The BoC HELD INTEREST RATE AT 5% TODAY, citing a weakening Canadian economy – however left the door open for further rate hikes if inflationary pressures continue to persist.
The decision comes as good news to many, as folks were holding their breath on another hike. Last Friday, Stats Canada reported that the Canadian economy appeared to stall in Q2, as investment in housing continued to fall around the country driven by a decline in new construction projects and renovation. Stats Canada reported a CONTRACTION of the economy of 0.2%, and also revised it's forecast for Q1 2024 to 2.6% (down from 3.1% growth). (LINK)
Ironic, isn't it? The biggest hurdle of construction and renovation activity is borrowing costs. And seeing new construction slow down does not at all solve the supply / demand equation – it exacerbates the problem, particularly in Calgary...
As the rest of the country's real estate markets 'balance out', Calgary's real estate market remains resilient - almost unbelievable, of how short supplied we are right now. Two key drivers for the supply constraint: labour shortage & heightened demand for housing in Calgary.
Some anecdotal notes from CREB's monthly update for August:
1. August real estate sales surged to a record HIGH of 2,729 units transacted, largely driven by activity in the condominium sector (lower price point, higher relative inventory compared to other property types)
2. Sales-to-new listings ratio remained ELEVATED at 87% (meaning a very strong absorption rate - newly listed homes are being immediately bought up)
3. Inventory levels in August DROPPED to 3,254 units - new record low for the month of August
High Sales + Low Inventory = extremely tight market conditions and increase to prices. As a result, much of the market is seeking lower cost alternatives, putting a pressure on lower priced products, particularly in the detached home market. Across all property types, Prices have appreciated as much as 15% on average since last August.
A couple of graphics to summarize where are market is currently heading into the Fall:
As of September 5, 2023 (last 7 days):
Source: Pillar 9 MLS
Source: CREB
Things to think about if you're a BUYER in Calgary:
- Are prices really going to come down if I wait another 6 months? What is this based on, true data or feelings?
- What will happen to the resale / rental markets with new construction slowing significantly due to high borrowing costs?
- What will happen if rates stabilize? Will this lead to more or less demand for housing?
- Based on the current inventory, where will inventory be if rates stabilize and demand picks up even more?
Things to think about if you're a SELLER in Calgary:
- Will selling now or later, best position me for where I want to be in the future?
- Are you leaving a lot of money on the table if you don't sell, and the market takes an unpredictable turn?
- What can I do to make my home show the very best if I want to sell? Does that even matter right now in this market?
The answer to most of the questions above is 'it depends'. It really depends on your current situation and where you want to be. It is evident that if the economy comes to a grinding halt, there will always be a need for housing no matter which way you look at it, the best question to ask yourself is, are you prepared?
Give me a call if you want to chat about your situation and how we can help!