Canadian Real Estate Trends:
In line with current Canadian real estate trends, as reported in today’s Better Dwelling article, the impact of higher interest rates is reshaping the market landscape. The recent release of Canadian Real Estate Association (CREA) data for September reveals a decline in existing home sales, but there’s more to uncover in this evolving narrative. We’ll delve into the shifting market dynamics and their implications for homeowners, homebuyers, and sellers.
Canada’s Real Estate Market: Still Active
Canadian real estate sales may not be soaring, but they remain relatively robust. In September, seasonally adjusted sales dipped by 1.9%, while unadjusted annual growth showed a 1.9% increase. With over 35,000 existing home sales during the month, the market sits at a level reminiscent of pre-pandemic times. It’s far from sluggish, despite not meeting recent expectations.
Inventory on the Rise
One of the key factors contributing to the current market conditions is the substantial rise in inventory. Seasonally adjusted new listings increased by 6.3% in September, marking the sixth consecutive month of growth. Unadjusted data reveals an inventory that’s 14.2% higher than the same period the previous year. This aligns with the high-end of pre-pandemic norms. As BMO senior economist Robert Kavcic notes, the period of limited listings is over, and ample supply is now available.
Balanced Market Conditions
The combination of slower sales and increased inventory has resulted in an unusual amount of market slack. The sales to new listings ratio (SNLR) fell to 51.4% in September, down over four points from the previous month. This places relative demand at a level close to a perfect balance, an unexpected development. In contrast, during the spring’s heated market, the SNLR climbed to 68%, clearly favoring sellers. Such well-supplied market conditions are a rare occurrence in the last decade, suggesting a notable shift.
Bank Adjustments and Lower Price Forecasts
In response to the cooling market, Canadian banks are revising their price forecasts. TD and BMO have both shown increased caution in their outlook. The interplay of abundant listings, restrictive mortgage rates, cautious investor demand, and a subdued economic outlook points to a challenging market environment. According to Kavcic, the market is at risk of seeing further price declines, likely extending into mid-2024. Buyers and sellers exist in this market, but lower prices are necessary to align with current mortgage rate and qualification criteria.
Our Take:
For homeowners, buyers, and sellers, these market dynamics signal a need for vigilance. While sales and inventory levels have normalized, the market continues to adjust to higher interest rates. Homeowners should consider the impact of these changes on their property values, while buyers may find opportunities in a more balanced market. Sellers, in turn, should be mindful of pricing in this evolving landscape, as lower prices may be necessary for successful transactions. The real estate market in Canada is in a state of flux, and adapting to these shifting conditions is crucial for all stakeholders.
Wondering what this means for our local market? Call us – we love to talk real estate!