BCREA 2024 First Quarter Housing Forecast Update: BC Housing Market Set to Rebound Amidst Changing Interest Rate Environment

First Quarter – January 2024

A year marked by elevated mortgage rates resulted in the slowest pace of housing activity in British Columbia since 2013. In 2023, the total number of home sales in BC reached 73,000, while new listings activity was similarly constrained by the so-called “lock-in” effect as potential sellers put off listing to avoid taking on a new mortgage at a much higher rate and payment. With a sharp decline in mortgage rates at the end of 2023 and the possibility of the Bank of Canada lowering rates as early as spring, the housing market is expected to rebound in 2024, setting the stage for a robust 2025.

As observed in mid-2023, following a pause by the Bank of Canada, the resale housing market can swiftly respond to changes in monetary policy. With substantial progress in bringing inflation back to 2 per cent and a softening in economic growth and employment, there is less necessity for monetary policy to remain stringent. Therefore, we anticipate the Bank of Canada will begin to lower its policy rate this year, ultimately bringing its overnight rate back to 4 per cent by the end of 2024. This anticipated move has already been factored into bond markets, leading to five-year fixed mortgage rates dropping below 5.5 per cent, down from the peak of over 6 per cent in late 2023. 

Fueled by pent-up demand from strong population growth and favourable demographics, even a small improvement in affordability could significantly stimulate home sales this year. Our forecast is for home sales to increase by 7.8 percent to 78,775 this year before rising to 86,475 in 2025.

The ultimate impact on prices resulting from higher sales hinges entirely on how inventory evolves this year. Here, there are two possible risks. Sales could quickly outpace existing inventory, leading to a rapid tightening of markets and faster-than-expected appreciation of home prices. Conversely, the spectre of mortgage renewals at much higher payments in the near future for many borrowers could spur a larger influx of new listings to the market. Our current view is that new listings will likely increase in 2024 but not at a worrying pace, resulting in a more balanced market with relatively stable pricing. 

For the complete news release, including detailed statistics, click here.

For more information, please contact:
Brendon Ogmundson
Chief Economist
Direct: 604.742.2796
Mobile: 604.505.6793
[email protected]

Post a Comment