Alberta home buyers await better interest rates: report

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Most Canadians in Alberta are holding off on buying a home until interest rates come down.

“Rates have a long way to go before affordability returns to par,” Robert Kavcic, senior economist at BMO Capital Markets, said in a news release.

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BMO released its Real Financial Progress Index in late April, which revealed some hesitant homebuyers in Wild Rose Country. The report found that nearly two-thirds of Albertans looking to buy a home were waiting for interest rates to drop. Their reluctance to do so in the face of high interest rates was due to several factors.

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The BMO report said the cost of living, inflation and general dissatisfaction with their financial situation were among buyers' top reasons.

Amid all the uncertainty, BMO noted that Albertans are choosing to remain on the sidelines of the market until interest rates change. The Bank of Canada kept its key interest rate at five per cent through April and the next update is expected in June.

While many homebuyers may not be entering the market right now, BMO said it remains one of the biggest aspirations in Albertans' lives, with 68 per cent aspire to owning a home. Unfortunately, more than half (58 percent) believe that owning their own home is out of reach.

Nearly half of respondents (46 percent) said they plan to buy a home in the near future, but fewer respondents expect this to happen in 2024. Only 15 percent said they plan to buy a home in 2024. Just over a third say they are looking to 2025 or later.

Although Albertans may be waiting for the housing market to hit, the index suggests the vast majority (87 per cent) of Albertans believe they are making “real financial progress.”

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However, economic pressures still weighed on Albertans' financial minds. Most are concerned about unexpected expenses and housing costs (86 percent and 74 percent, respectively).

Despite potential homeowners' fears, real estate prices in Alberta continue to rise, with sales up more than 20 per cent year-over-year compared to 2023, says a report from the Alberta Real Estate Association. While Albertans may be hesitant due to interest rates, residents from other provinces are taking advantage of the relatively lower prices in the market compared to other areas of the country such as Ontario and British Columbia.

Alberta's real estate explosion is particularly true in Edmonton, where 2,168 homes were sold in April – a 58 per cent jump compared to April 2023. Home prices in Edmonton are also significantly lower than in Calgary, with a median price of $400,000 compared $565,500 in Calgary.

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Launched in February 2021, BMO's Real Financial Progress Index is designed to show how consumers feel about their personal finances and financial progress. According to BMO, the aim of the index is to initiate a dialogue to help consumers achieve their financial goals.

The index is based on research from Ipsos, which contacted approximately 2,500 Canadians for the index.

Some Canadians in Alberta may be waiting for lower interest rates, but the longer they wait, the more they will likely pay if current trends continue. Although interest rates could fall, a decline in inventory of more than 14,000 and increased sales activity means Alberta home prices are less likely to fall.

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