Although I
know I keep saying it, the housing numbers for markets across Canada in August
were quite similar to those for April, May, June, and July - still slowing,
albeit at a slower rate.
It has come
as quite a shock to see rates rise from record lows to above what would be
called "back to normal" so quickly, especially after more than a
decade of warnings that "higher interest rates are just around the
horizon."
Given that
the Bank of Canada increased interest rates by 300 basis points in just six
months, it is understandable that both housing activity and prices have slowed
down. It appears that the decrease in housing statistics is also coming to a
close as rates are now believed to be close to their peak. The fact that
unemployment is at an all-time low help explain why supply is not building up.
For the
first time since February, national sales remained largely stable month over
month in August, and demand and supply dynamics in many sectors also
stabilised.
While not a
tiny decrease historically, the National composite MLS Home Price Index
decreased by 1.6% month over month in August 2022 compared to June and July.
As a result,
price drops are becoming smaller and the market and sales circumstances are
stabilising.
I believe
that many potential buyers who are still on the sidelines might wait to enter
the market until prices have reached a definite bottom and the Bank of Canada
has made it plain that it will no longer be raising interest rates. Not yet,
but perhaps very soon.
However, as
the first mostly "regular" summer vacation season in three years
comes to an end, I've been noticing sold signs sprouting up all over my
neighbourhood. I can't help but recall the significant summertime slowdown that
occurred at this time last year. In the fall that followed, purchasers
unexpectedly made a comeback.
It is clear
that this year is unique. Although supply is still low, it has increased from
the previous year, which is positive for purchasers. However, purchasers today
must pass a considerably harsher stress test in order to enter the market.
Though I do
wonder if the next surprise will once again be to the upside, as has frequently
been the case with Canadian housing markets in recent years, after a sharp
adjustment in housing markets this year in response to the first real inflation
crisis in our three decades long inflation targeting era.
Although the
need is still present, the question is when it will resume. Inflation both
domestically and internationally is the crucial statistic to pay attention to.
SOURCE
BY: CREA