On October 25th the Bank of Canada (BOC) maintained its overnight rate at 5 per cent noting there is growing evidence that higher interest rates are dampening the economy. 

The BOC expects economic growth to be weak through 2024 with inflation averaging at 3.5 per cent until at least the middle of next year before falling back into its 2 per cent target in 2025.

The combination of a slowing economy with inflation stuck in the 3-4 per cent range really complicates the mortgage rate and housing market outlook for the next 12 months or so.

For the last 2 years housing market activity has closely mirrored movement by the BOC.

Sales dropped significantly when the BOC began raising rates last year, then a small recovery when rates paused earlier this year, only to decline again when rates were tightened again over summer.

It now appears we are at or very close to the end of the tightening cycle.  If mortgage rates decline in 2024 it will certainly provide relief to potential buyers but over the next two years we can expect rates to be much higher than borrowers have grown accustomed to over the last decade.

Fixed mortgage rates have hit annual highs over 6 per cent, further compounded by the punishing stress test which requires buyers to qualify 2 per cent higher than the posted rate.

After trending downward for most of the year inventory levels have seen a modest uptick since summer but active buyers are a distant memory (with some exceptions like downsizers). To put it into perspective, households are experiencing the highest borrowing costs seen in 20 years!

Prices saw a significant increase early this year recovering around half of their 2022 decline, but that surge has given way to a flattening trend.  Most sellers (again there are some exceptions) are experiencing longer days on market and offers, if any, are few and prohibitively low.

Any activity seen on realtor.ca, at showings, or at open houses right now appears to be mostly recreational, with zero urgency from potential buyers.

Moving forward sellers and buyers (and their realtors) can expect sales activity to remain flat thru the end of this year and for much of 2024.

The British Columbia Real Estate Association predicts annual sale prices in 2023 to be 1.9 per cent lower than in 2022, with a slight increase next year, based on the strength of the expected recovery in the second half of 2024.

Fingers crossed.

If you would like to know more about the economic outlook for 2024 …

… or just want to talk thru some timing and pricing considerations for a sale in the near future, we can help.

It’s what we do.

Jenn and Colin