Home Buying, Market Intelligence, Peerage Partners, Real Estate News
July 2023, More Market Uncertainty
In mid-July, the Bank of Canada (BOC) raised the prime interest rate to 5% and is hinting at a potential further increase in September. This is happening even though inflation dropped as low as 2.8% after the July increase and then stabilized at 3.3% by August. It seems that interest rates will continue to rise until inflation approaches the BOC’s goal of 2.5%, which they aim to achieve by mid-year 2025 or even sooner.
In addition to the rate changes that lower the buying power of every potential home buyer, there have been continued supply chain issues causing the cost of new supply to remain relatively unstable. Furthermore, in the realm of real estate, there is also what is known as the “summer slow down”. During this time people are out enjoying the weather, taking vacations, and not thinking about moving as they are compared to other months. Traditionally July consistently experiences a decline compared to June in any market, and August typically follows as the second slowest month after December.
Considering these factors, the statistics for July are not surprising. However, given the ongoing fluctuations in supply chain and interest rate costs, we can anticipate more uncertainty ahead. The average price of a Single Family Home in the Fraser Valley remains above $1.5 million and as interest rates rise, fewer individuals can afford this price point. Consequently, this has resulted in a 42% decrease in sales in July compared to June 2023. Nevertheless, sales are still up by 35% compared to the same time last year and have resulted in increased Single Family inventory available for sale during the month of July.
Multifamily options such as Townhomes and Condominiums have also experienced the regular summer dip in sales compared to June of this year, but both have demonstrated an increase and have shown improvements from July 2022. The average price of a Townhome in the Fraser Valley sits around $846,000, remaining unchanged from July 2022. While Condominiums experienced a slight increase of about 1% compared to July 2022. Once again, this is not unexpected given the higher interest rates as there is little space to fluctuate pricing much higher. Due to costs and inflation the potential for prices to decrease is also restricted when considering newer options.
We expect to see a further slowdown for August and potentially some minor price drops here and there, but nothing substantial for the reasons outlined above. There is hope that interest rates will remain stable in September, however, considering inflation no one is holding their breathe for this to happen. It’s more likely that we will witness another increase or two before rates stabilize and hopefully decrease again.
We are still eagerly waiting for the targeted municipalities to share their plans for updating and creating streamlined approval processes. These changes are aimed to allow more product to market at the same time or increase the supply to help moderate prices increases overall. This would help add supply, however, could also put more downward pressure on home prices overall once strategized and implemented. For now we patiently await what they come up with, as well as the provincial government’s announcement of each municipality’s target. We then look forward to seeing if these targets are actually achieved.
Market Intelligence, Peerage Partners, Real Estate News
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Home Buying, Market Intelligence, Real Estate News