The strength of the entry-level category is now being matched by the move-up category…
The Two Minute Market Update is intended to keep readers apprised of what’s going on in local real estate markets and in the global financial markets that affect real estate via inflation, interest rates, capital flows and public policy. It is best suited for those not able to keep up with all the news every day, but still wanting to be informed.
Two Minute Market Update, November 4th, 2024
Single family properties in North Vancouver have continued to exceed sales activity from over the summer. However, as we’ve been monitoring closely, the transactions which are occurring tend to be those which are priced attractively or willing to cut prices. The strength of the entry-level category is now being matched by the move-up category, as buyers are finally finding what they’ve been waiting for at a price they can stomach and with financing rates lower than have been available for a couple of years. The luxury category is not yet experiencing the same level of activity. What I’ll be watching for now is whether the increased activity halts the price reductions and if sellers can regain the upper hand in negotiations, something that could be a harbinger of what’s to come for the spring market. Or will it bring more supply to market that has been waiting for better conditions. Seasonally, supply usually starts to be removed from the market toward the end of November.
Following jumbo rate cuts on both sides of the border, markets are now pricing in a more gradual pace of rate cuts due to persistent economic data showing a resilient US economy with consumers spending and production levels increasing. Known as a “soft landing” or “goldilocks economy”, falling inflation and increasing nominal growth still allows the Federal Reserve to cut rates, but this will be data dependent. Possibilities of a positive surprise in inflation could have a big impact on bond markets which eventually flow through to mortgage rates in Canada – one of the risk factors we identified in my Annual Report.
All eyes are currently on the Presidential Election. In my opinion, the result is not as significant for the global (or US) economy as it is portrayed by those with a political agenda. The greatest risk is civil strife in the event of an unclear or contested result – from either side. The BC election seems resolved in favour of an NDP government with a very slim majority. They needed to make a number of concessions to hang on with their fingernails and will need to govern cautiously to prevent further losses of support. Do not expect, however, wholesale changes in Residential Tenancy laws, short-term rental restrictions or other policy changes that will bring investors back to the real estate market in large numbers. They have made clear that their plan for addressing the housing affordability issue is to build as much rental and social housing as possible near transit. They have plenty of work to do to make the math work for developers if they intend for any of that supply to materialize anytime soon.
Equity markets are slightly off their highs and remain jittery due to the upcoming election. Tax, tariff and regulatory issues are all at play and the uncertainty has resulted in a lot of hedging. This is keeping the volatility index, the VIX, very elevated. As the VIX decreases, prices usually rise. Regardless of the election outcome, so long as it is a clear victory for one side, I’d expect to see the risk premium sucked out of the market and a relief rally. Keep in mind, this would be happening from very high valuations already. Eventually, companies need to start showing profits to justify their valuations, lest other investments begin to look more attractive on a risk-adjusted basis.
Bitcoin, similarly, is awaiting regulatory clarity regarding its further integration into the financial system. Last week it briefly matched its all-time high from March and subsequently pulled back. Gold is hovering near it’s recent highs as well. It could be the beneficiary of any uncertainty beyond Tuesday night’s vote count. Just as the Middle East conflict between Israel and Iran ebbed and the oil price dipped below $70 again, OPEC announced an extension of their current production cuts. This is pushing the price back above that pivot point. Oil is also awaiting the removal of election uncertainty as the candidates have differing outlooks on US production.
Matthew Stiles
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Disclaimer: The information provided in this column is for general informational purposes only and does not constitute financial, investment, or other professional advice. While I strive to provide accurate and up-to-date information, I make no warranties or representations as to its accuracy, completeness, or reliability. Any actions taken based on this information are at your own risk. Always consult with a qualified financial advisor before making any investment decisions.