The Bank of Canada is set to cut its prime interest rate on Wednesday but no one’s exactly sure how low they’ll go.
Although rates have been coming down over the past few months, the real estate market in B.C. hasn’t yet seen much of an uptick, at least, until October.
Numbers in September were flat, but Brendon Ogmundson, chief economist with the BC Real Estate Association, says that although final numbers aren’t in yet, things have begun to pick up this month.
“The good news is October sales are really strong,” he explained. “Midway through the month, we’ve seen a real jump in home sales all across the Lower Mainland, from a September number that was 25 per cent below normal all the way back to normal.”
“It could be that the impact was just really delayed, and we’re seeing it all show up in the fall, but it does seem like we’re starting to see sales really pick up,” he continued.
Experts predict the Bank of Canada will slash the rate by another 50 basis points from its current 4.25 per cent to 3.75 per cent.
Moving forward, if the BoC does cut the rate, Ogmundson doesn’t believe there will be a lot of extra movement or sales in real estate, as it’s “already priced in to five year fixed mortgage rates.”
“Right now, a five-year fixed rate for someone with more than 20 per cent down payment is around 4.5 per cent,” he said.
“For a first-time homebuyer, it’s closer to 4.2 per cent, so it’s already a lot better than this. I’m not sure that the rate is going to fall much more, but I think in terms of overall confidence in the market, I think a half-point cut is going to continue to spur some buyers to get off the sidelines, and maybe it helps a marginal kind of buyer pass a stress test.
“I think all in all, it’s going to be positive for the market. We should end the year with some real momentum for sure,” he explained.
Ogmundson believes next year will be a more “normal” year for the real estate market.
“We’ve had two years where home sales have been 20 to 25 per cent below just average activity,” he said. “So, getting back to average is going to feel like a real surge, but it’s just things normalizing as rates come down.”
“We don’t expect we’re going to get a replay of 2021 or 2016 or something, I just think we’re going to have a steadier year with a decent amount of sales activity.”
But will the increase in activity, Ogmundson cautions against any major price increases for the region.
“One benefit from sluggish sales over this year, is that we have seen inventory start to accumulate. And so as sales pick up, I think we can see demand rising without prices accelerating because there’s enough supply in the market right now to cushion the impact.”
–With files from Mike Lloyd.