In Metro Vancouver, the real estate prices are moving up for a second straight month while sales volume remains low. The sales number for March is 42.5% below last March but only 28.4% below the 10-year average.
Remember the sales were down 42.9% and 33% below the 10-year average for January and February respectively. So it is doing better on a 10-year average basis, but sales volume is still really low.
The prices have gone up as you can see by the table below. The sales-to-active listings ratio used to gauge price trends have also moved up. All of them are above 20% which indicates pricing pressure upwards.
It is actually surprising how much prices jumped month over month. What seems to be playing out is that the sellers are out waiting the buyers. The inventory is low because sellers do not want to sell below the previous high. With the news that one million immigrants came to Canada last year and the government really having no plans to house them, sellers are confident the prices are going to be supported. Also the high rents are helping investors/speculators hold on for better times. There is always a base level of activity that has to happen: marriage, moving out, downsizing, divorce, new jobs…So those buyers cannot wait any longer and rush back in.
How long will this last? Hard to say. The economy is slowing as we hear about more layoffs but few people are forecasting an apocalyptic recession, so I can’t see prices going down too much. The activities might remain at base level, but as interest rates start to decrease more and more people will move back into the market.
Currently, here are the forecasts from the big 5 banks. Uniformly saying no cuts this year. For 2024, the range is a total cut of 1% to 2%, with 1.5% being the average. Meaning the average forecast for the Canada overnight rate is 3.0% at the end of 2024.
Of course these forecasts assume no surprise emergencies. Nobody knows what kind of trouble can cause a crisis that will force the central banks to lower rates. For example, the US bank run that caused the downfall of 4 banks came from nowhere. Luckily, the Federal Reserve was able to nip it in the bud. And please note, there is nothing similar to the great financial crisis except that banks were involved. The mechanics behind it are completely different. Note the Canadian banking system is very different from the US. We are more conservative and are forced to have more reserves held at the banks. And we only have a handful of very large strong banks. There are over 4,000 regional banks in the US. Only those were in danger.
So don’t worry and enjoy your Easter long weekend.
Have a great month!
John
