Buyers have yet to come out of the woodwork just yet and active supply continues to build for single family detached homes. Nearly every North Van SFD sold below list price over the last month.
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, September 24th, 2024
Buyers have yet to come out of the woodwork just yet and active supply continues to build for single family detached homes. Nearly every North Van SFD sold below list price over the last month. Indeed, with 300 current listings, a 10:1 sales ratio indicates a modest buyer’s market, so prices should be dropping. Asking prices are also coming down markedly. On condos (attached) in North Van, the ratio is slightly better (at 12.7:1) and prices are holding just above the $1000/sqft figure on most “newish” construction. That number is important because it’s the baseline for profitability in development. If further softness persists in the existing stock, sellers of new construction coming to market are going to become increasingly desperate for purchasers. We’ll be looking forward to seeing the monthly statistics for September to see what effect these trends have on the benchmark price indexes.
Coming to the rescue of the above situation was the federal government last week, raising the CMHC insurance limit on mortgages from $1M to $1.5M, thus permitting anyone buying in that category a lower downpayment than the previously required 20%. Pain for homeowners, developers or the banks that lend to them will not be tolerated in Canada. Let’s remove all doubt about the ultimate source of housing unaffordability. It’s a political necessity – like gun rights in parts of the US. These changes, along with marching lower of interest rates, will almost certainly put a floor under prices by spurring demand from those who want to purchase, but need more than a 1BR and don’t have the $200,000+ deposit previously needed.
The US fed started off their rate cutting cycle with a bang, lowering by 50 bps right away as we posited in the last update. This “jumbo” cut, is likely to be paired with another one either at the next meeting in November or the December meeting. Most importantly it gives the BoC needed cover to embark on an accelerated lowering of rates in Canada. The terminal rate now sits at 2.5% by next June (from today’s 4.25%) and 3% by March. That’s 5 cuts over the next 4 meetings, meaning a jumbo cut is expected here soon as well. Inflation readings came in right at the targeted 2%, so any further slowing in price growth and/or weakening employment would be grounds for making that big cut sooner than later.
Equity markets are back to making new highs with only the Nasdaq lagging behind. Even the TSX is participating in this latest rally, adding to the wealth effect in this country as retirement funds expand. The “soft landing” narrative in the US is growing as the consumer proves resilient and domestic manufacturing keeps GDP growth positive. The sector rotation which started in the summer is continuing and it remains to be seen if it can successfully transition back to tech stocks which would likely be needed to get the S&P 500 over 6000.
Bitcoin is again challenging a resistance level around $64-65,000, and could breakout strongly if the seasonal strength proves true for this year. Analysts are confidently proclaiming price targets in the six figures for 2025. Gold is also making new highs above $2650/oz. Oil is holding on to the $70 range as production cuts take effect. Nothing has changed the longer term outlook for oil, as the future price is below the current price (known as “backwardation”). Gasoline prices, natural gas prices and heating oil are all low, relative to the past few years, meaning these components of the inflation basket will continue to drag the overall basket lower. This will make upside inflation surprises all the more unlikely without some major catalyst.
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.