After five consecutive pauses on the Bank of Canada's key interest rate following a cycle of interest rate hikes for more than a year, economists see a recovery awaiting the national housing market - but they do not expect a significant increase yet.

The central bank is expected to keep the key interest rate unchanged again when it announces its decision on Wednesday, but it is unclear what direction it will take afterward.

With the possibility of modest cuts later this year - some forecasts indicate those cuts will start in June - it may take months before buyers are confident enough to return to buying from the sidelines.

Rishi Sundi, an economist at TD Bank, said this uncertainty might make some buyers cautious throughout the spring.

He added, "I think the background is somewhat blurry and that might restrict some activity."

But Sundi said the housing market in Canada is "like a coiled spring," noting that sales activity and prices usually jump when there is a shift that "shakes the market" like an interest rate cut.

"There is strong demand, especially in Ontario and British Columbia, so it only takes a little spark."

"In its latest report on national home sales and price data, the Canadian Real Estate Association hinted that February might be the 'last relatively quiet month of the year'.

Larry Cerqua, CREA's president, said in a statement last month: “After two years of mostly quiet resale housing activity, there is a feeling that things are about to improve.”

"At this stage, it is hard to tell if buyers will wait for a signal from the Bank of Canada or if they are just waiting for spring listings to hit the market."

Toronto area real estate agent Dean Artenosi described the current moment as "a turning point where the worst is behind us." He said the central bank indicated that interest rates have "stabilized" through consecutive pauses, making buyers more optimistic.

Artenosi, co-owner of Coldwell Banker The Real Estate Center Brokerage, added: "The mood, mentality, and psychology indicate that we have returned to a normal market."

He continued, “People have become comfortable … and used to making payments at these higher rates, buyers have started returning to the market, and clearly there is talk of prices starting to decline now and we are seeing multiple offers again on some properties.”

Tim Hill from Re/Max All Points Realty said that outside of the west, activity slowed in March after a strong start to 2024.

He explained to the Vancouver realtor that many of his clients now find themselves in a waiting pattern, waiting for prices to drop, and said others are weighing the pros and cons of buying before that time, which is expected to fuel price growth amid lower borrowing costs.

Hill said, "We can all feel quite confident that (the central bank) has made no change yet, as much as people might want, but maybe we'll get more information in their press release about where they are headed and when we might see a Bank of Canada rate cut."

"For me, I now feel like we have seen this kind of calm, and I think April will be a really defining month for how the rest of the spring goes."

Robert Hogue, senior assistant economist at RBC, predicted a "gradual" recovery later this year as the central bank's rate cutting cycle progresses, rather than a big surge in activity after the first cut.

He said there are some exceptions to this forecast, notably the Calgary market, which has remained strong despite rising interest rates. Increased interprovincial migration demand and below-average inventory have kept the market tight in that city, according to the local real estate board.

Hogue said, "This market is still very strong and we do not see that changing."

Despite persistent demand, affordability remains a major issue in markets like Toronto, Vancouver, and Montreal.

Hogue said, "I don’t see it being about wisdom or caution, but about buyers’ budget constraints."

He noted that Canada may see "a series of small waves" in some markets over the next few months, as activity recovers while some move ahead of interest rate cuts.

Hogue said, "For these small waves to continue, you need a critical mass of buyers making their way back into the market."

"That’s why our view remains that we need to see a significant drop in mortgage rates, which I believe is closer to a story for the second half of 2024 than the spring market."

Artenosi said he urges his clients not to wait, and while borrowing conditions might be more favorable in the coming months, he warned of other factors, including Canada’s growing population, which could make it harder to buy affordably.

Canada’s live population count index from Statistics Canada showed that the population exceeded 41 million in late March, less than a year after reaching 40 million.

Artenosi said, "Playing the waiting game is wrong," adding that those who hold out might increasingly find themselves in bidding wars, "there won’t be a perfect scenario."