So what are we seeing in the market? What do the numbers mean? Things are obviously still changing with these numbers increasing and also decreasing in various sectors. If you follow me on social media you've seen me talk about it all quite a bit lately.
Available listings continue to pull back, and buyer sentiment has dramatically improved, I believe on the rumours that the rate hike cycle will be halted at the September 7th announcement.
I put it out there as well, but I think many thought it was all over because that's sort of what the headlines said......sort of.
FYI – If you didn't read my full post....Halting the cycle doesn’t mean there won’t be an increase on Sept 7th.
Many realtors ran with this headline, stating “hurray, the BoC is going to stop the hike cycle!” but either they didn't add context or pay attention to the quote and understand where the headline came from. If they did the story may not be as clear.
This quote: “We suspect that a narrative shift is coming, given that we forecast that the Bank will end its rate hike cycle at its next meeting in September, bringing the overnight rate 75bps higher to 3.25%.”
The quote originated from a research roundup by the Globe & Mail.
If you’re not a Globe subscriber, you can access the article here on Canada Today.
There’s still the assumption by this CIBC strategist that we’ll see a 0.75% increase in the overnight lending rate. However, the September 7th announcement will mention that the tightening will stop. Hence, all this talk about the “halt.”
If, and that’s a big IF, the Bank of Canada does indeed halt the rate hike cycle, you can expect, as I said a few days ago, an extremely active Fall Market with almost a “back to normal” attitude from most buyers. Except for those buyers that are priced out by the increase. However much it may be.
Nobody can predict with absolute certainty what will happen here, but one CIBC economist thinks the hikes are over after September 7th. I firmly believe that 2023 will see an easing interest rate environment during some of the eight scheduled announcements.
As you saw from the numbers, listings are pulling back now, and buying activity is up significantly.
Some of that seems to be helped along by the investor market taking advantage of a heated rental market offering better investment positions than we've seen in quite awhile.
Next week is a big week for real estate. It’s the official beginning of the Fall market, where we typically see a ton of activity on both the listing and buying side.
But.....
Like I said above, the Sept 7th announcement, in my opinion, is the most important one yet. It will either make or break the market in the short term.
There’s been a resurgence however in some micro-markets during what’s typically a relatively stagnant last few weeks of the Summer months. So the potential of a strong fall market is a definite possibility even if the BoC tries to shake it. Only time (next few weeks) will tell though.
I don’t see too much volatility overall though, as many of these buyers and sellers aren’t in over-leveraged panic situations.
Also very important to understand that many of the buyers that locked in to 5yr mortgages during the peak of the market don’t have to renew until 2024-2026
And anyone who’s locking in now is good until 2027-2028 which is more than enough time to ride out this potentially underperforming market.
Many, including myself though, think setting up on a slightly shorter term is better, at this point until you're into 2023.
You can be a pessimist all you want (the market is crashing!!!) but, long term, you’d be wrong; in terms of many Golden Horseshoe real estate markets anyway.
We have a ton of new immigrants coming here every single year; including international students, and those on work permits. They’re either renting houses and condos. Well, most of them are when they first land. Or living with family.
Guess what 40% of them do within the year to 18 months of landing though?
They buy.
So if you’re a Buyer right now, what would stop you from buying?
When you first called your agent, or spoke to your spouse, parents, etc about buying, why did you do that?
Nobody likes to move but everyone likes the result of moving. The new lifestyle, close access to friends and family, closer to work, more living space for your family. That new bedroom for your 2nd or 3rd kid.
None of that motivation has changed. So why would anything that happens in the short term change your motivation? You may not be affected by the interest rate hikes if you’ve locked in to a fixed mortgage or even a fixed payment variable.
You know that there will always be demand for your property in the long term. You’re not planning on selling anytime soon. So as long as your original commitments haven’t changed, then an interest rate announcement shouldn’t make a difference.
Sellers, I’d still be cautious here and not make any drastic decisions. Buyer sentiment may be stronger right now but that could change on a dime after September 7th.
But 2023 will be a different beast where sellers will be back in the driver’s seat especially as we approach late Q1 into mid year and rates start to come back down.
However, if you're Selling and Buying, as long as it's done in the same market and you enter with a solid plan before making a move, you'll be more than good.
Now let’s look at the numbers as a whole.
