August 29th, 2022 | Market Watch

Fall Market Update

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Historically, August is the slowest month of the year. September, and more specifically, Labour Day, marks the start of the Fall market – the 2nd strongest market after Spring. This year, Real Estate prices peaked in February, after which, we saw a gradual decline in prices, sales volume, sales activity and just overall consumer demeanor as the primary focus for the BoC became (and remains) inflation.

The continuous interest rate hikes, coupled with overly inflated home prices, resulted in a quick turnaround – anywhere from 10-30% depending on location. June to August has been much slower. September, however, is likely going to see an uptick, even if it’s temporary. Here are 3 reasons why:

  1. Fall market will see an influx of inventory (Supply). This increase in supply will result in more transactions. Buyers will compete for homes they love, and the competition will drive prices for those homes up.
  2. Some Buyers may be weary, but other Buyers are eager (Demand). Many Buyers are (and have been) looking actively. They’ve just not found the ‘right home’ – yet. More supply will mean buyers will have more to choose from, and more of those Buyers will find a match in the Fall.
  3. Interest rates are (very) likely to increase in September (the Spark)

Tiff Macklem has made his (and the BoCs) mandate clear – inflation is too high, and we need to get back to the ~2% mark. If the BoC raises rates, mortgage rates will undoubtedly follow (certainly variable rates). Buyers who have secured rates and have a set timeline (i.e. 90 days) to purchase with a lower promised mortgage rate will do so!

So, here’s a summary and quick advice to all you SELLERS and BUYERS:

Tiff Macklem is the governor of the BoC. And, while inflation fell from 8.1% to 7.6% in July – “it remains far too high”. The BoC has one mandate at present = get inflation under control. To do this, they’ll continue to raise their policy interest rate. The policy interest rate is currently set at 2.5%. It is highly likely that September will see an increase of 0.50 to 0.75 and that by early 2023, we’ll be around 3.5-3.75%. Woah!

The market peaked in Jan and Feb and has steadily declined since – in sales volume, and prices. August is historically our slowest month – but September and the Fall Market will likely see an uptick in both activity and prices.

What any SELLER and BUYER should consider at this point is to make decisions based on their own circumstances, while respecting the current state of the economy. This does not mean don’t sell or don’t buy, but it does mean don’t go crazy.

If a SELLER is looking to upgrade – this downturn is largely in their favour. This is simply because the property they’ll upgrade to is most probably more expensive than their current home, and therefore, the 10-20% correction while devaluing their own home will help them on the purchase side.

For example:  

Your home is worth 1.5M, and the home you’re looking to upgrade to is worth 2.5M. Your home has come down by 10% and so has the home you’re looking to upgrade to. So now, your home is worth 150K less, or 1.350M, and the home you’re looking to upgrade to is worth 250K less, or 2.250M. You save more on the purchase vs the loss on your sale – relative to the peak in Jan/Feb. This scenario holds true many times over for many Sellers looking to upgrade.

If you’re a BUYER looking to get into the market – while interest rates are higher, remember, this downturn won’t last forever. If you can afford the home you like, at the rates today (and slightly higher), and you’re comfortable, go for it! Ultimately, you can’t and shouldn’t try to time the market. There’s already been a significant drop, and while there may be more, who cares! The flip side is that the market doesn’t decrease further, but increases instead. Your potential loss is more significant than your potential gain. So, Buyers who don’t own anything, wait if you must, but act if you can.

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