Real Estate

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

Canada’s real estate market is seeing some signs of increased activity, but one economist says a recovery will be gradual until interest rates are firmly moving down. 

Robert Hogue, an assistant chief economist at RBC, said in an interview with BNN Bloomberg on Wednesday that “some markets are picking up” across Canada, but on an aggregate basis the recovery in the real estate market “has probably not started.” He added that a recovery could be “gradual at first” and doesn’t expect a drastic increase in activity in the coming months. 

Hogue said he is expecting the Bank of Canada to start lowering interest rates in June followed by 100 basis points of cuts over the second half of the year and another 100 basis points of cuts into 2025. 

“So the implication for the housing market is that now probably as we get closer to that first cut, we might see a little bit more activity,” he said. 

“But really, to make a meaningful difference for many homebuyers who are sitting on the sidelines right now, we would need to see a series of cuts.” 

He added that the initial 100 basis points of interest rate cuts from Canada’s central bank will “start to make a material difference” and spur activity. 

In a report last week, Hogue highlighted that February real estate data offered some valuable information on the direction real estate markets are moving.

He said that the improving sentiment from rate cut expectations has not yet resulted in a steady recovery, as the “sharp loss of affordability during the pandemic” weighs down buyers.

Between January and February, home resale figures fell 3.1 per cent across Canada, the report said, “reversing about a quarter of the 12.7 per cent increase in the previous two months.” Overall, the market “remains subdued,”  Hogue highlighted in the report, as the total number of units sold in February came in at 461,000 which was 11 per cent lower than the 10-year average. 

However, Calgary’s real estate market was an outlier in February, as home sales were 60 per cent higher than pre-pandemic levels, the report said. 

Buyer and seller ‘standoff’ 

In speaking with BNN Bloomberg, Hogue highlighted that sellers largely passed on listing homes in the fall due to softer demand, placing their hopes instead on the spring market. 

“More sellers are likely to come over to the springtime. And we’re starting to see new listings making their way up,” he said adding that some sellers are under pressure to sell at certain price points and may not have a large degree of flexibility. 

On the other side, Hogue said buyers “don’t have much room to manoeuvre either” amid high interest rates and poor affordability conditions. 

“That’s why we think there could be a bit of a standoff between buyers and sellers over the coming months,” he said.