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Spring housing market surge unlikely as affordability, cost of living weigh on buyers



After five consecutive holds of the Bank of Canada's key interest rate, which followed more than a year of rate hikes, economists are foreseeing a rebound in the national housing market. However, they caution against expecting a significant surge just yet.


The central bank is widely expected to maintain its key rate steady in its upcoming announcement. Yet, there's uncertainty about its future direction. While modest rate cuts might be on the horizon later this year, possibly starting as early as June, it could take some time before buyers regain enough confidence to actively participate in the market.


This lingering uncertainty might keep some buyers cautious during the spring season, according to TD Bank economist Rishi Sondhi. He describes Canada's housing market as resembling a coiled spring, suggesting that significant pent-up demand exists, especially in Ontario and British Columbia.


Sondhi notes that historically, sales activity and prices tend to spike following market-shifting events like interest rate cuts.


In its recent report on national home sales and pricing data, the Canadian Real Estate Association (CREA) hinted at a potential uptick in activity, suggesting that February might have been "the last relatively uneventful month of the year."


Larry Cerqua, chair of CREA, stated that there's a sense that things are about to pick up, but whether buyers are waiting for signals from the Bank of Canada or for spring listings to increase remains uncertain.


In the Greater Toronto Area, realtor Dean Artenosi sees the current moment as a turning point where optimism is growing among buyers. He attributes this sentiment to the perceived stabilization of interest rates and suggests that buyers are becoming more comfortable with the current market conditions.


Out West in Vancouver, real estate agent Tim Hill observes a cooling of activity in March following a strong start to the year. Many clients are now adopting a wait-and-see approach, anticipating potential rate cuts before making purchasing decisions.


RBC assistant chief economist Robert Hogue predicts a gradual rebound in the housing market later this year, particularly as the central bank's rate-cutting cycle progresses. However, he expects this rebound to be gradual rather than immediate.


Despite pent-up demand, affordability remains a significant concern in markets like Toronto, Vancouver, and Montreal. Hogue emphasizes that affordability constraints, rather than caution, are affecting buyers' decisions.


Hogue suggests that while some buyers might try to enter the market ahead of anticipated rate cuts, sustained market activity will require a significant drop in mortgage rates, likely in the latter part of 2024 rather than during the spring.


Artenosi advises his clients against waiting, citing factors such as Canada's growing population and the potential for bidding wars. He cautions that there may never be a perfect time to enter the market.


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