Hesitant Homeseekers: Why BC sales are still unexpectedly low. | REW | The Guide

On June 5, 2024, the Bank of Canada (BoC) made a strategic move by reducing its key interest rate by 25 basis points. While aimed, in part, at stimulating the housing market and making home loans more affordable, many real estate buyers remain cautious. If you recall in our Dexter Realty May Market Update, sales in May were down 20 percent year-over-year. It also marked the first month-over-month decline in sales in 2024.

One of the main reasons for buyer hesitation is ongoing inflation. Or at least, rising living costs. Despite the BoC's efforts to lower borrowing costs, inflation continues to affect everyday expenses. Rising prices for goods and services reduce disposable incomes, making it harder for potential buyers to save for down payments and manage monthly mortgage payments. The fear that inflation will continue to erode purchasing power makes many hesitant to commit to long-term financial obligations.

When you consider the high cost of living and average salaries in BC, it’s not a surprise that buyers are cautious. Many buyers expect the housing market may cool down in the future, potentially leading to more favourable buying conditions. This wait-and-see approach means that even with lower interest rates, buyers are not in a hurry to make purchases. They prefer to wait for a possible market correction that could lead to lower home prices and better buying opportunities. While we know real estate has typically never gotten cheaper, one can only hope. It’s interesting, too, because currently the inventory volume alone in the Lower Mainland would in theory make buyers feel more confident, but we continue seeing lower than average reported sales in the Vancouver area.

Homebuyers sitting on the sidelines are looking for more direct support measures, like tax credits, grants for first-time buyers and, probably the most important measure, increased housing supply initiatives. Without complementary policies, the impact of a rate cut is limited.

The Bank of Canada's rate drop in June 2024 is a well-intentioned move aimed at stimulating the housing market. However, economic uncertainty, high property prices and low consumer confidence collectively undermine its effectiveness. To truly excite buyers, a more comprehensive approach that addresses these multifaceted challenges is essential. Potential homebuyers need not just lower rates, but also stable employment, affordable housing options and a robust economic outlook to feel confident in making one of the biggest financial decisions of their lives.