30 Aug 2022
Week 130: Are we done with rake hikes this September?
Week 130: Are we done with rake hikes this September?
Available listings continue to pull back, and buyer sentiment dramatically improves (especially for condo buyers) on the rumours that the rate hike cycle will be halted at the September 7th announcement.
FYI – Halting the cycle doesn’t mean there won’t be an increase on Sept 7th.
Many realtors ran with this, “hurray, the BoC is going to stop the hike cycle!” but when you pay attention to the quote and understand where it came from, the story may not be as clear.
This quote: “We suspect that a narrative shift is coming, given that we forecast that the Bank will end its rate hike cycle at its next meeting in September, bringing the overnight rate 75bps higher to 3.25%.”
The quote originated from a research roundup by the Globe & Mail. If you’re not a Globe subscriber, you can access the article here on Canada Today.
There’s still the assumption by this CIBC strategist that we’ll see a 0.75% increase in the overnight lending rate. However, the September 7th announcement will mention that the tightening will stop. Hence, all this talk about the “halt.”
If, and that’s a big IF, the Bank of Canada does indeed halt the rate hike cycle, you can expect an extremely active Fall Market with almost a “back to normal” attitude from most buyers. Except for those buyers that are priced out by the increase. However much it may be.
Nobody can predict what will happen here, but one CIBC economist thinks the hikes are over. I firmly believe that 2023 will see an easing interest rate environment during some of the eight scheduled announcements.
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Urban Markets: Downtown & Surrounding Areas
House Average Price: $1,417,544
House Median Price: $1,330,000
458 Active Listings
37 Firm Sales This Week
Months of Inventory (MoI) ~ 1.57 (down from 1.77 last month)
Average Days on Market ~ 13.65
Condo Average Price: $837,194
Condo Median Price: $735,000
1482 Active Listings
99 Firm Sales This Week
MoI ~ 2.02 (down from 2.16 last month)
Average Days on Market (DOM) ~ 27.19
As you can see from the numbers, listings are aggressively pulling back now, and buying activity for Condos is WAY up.
Much of that is driven by the investor market taking advantage of a heated rental market offering better investment positions than ever.
Next week is a big week for Toronto real estate.
It’s the beginning of the Fall market, where we typically see a ton of activity on both the listing and buying side.
Like I said above, the Sept 7th announcement, in my opinion, is the most important one yet.
It will either make or break the market in the short term. (continued after chart)
Urban North: Rosedale, Deer Park, Moore Park, Forest Hill, & Lawrence Park
House Average Price: $2,301,000
House Median Price: $2,525,000
116 Active Listings
7 Firm Sales This Week
MoI ~ 2.04 (down from 2.40 last month)
Average Days on Market ~ 19
Condo Average Price: $1,083,771
Condo Median Price: $907,000
165 Active Listings
7 Firm Sales This Week
MoI ~ 2.12 (down from 2.43 last month)
Average Days on Market ~ 39.86
There’s still some decent movement in the luxury markets during what’s typically a relatively stagnant market in the Summer months. The last few years have been a little more active as supply was practically at zero. However, supply has nearly quadrupled here in two years, and buyers are treating the season as they usually would.
I don’t see too much volatility here as many of these buyers and sellers aren’t in overleveraged panic situations.
Also very important to understand that many of the buyers that locked in to 5yr mortgages during the peak of the market don’t have to renew until 2024-2026
And anyone who’s locking in now is good until 2027-2028 which is more than enough time to ride out this underperforming market.
(continued after chart)
Leaside, Davisville, Yonge & Eglinton
House Average Price: $1,588,333
House Median Price: $1,820,000
28 Active Listings
3 Firm Sales This Week
Months of Inventory (MoI) ~ 0.85 (down from 1.65)
Average Days on Market ~ 31.33
Condo Average Price: $804,750
Condo Median Price: $780,000
163 Active Listings
8 Firm Sales This Week
MoI ~ 2.38 (down from 2.53)
Average Days on Market ~ 31.88
You can be a pessimist all you want but, long term, you’d be wrong; in terms of Toronto real estate anyway.
We have a ton of new immigrants coming to Toronto every single year; including international students, and those on work permits.
They’re either renting houses and condos. Well, most of them are when they first land. Or living with family.
Guess what 40% of them do within the first year of landing?
They buy.
(continued after chart)
Birch Cliff
House Average Price: $1,465,000
House Median Price: $1,019,000
31 Active Listings
4 Firm Sales This Week
Months of Inventory (MoI) ~ 1.52 (up from 1.55)
Average Days on Market ~ 27.75
If you’re a Buyer right now, what would stop you from buying?
When you first called yoru agent, or spoke to your spouse, parents, etc about buying, why did you do that?
Nobody likes to move but everyone likes the result of moving. The new lifestyle, close access to friends and family, closer to work, more living space for your family. That new bedroom for your 2nd or 3rd kid.
None of that motivation has changed. So why would anything that happens in the short term change your motivation? You may not be affected by the interest rate hikes if you’ve locked in to a fixed mortgage or even a fixed payment variable.
You know that there will always be demand for your property in the long term.
You’re not planning on selling anytime soon.
So as long as you original commitments haven’t changed, then an interest rate announcement shouldn’t make a difference. (continued below chart)
Kingston Rd Corridor to Highland Creek
House Average Price: $1,243,525
House Median Price: $1,192,500
77 Active Listings
8 Firm Sales This Week
Months of Inventory (MoI) ~ 1.84 (up from 1.82)
Average Days on Market ~ 14.63
Condo Average Price: $438,764
Condo Median Price: $438,764
65 Active Listings
2 Firm Sales This Week
MoI ~ 2.44 (up from 2.04)
Average Days on Market ~ 10.33
Sellers, I’d still be cautious here and not make any drastic decisions. Buyer sentiment may be stronger right now but that could change on a dime after September 7th
But 2023 will be a different beast where sellers will be back in the driver’s seat especially as we approach mid year and rates start to come back down.
Want to talk about real estate? Let’s do it on YouTube 🙂
(don’t forget to subscribe to my new YouTube Channel here, where I go over all of these reports in more detail)
Have a terrific Tuesday, and I’ll see you next week 🙂
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That’s all for today; thanks so much for your energy and attention. If you want some clarity on the market and your specific situation, please DM, comment below or email Ara@thespringteam.ca.
