‘They’re not waiting’

“March the sixth,” she said. “But I can tell you people are not waiting for that to happen.”

She’s a real estate broker plying a tony enclave on the fringes of the city. The ‘sixth’ is the next rate review date for the Bank of Canada. And the ‘people’ she talks about are buyers. The spreading meme is that interest rates will officially start crumbling four weeks from now – at which point house prices will rise, competition will return, multiple offers, bidding wars and blind auctions will erupt as the sales-to-new-listing ratio soars and FOMO infects the land. The ‘smart money’ is getting in now.

At least, that’s what she wants. It’s what prospects are being told. And it may be a self-fulfilling prophecy.

Now, to be realistic – no major economist is predicting a rate cut next month. Maybe on April 10th, they say. More likely on June 5th. For sure by July 24th. But – everyone agrees – cuts are coming.

In advance of that mortgage rates have declined to the 5% level (or less if you negotiate). Buyers and shoppers have emerged from their snowdrifts and timidity. Realtors, brokers, agents, lenders, appraisers, bankers and inspectors bristle with hope and anticipation. After 2023 turned into a historic disaster with record-low sales in most markets, sentiment has rebounded.

Hopium or something more concrete?

This week more data will be at hand as the country’s largest realtor cartel reports sales and price stats. In the meantime, here’s what we know of the last few weeks in other markets…

Vancouver: Sales surged in January, up 36% year/year. “It’s hard to believe that sales figures came in so strong,” said spokesguy Andrew Lis. The average property price was $1.16 million, up 4.2%. Detacheds are a buck ninety-four. “If the January figures are indicative of what the spring market has in store, our forecast may already be off to an overly conservative start. Markets can shift quickly, however, and we’ll watch the February numbers to see if these early signs of strength continue, or whether they’re a blip in the data.”

Calgary: Sales and listings both popped last month. The sales-to-new-listing ratio is 77%, which means sellers are disgustingly in control. Available inventory has dropped to just over 1 month (compare that to 21 months of inventory for new, unsold condos in Toronto). The average detached price of just over $702,000 is up 13% year/year. “Supply challenges have been a persistent problem since last year,” says board economist Anne-Marie Lurie. “This month’s gain in new listings has helped provide options to potential purchasers, supporting sales growth. However, the growth in sales prevented any significant adjustments in supply, keeping conditions tight and supporting further price growth”

Victoria: Another city of surging sales – ahead 22.7% year/year and up 3.6% in a month. “Mortgage rates have levelled out, inventory is slowly creeping back up, and we are no longer in that highly pressurized market of recent years which created complicated and sometimes stressful conditions for buyers and sellers,” says Laurie Lidstone, the local head wizard. The average detached is $1.2 million, up just under 2% from last January.

Kitchener-Waterloo: Average prices jumped 3.2% in the last five weeks, to $762,174. Detached homes at over $911,000 have gained 7.5% since December. Townhouses are also up, but condos have dropped – by more than 8%. Overall, sales grew more than 25% year/year and listings swelled 23.5%. “We are optimistic that this year will have more stability than last,” says board boss Christal Moura. “With the Bank of Canada holding steady at a 5% benchmark interest rate, they recognize the overall economy has slowed down. However, housing is a key metric, and we expect the Bank to maintain a balanced response so long as housing continues with moderate growth in 2024 rather than any dramatic increases.”

Meanwhile the latest Nanos/Bloomberg poll finds a growing number of Canadians (closing in on 40%) now expect home values to rise in the next six months. It’s a big shift from one year ago.

Source: Bloomberg. Nik Nanos Research

So with prices still nuts and unaffordability off the charts, why would this occur – even before any central bank rate-cutting has been executed?

Human nature, mostly. People always want houses. In our society, it’s cultural. And when sales/prices start to increase, folks want property even more. There is also pent-up demand after a year in which the population increased, Mills hit their mid-30s, Gen Zs started entering the market in large numbers, the cost of home loans fell by more than 1% and the central bank stopped increasing rates –  seen as a prelude to cuts.

Will people over-borrow, over-extend, submerge into debt and stretch absurdly to get a house? Yup. Sales may well be less than in the boom times of 2021-2, but it looks like there are enough buyers coming to push prices to a new ceiling. The political crisis will worsen as it becomes clear to everyone that promises to build more houses over the next decade will do diddly to drop prices now or in the future.

So, we stick with recent pronouncements on this pathetic blog. January of 2023 was indeed the recent bottom for prices. And the buyers’ market will end with the new rutting season – which starts next month.

It may be crazy. It may end badly. But here she be.

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