Nearly 75% of Canadians delay home purchases while waiting for rates to fall and prices to settle
Nearly three-quarters of Canadians who had considered buying a home are now taking a “wait-and-see approach,” according to a new Bank of Montreal survey reported by Financial Post.
The survey found 73 percent of prospective buyers have delayed their plans, up from 60 percent in March, as fears of a recession rise.
“We’ve seen consumer confidence generally fall really sharply since the start of the year, and even just in the last month or two as well,” said Robert Kavcic, senior economist at BMO Capital Markets.
He cited “alarming trade-war headlines” and a declining equity market until recently as factors reinforcing economic concern.
“If you’re worried about the economy going off the rails, if there’s no pressure to go out and buy a house right now because prices are rising quickly, which they’re not, it kind of makes sense from just a behavioural perspective to defer that,” Kavcic added.
After a brief recovery at the end of 2023, Canada’s housing market slumped again.
In April, the Canadian Real Estate Association (CREA) lowered its forecast for annual home sales growth to 0.2 percent, down from 8.9 percent projected in January.
CREA also revised its outlook for the average national home price in 2025, predicting a 0.3 percent year-over-year decline to $687,898. That marks a $30,000 drop from its January forecast.
BMO commissioned Ipsos Canada to survey 2,500 people from March 3 to 26 as part of its quarterly review of Canadians’ financial progress.
But following the economic disruption triggered by US President Donald Trump's tariff measures, the bank issued additional follow-up questions in April.
Kavcic said sentiment might not recover even if Canada and the United States reach a trade agreement.
“It’s going to take some time to undo the psychological damage that’s been done. So we’re probably not going to just immediately go all the way back to where we were,” he said.
Deloitte Canada’s most recent economic outlook, released last week, projects a recession beginning in the second quarter.
Growth is forecast to contract by 1.1 percent in Q2 and by 0.9 percent in Q3, primarily due to ongoing trade uncertainty.
Dawn Desjardins, chief economist at Deloitte Canada, said Canadians should be prepared for “really soft economic activity over the next six to eight months.”
The BMO survey also found that 82 percent of respondents pointed to the “fear of the unknown” as their main financial stressor. Financial situation anxiety affected 81 percent, while 72 percent said housing costs were a major concern.
In April 2024, 72 percent of prospective buyers said they were waiting for the Bank of Canada to lower interest rates before entering the market.
At that time, the central bank had not yet launched its rate-cutting cycle, which eventually resulted in seven consecutive cuts that brought the rate down to 2.75 percent from five percent.
Despite those cuts, affordability concerns persist.
According to MortgageLogic.news, a rate bulletin edited by Financial Post columnist Robert McLister, the lowest five-year fixed mortgage rate currently available is 3.74 percent.
Still, 38 percent of buyers are waiting for rates to fall below three percent.
Price declines have not eliminated hesitation. While 56 percent of respondents feel they “missed their moment” to buy a home, half said owning a home now seems “less attainable” than it did a year ago.
A year earlier, 56 percent of Canadians who wanted to own a home told BMO they already believed that goal was “unattainable.”
“Housing and borrowing conditions now versus a year ago, are better. It’s not where we need to be, but they are better,” Kavcic said.
