|In May the Fraser Valley real estate market saw an uptick in new listings, 40 per cent over April.
Typically we see an influx of inventory earlier in the spring but the series of rate hikes in the latter part of 2022 had many sellers in a holding pattern for most of the year. It has been sweet to see more options on the market for buyers and the improved supply was met with enthusiastic demand as prices edged up across all housing types.
Then, just when we thought rates were stabilizing, the Bank of Canada (BOC) increased its policy rate by 25 basis points on June 7. This latest rate hike has soured the housing market.
Anecdotal evidence suggests that activity has slowed, and the demand for fixed-rate mortgages has surged. Many households now face higher monthly payments in the next two years. The Bank of Canada knows that and wants to see household spending slow from the pace of the first quarter. Consumer confidence has risen sharply since March. But with household debt-to-income levels at near-record highs, the sensitivity to interest rates is extreme.
Ironically, as the BOC continues it quantitative tightening (after months of no action) the Federal Reserve has decided to pause rate hikes for the first time this cycle. US inflation peaked at over 9.1% and fell to 4.0% in May. Canadian inflation topped at 8.1%, its most recent posting was 4.4% in April. May data for Canada will be released on June 27.
If you have been thinking about listing your home in 2023 now would be the time.
Pricing has seen an uptick since last year and buyers are making moves to get in the market before the next rate hike … which means a strong sale price with minimal days on market.
Analysts are expecting one more rate hike in Canada this year, July 12.
If this happens, we expect buyers will take some time to re-evaluate as they adjust to the new rate landscape. Thus, buyer demand and ultimately housing prices will likely soften as we move into August, September and the final quarter of 2023.
Further, the short-lived idea that the Bank would cut rates any time this year has now vanished. Most are betting the first-rate cut is more likely to be in mid-2024.
So think about it.
Lemonade. Its what we do.
Jenn & Colin