desormeaux.
