Can you believe we are nearing the end of September! We are starting to get our October market report ready for the team and wanted to share some of the initial findings, as there are a few things that you may need to be aware of if you are thinking about a sale before the end of the year.
Active Listings: 232 (This is an 80% increase in active homes since the beginning of June)
Vacant Homes: 80 (This is a 34% increase of total listed homes)
Assignment listings: 14 (17.5% of all vacant listings - 6% of all listings)
Tenanted Properties: 25
Total Sales In The Month: 57 (The total number of sales is not likely to increase much in the next day)
Predicted Months of Inventory: 4.0, which will be the highest MOI since January 2019, which was when the market started to bounce back after the last correction.
This is important because it means THINGS ARE SLOW!
The Market Segments Break Down:
- Detached: 141
- 35 sales, which represents 4+ months of inventory
- $1.2m avg price (second lowest since May 2021)
- With increased supply, we are expecting to see this further decrease through October
- Condos: 52 listed for sale
- This is a HUGE number of listings for sale right now
- Also a large number for these types of homes
- 1 condo apartment
- 2 condo townhomes
- 26 Condo Apartments
- 26 Condo Townhomes
- Sales have been EXTREMELY slow for condos, with only 3 in total
- Townhome: 21
- 7 sales
- Semi-Detached: 18
- 6 sales
- Both townhomes & Semi's are expected to be at 3-months of inventory
Why is the market so slow you ask?
There are lots of factors at play here, but mostly interest rates and Buyer reluctance is impacting the market conditions.
- Interest rates have made a $500,000 mortgage a lot more expensive
- However, when factoring in the still present stress test to qualify for a mortgage, with an additional 2% on top of the rate is required and a new mortgage holder would be required to qualify at 8.5%, which would be $3977, or nearly $2000/mo more than in February 2022.
- Another factor which gets more into the weeds on interest rates, is the current bond yield in Canada. Mortgage rates follow the bond yield, with a spread between them, which is usually between 1-2%.
- This means that if the current 5-year bond yield is 1%, then we can expect 5-year fixed closed mortgage rates to be around 2-3%.
- The current Canada bond Yield (as of last night) is 4.33%, which has increased from under 4% in the last 2 weeks… it’s not looking good for mortgage rates.
- In February 2022, when rates were around 1.5% for a variable rate, the payment would have been roughly $2000/month
- Today in 2023 with rates at approximately 6.5%, a monthly payment is $3,350/mo this is an increase of $1350/month
We will have a lot more data and information available next week, but this is a little taste of what is going on in the market right now.
We want to be clear that the state of the market is not all doom and gloom and market cycles are normal and a good thing to help balance things out, but it’s fair to say that as the hangover of the low rate party that we all got used to over the last decade starts to kick in, there is going to be some big changes coming to the real estate market, for Buyers, Sellers, landlords and tenants.
Don’t be freaked out by all the noise, however if you are a home owner considering a sale in the coming months, you may want to ask your self why you’re waiting. Is it because you want to see more options to buy before you sell? Do you just want to cash out at the highest possible price? Everyone will have a unique reason and motivation for selling and having an understanding of the market and how it works is a healthy relationship to have.
In the mean time, if you have any questions about anything in this blog, please feel free to reach out to us to discuss.
Until next week!
***Disclaimer, I’m not a mortgage broker, and I would encourage anyone looking into financing options to contact their broker to confirm the numbers for your specific scenario and the numbers presented should just be seen as an overview as to why things are so different now.