Dead or alive

What’s the big ask in my email box lately?

It’s what Kate says.

I am a regular blog reader, and very much enjoy your daily thoughts, wit, and generous financial advice. Thank you. Our mortgage is up for renewal, and we usually go with a five-year mortgage. However, with rates most likely coming down is 2024, possibility late 2023, is a five-year mortgage the best choice?

The green bank (as of last week) is offering a five-year mortgage at 4.74%, the three-year at 4.84%, a two-year at 5.52%, and then the one-year at 6.04%.  The longer the mortgage the lower the rate.

This is easy. Take the three. It’s a better deal than the shorter terms, marginally more than a five, barely above the current inflation rate (free money) and gives stability for 36 months while CBs work out next moves and any recession comes and goes.

After all, we’re not at the finish line. The boys in Ottawa may be on pause until closer to Christmas, but the Fed is still juiced. The US rate will rise again a quarter point next Wednesday, and America is not quite over its case of bank jitters (First Republic is a banana). Inflation is still hot in the States, bond yields remain inverted (often signaling a downturn ahead), a debt ceiling crisis still looms and we’re about to get a presidential race between an tax-loving 80-year-old and a bitter man who tried to overthrow the last election and faces criminal charges. Ugh.

So, uncertainty remains. Ukraine. Putin, China. Banks. Debt. Ninety-three year amortizations. Best to lock up your loans for a reasonable time because chances are everything will feel a lot better down the line.

Now, is everyone paying attention to what’s happening on the big city streets?

Vancouver, Victoria, Calgary, SW Ontario, the GTA, Montreal, LM and even Halifax – spring has arrived. Loins are stirring. House sales are still a pale version of last year, but prices are going up as inventory goes down. Is this a dead cat bounce, or the inevitable result of a carnal house lust that Canadians just can’t get over?

Look at the stats. Here’s some stuff from Toronto analyst, data freak and realtor Scott Ingram.

The first reason there’s price pressure? Buyers now outnumber vendors, with precious little to choose from – giving us a classic seller’s market. The months-of-inventory (MOI) level is back to about where it was a year ago, just after Peak House in Feb of ’22. That means a supply of detached homes less than 1.5 months while condos are down to under 1.9. Look below to see the dramatic reversal since January – when a certain pathetic (prophetic) blog told you we’d hit bottom.

Available inventory crashes as buyers come back

Now what about sales and prices?

Last week turned out to be the biggest one of the year so far for deals. Up 17% for freeholds ad 11% for condos. The interesting part is the number of transactions where the sale price exceeds the asking one. It’s a good indicator of buyer confidence and market momentum.

For the first time in 2023 the sold-over-asking ratio popped over the 60% mark for detacheds. The skeptics allege this is because asking prices are artificially depressed to attract offers, but the stats don’t support the premise. Buyers are just horny.

Six in 10 are now happy to pay more than asking

Of course, year-over-year numbers are dismal for sales, but part of the reason is a lack of stuff to buy. When a good prop shows up, it is swamped with interest and the owner deluged with offers. But only one buyer is successful. Or crazy. Take your pick.

Is it a good time to list?

You betcha. Days-on-market have dropped 40% in two months. Homes in demand areas are sold in a day or two. The neighbourhood selling price in those leafy areas where people have always been attracted to is back at early-2022 levels. It has been a remarkable and rapid ascent from the dismal first chapter of 2023.

But can it last? Are these people delusional in believing they can pay tens or hundreds above asking or finance at double the mortgage rate of a year ago, and still do the right thing? After all, as we showed here a few days ago, there is little or no financial justification for owning over renting when it comes to an urban condo. If the world takes a turn for the worse, if we get more banking woes, renewed inflation, recession or rate reversal, this dead cat could truly be deceased and smell like it.

So, Kate, step aside. Don’t speculate. Ignore the noise. We’re not there yet.

About the picture: “This is a picture of Indie, a female Schipperke, out on our daily drive down an abandoned rail line,” writes Mike.  “She sees plenty of deer on this trek and it sends her into hysteria…she wants at them in a bad way! That coupled with the hoodie is hence the added “Thug Life” meme.  She is, however, a true princess! Love the blog, appreciate the time you put into it! BTW, we’re selling our acreage, going up May 1^st, approx. 30 minutes east of Calgary. There’s barely any rural properties on MLS available nearby, so the time is right! This is us hoping to cashing in, with intentions of renting, however rough that might be to actually find something. We’re jumping in!!”

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