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Buyers and sellers face a 'standoff' in the spring real estate market: economist



Canada's real estate realm is displaying hints of livelier activity, but an economist warns that a full-fledged resurgence awaits the decisive downward trajectory of interest rates.


Robert Hogue, an assistant chief economist at RBC, revealed in a recent interview that while certain pockets of Canada are witnessing upticks in real estate action, the broader picture suggests the market's recovery is yet to kick off in earnest. Describing the potential revival as initially gradual, Hogue doesn't anticipate any abrupt surges in market dynamics in the foreseeable future.


According to Hogue, the Bank of Canada is poised to initiate interest rate reductions from June onwards, with a projected 100 basis points of cuts slated for the latter half of this year, followed by an additional 100 basis points decrease extending into 2025. This impending monetary policy shift could nudge hesitant homebuyers into action, albeit the economist emphasizes that sustained market revitalization necessitates a series of rate cuts.


Hogue underscores the pivotal impact of the initial 100 basis points reduction, foreseeing it as a catalyst for heightened market activity. However, despite growing optimism stemming from rate cut expectations, the real estate landscape remains encumbered by pandemic-induced affordability strains, resulting in a subdued market sentiment.


The latest data reveals a 3.1 per cent decline in home resale figures nationwide between January and February, partly reversing the preceding months' 12.7 per cent surge. Hogue's analysis underscores the market's current languid state, exemplified by February's total unit sales, which stood 11 per cent below the ten-year average. Notably, Calgary emerges as an outlier, boasting a real estate market that surpassed pre-pandemic levels with a staggering 60 per cent surge in home sales.


Delving deeper, Hogue elucidates a brewing standoff between buyers and sellers as a defining feature of the present market landscape. Sellers, previously reticent due to subdued autumn demand, are now gearing up for the spring market, albeit some remain constrained by inflexible price expectations. Conversely, prospective buyers find themselves navigating a confluence of high interest rates and challenging affordability conditions, leaving minimal room for negotiation.


In essence, the Canadian real estate arena finds itself at a juncture marked by cautious optimism and lingering uncertainty. While signs of activity percolate across certain regions, the path to a robust recovery hinges on the decisive downward shift of interest rates, offering a glimmer of hope for both buyers and sellers amidst an evolving market landscape.


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