{"id":2146,"date":"2024-10-09T12:40:47","date_gmt":"2024-10-09T16:40:47","guid":{"rendered":"https:\/\/www.caianderson.com\/blog\/?p=2146"},"modified":"2024-10-10T14:17:49","modified_gmt":"2024-10-10T18:17:49","slug":"big-dips-projected-to-come","status":"publish","type":"post","link":"https:\/\/www.caianderson.com\/blog\/2024\/10\/09\/big-dips-projected-to-come\/","title":{"rendered":"Big Drop Coming"},"content":{"rendered":"\n
The Bank of Canada started reducing the benchmark overnight rate in June and has since lowered it by 25 basis points at its July and September meetings, bringing the rate to 4.25% from 5% at the peak of the rate hiking cycle.<\/p>\n\n\n\n
The Bank of Canada anticipates a 50 basis point cut before the end of this year. Projections of the central bank\u2019s policy rate reaching 3.5% this year and before ending the easing cycle next year at 2.75%. <\/p>\n\n\n\n<\/figure>\n\n\n\n\n\n\n\n
Projected Bank of Canada Rate Cuts for Remainder of 2024 and into 2025:<\/h4>\n\n\n\n<\/figure>\n\n\n\n\n\n\n\n
For the first time since 2020, the U.S. cut the federal funds target rate by 0.50% at their last meeting held in September. <\/p>\n\n\n\n<\/figure>\n\n\n\n
Generally, when speaking about rates, Canada follows what the U.S. does. It is encouraging to see the Federal funds target rate decrease for the first time in four years. Yet, despite what the U.S is doing, Canada needs to continue to cut rates. Canadians not only have higher debt loads than Americans but that debt also renews more regularly e.g., mortgage terms in Canada generally do not exceed 5 years while in the U.S. it\u2019s not uncommon to find 30-year mortgages. All of that means that the household debt burden is heavier in Canada.\u00a0\u00a0Since 2005, Canadians have carried more household debts compared to Americans. <\/p>\n\n\n\n<\/figure>\n\n\n\n
Market Snapshot, Fraser Valley, BC. <\/h2>\n\n\n\n
The Fraser Valley real estate market is showing signs of shifting toward a buyer’s market due to sluggish sales and rising inventories. In September, sales fell to 982, down 8% from August and over 10% from the previous year, marking the second-lowest sales volume in a decade. Active inventories reached levels not seen in ten years, with overall inventory rising to 9,045 homes, a 39% increase from last year.<\/p>\n\n\n\n
With three interest rate cuts already and more anticipated, potential buyers are being cautious, waiting for the right moment to enter the market. The current conditions favour buyers, especially in the detached home segment, but stagnant asking prices mean many properties remain unsold for longer periods. The average Days on the market for detached homes is 35; townhomes are 30, and condos take an average of 37 days to sell. <\/p>\n\n\n\n
New listings increased by 21% in September, with 3,352 properties coming onto the market, highlighting a growing supply amidst declining demand.<\/p>\n\n\n\n
Despite strong underlying demand, affordability challenges and the need for some buyers to sell before purchasing contribute to market weakness. REALTORS\u00ae are encouraged to guide clients through these conditions, helping them assess risks and opportunities as the market evolves.<\/p>\n\n\n\n
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Months of Inventory (Absorption rate of Housing) For the Fraser Valley:<\/h4>\n\n\n\n<\/figure>\n\n\n\n
Months of Inventory is used to measure the absorption rate of housing. It is a great tool to use to understand what type of market we are in. Right now, for all property types across the Fraser Valley, we have 9.3 MOI. This is very much in Buyer’s market territory. Last year for all property types at this same time, MOI was 5.9 MOI. The higher the number of months of inventory, the lower the absorption rate of housing is. 1-3 MOI is a Seller’s Market, 4-6 is a Balanced market and 6+ is a Buyer’s market. <\/p>\n\n\n\n
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To shine a light on how sluggish the market has been this year, we can compare it to last year. Sales are down 7.4% and new listings are up nearly 20%.<\/p>\n\n\n\n
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Prices<\/h4>\n\n\n\n
Benchmark prices have also dipped, with the composite Benchmark price falling 1.4% to $978,800. Specifically, single-family homes now average $1,501,100 (down 1.5% from August), townhomes at $834,400 (down 1.4%), and apartments at $545,000 (down 0.2%).<\/p>\n\n\n\n
Going forward, I expect prices to remain quite stable. The next rate announcement is Oct. 23, 2024, however, unless they cut rates by more than 0.25%, it really doesn’t seem to be having an effect on buyer confidence. A 0.25% rate cut amounts to $15 savings for every $100,000 you borrow. <\/p>\n\n\n\n<\/figure>\n\n\n\n\n\n\n\n<\/figure>\n","protected":false},"excerpt":{"rendered":"
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