Home Buying, Market Intelligence, Peerage Partners, Real Estate News
June 2023, Uncertainty
In May, we observed signs of overall market improvement, but we also discussed potential changes that could lead to some turmoil. Recently, the Bank of Canada (BOC) raised the prime rate to 5% in mid-July, and there is a possibility of further increases in September. This is happening even though inflation has stabilized at 3.4% for the months of May and June this year. It seems that interest rates will continue to rise until inflation is closer to the BOC’s goal of 2.5%, which they aim to achieve by mid-2025 or possibly sooner.
Amidst all these ongoing developments, the sales figures for the month of June have once again shown an increase across all product types. Particularly, single-family home sales experienced the largest growth compared to June of the previous year, with a significant rise of 77%. However, with the aforementioned recent rate increase, this momentum is expected to slow down, especially considering that the average price of a single-family home in the Fraser Valley for June reached $1,609,796. This represents a 2.2% increase compared to June 2022 and a slight increase of one-tenth of a percent from the previous month. With higher rates and prices exceeding one and a half million dollars, it is likely that more buyers will be pushed out of the single-family housing market and towards more affordable multi-family property options.
Supply continues to be higher compared to the previous month for all product types. However, when compared to June 2022, the supply is still lower, with a decline of up to 38%. On the other hand, average prices have remained relatively stable. In the townhome sector, there has been no increase compared to June 2022 (although there has been a slight monthly increase), while condominium prices have seen a year-to-year decrease of approximately 5%. This represents a significant improvement compared to just a few months ago when prices were down by 30% or more across all product types when comparing year to year. Overall, these trends indicate a healthy improvement in the market.
Nevertheless, considering the recent rate increase and the strong possibility of another increase in September, the current situation could undergo significant changes. As we are now well into the summer months, which traditionally exhibit slower sales in the real estate market, the uncertainty surrounding rate increases might make potential home buyers hesitant once again. This hesitation could potentially lead to a market dip during July and August. The impact on September remains uncertain, as another rate increase during that month would further impede purchaser affordability.
Lastly, we are anxiously waiting the release of plans by the targeted municipalities to update and establish streamlined approval processes, aiming to bring more products to the market simultaneously and increase the overall supply to help mitigate price increases. This approach would assist in augmenting the supply; however, it could also exert downward pressure on home prices once the strategies are formulated and put into action. The outcome and success of these plans remain to be seen, and we will have to wait and observe if the targets are achieved in the end.
Market Intelligence, Peerage Partners, Real Estate News
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Home Buying, Market Intelligence, Real Estate News