There may be pent up supply and demand ready to take advantage of the best financing rates in two years…
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, Dec 18th, 2024
North Vancouver property sales have been steady in a usually slow December market. Homes that have been sitting on the market through the summer and fall are finally finding buyers at lower prices. This remains a good time to be buying a home despite “balanced” conditions. What little supply remains into the New Year might be a little stickier on prices as sellers look forward to (what is shaping up to be) a fairly hot spring market. There may be pent up supply and demand ready to take advantage of the best financing rates in two years and a few mortgage rule changes which move the needle on affordability for some buyers.
The Bank of Canada made their last rate cut of 2024 a “jumbo” cut, although gave forward guidance toward a slower pace of cuts moving forward. Lacklustre employment data and slightly lower inflation readings are emboldening the central bank on their easing programme. On the other side of the equation, the Canadian Dollar dropped below the key $0.70 level for the first time since March of 2020. This happened a day after an exciting day in Ottawa which saw the housing and finance ministers spontaneously resigning mere hours before the release of the (late) fall budget update, which showed a much higher deficit than expected. The Trudeau government is in complete shambles, and the Loonie is how world markets show their confidence in Canada’s investment-worthiness.
Bond markets are indicating skepticism of a prolonged rate cutting cycle. Factors keeping rates elevated include the aforementioned weak Canadian Dollar which will begin impacting inflation readings, the approaching Trump inauguration and instability in the federal government. Trump has renewed his threats of 25% tariffs on Canadian exports. It doesn’t appear many are taking this seriously, as he’s been known for using such tactics to extract the types of concessions he’s really after. A Canadian government in limbo, however, cannot effectively negotiate a way out of this, so it remains possible that it is implemented (at least temporarily) which would wreak havoc on Canadian industry, likely be met with retaliation, and have an enormous impact on prices. Let’s hope this is just typical Trumpian bluster. Nonetheless, it would be prudent to secure a pre-approval now if you intend to purchase a property in the New Year as bond markets will begin to reflect this risk as will fixed rate mortgages.
Equity markets, particularly the Nasdaq are powering to new highs as techno-optimism abounds on Wall Street. The same can’t be said for traditional “value” stocks and the Dow Jones index which have been modestly negative every day for nearly two weeks now. The declining participation rate in the recent rally is concerning as this is often a harbinger of painful corrections to come. For now, markets are still celebrating the incoming undivided US government and the effect it will have on regulation across American industry.
Bitcoin crossed $100,000 making it a $2 trillion dollar asset. Buyers are attempting to “front-run” institutions like the US Treasury, US state governments, and other national governments which are seriously considering adding it to their treasuries. If this materializes, it would spark a new monetary era, one where bitcoin acts as a base layer upon which the rest of the financial system is built. These were scenarios most “bitcoiners” thought might play out in the 2030s. Trumps presidency and his picks for key regulatory posts is accelerating this trend as well as other technology trends like AI. Commodities are struggling to find much momentum in the face of this obsession with gigantic returns in cutting-edge industries. Why would you invest a billion dollars to build a mine so you can hopefully earn it back in 10-15 years, when the alternative is to speculate on fat digital penguins or quantum computing stocks, doubling your money in a few weeks? Something is broken here. But it sure is exciting!
See you in 2025!
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.