Welcome back to my monthly update on the status of the real estate market.

As I normally do, I will be sharing with you the most important data in recognizing what is happening in the market and helping us predict what the market will do in the short term. I will however bring in two factors which I have previously never spoken about, with the intent of seeing the market from a slightly different perspective. Those two factors are consumer confidence and trends. As we will see, there is a correlation between the two.

If you reference the stats that are provided, the number of sales in July dropped. This is nothing to be concerned about as it is likely just a normal seasonal occurrence. We also see that the number of listings has dropped but remains high in relation to the number of sales. This of course affects the sales-to-new-listing ratio, which for the month of July is at the lowest point it has been all year, 38%. For those of you who read this update on a regular basis, you will know that the SNLR is a very strong predictor of prices, and once again it did not disappoint. Because the SNLR has been trending downward for the past 3-4 months, and it is now below that 40% threshold, prices have little option but to fall. They fell an average of 5.4% which represents $64,000.

On July 12 the Bank of Canada raised their overnight interest rates yet again by .25% in their ongoing effort to slow inflation down to what they deem to be an acceptable level. Ideally, their target is 2%. It’s been working. From a 39 year high of 8.1% in 2022, to 2.8% as of the end of July, 2023. Prior to dipping below 3%, it was pretty much understood that rates would climb until the Bank of Canada reached its inflationary target. Now that we are below 3%, there is a reasonable chance that the Bank of Canada will not raise rates again on September 6th. If inflation doesn’t rise again, the bank of Canada may not raise rates again for the remainder of the year. If this comes to fruition, you can bet on consumer confidence to increase. This will start bringing buyers back into the market. If however, the Bank of Canada raises rates on September 6th, October 25th, or December 6th, we can expect those hikes to have a detrimental effect on consumer confidence, and buyers will continue to hide behind trees.

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For the past few months, there has been a clear downward trend. There have been fewer and fewer sales, more and more listings sitting for longer periods of time, and a greater and greater percentage of properties not selling at all. We have also seen the inevitable price drop as a result of those trends. In order for a trend to reverse, there must be a significant or substantial event in the marketplace. A halt on interest rates can have a substantial effect on consumer confidence and hence, this could be the event that turns the trend around. September 6th is going to be an interesting day, and for that matter the entire fall market. Stay with me as I will report on the Bank of Canada’s September 6th decision. 

Regards,

Ken Wilder BA, ABR, CH