The real estate market in Metro Vancouver continues to be ice cold. October sales were 45.5% lower than last October. That is 33.3% below the 10-year October sales average. The slowing sales the last few months are increasing the number of listings on the market. It is 22.6% more than last October. However, new listings slowed more in October, so inventory actually decreased by 1.2% compared to last month. This is reflected in the slightly stronger sales-to-active listings ratios: 14.3% for detached homes, 21.6% for townhomes and 23.2% for apartments. The higher the ratio, the higher the demand. As you can see from the chart below, the slightly improving demand is slowing the month over month price declines. And the lower priced properties are holding up better. Apartments have a 0.2% decline while townhomes and detached homes have declines of 0.5% and 0.7% respectively.
Going forward, the market is still a captive of the interest rate. Canadian Housing and Mortgage Corporation came out with a report giving their view of the market. Basically, it is saying that we have passed peak inflation rates, interest rate will peak next year and the policy rate will hold for about a year before going back down. The price of real estate may drop but will not give up all of the post covid gains. In general, the majority of the narrative out there agrees with this. The only key difference is how high the interest rate will go before levelling off.
Since the report came out, the Bank of Canada raised their overnight rate 0.50% to 3.75%. Everyone expected a 0.75% increase but the Bank of Canada sited economic stability concerns. This does indicate we are near the top of the interest rate range. Yesterday the Federal Reserve raised their rate 0.75% as expected. There was indication that the time to reduce the pace of increase is coming soon. Currently, most are thinking a 0.50% increase in December. What is a bit troubling is that Jerome Powell, the Chair of the Federal Reserve, announced that the peak interest rate will probably be higher than previous thought. It is expected that the US will have a higher interest rate than Canada because their inflation is higher. See chart below. But it seems he thinks inflation is more stubborn and that a higher final interest rate might be needed. The problem is the lag between the interest rate increase and its final effect on the economy. However he did acknowledge this lag during the meeting. For everyone’s sake, I hope he gets it right this time.
Don’t forget November 11th is Remembrance Day.
Have a great month.
