This week the Bank of Canada lowered their overnight rate by .50% to 1.25%. This was, in my opinion, a kneejerk reaction to the potential Covid 19 outbreak that has the potential to super charge our spring real estate market, which has been sitting in a sellers market already for the last 6 months. Coupled with the softening of the stress test effective April 6th we are likely to see prices of entry and mid level housing to rise, perhaps not at the levels seen through the last aggressive market cycle, but stronger growth than I had anticipated before this rate cut.
Bank of Canada Lowers Overnight Rate Target to 1 ¼ Percent - March 4, 2020
by Bank of Canada
The Bank of Canada today lowered its target for the overnight rate by 50 basis points to 1 ¼ percent. The Bank Rate is correspondingly 1 ½ percent and the deposit rate is 1 percent.
While Canada’s economy has been operating close to potential with inflation on target, the COVID-19 virus is a material negative shock to the Canadian and global outlooks, and monetary and fiscal authorities are responding.
Low inventory levels and brisk sales continue to tell the tale of a strong housing market in the region, and we are seeing some indicators of upward pressure on housing prices in the entry level to mid level price ranges.
In January there were a total of 411 sales and 1958 active listings. or a sales to active listings ratio of a hair under 21%. If you've been reading for a while you know that means we're in a seller's market and a seller's market tends to apply upward pressure on prices.
We've talked before about the cycles of real estate in the region and we're heading into the busy spring market. The hot commodities seem to be the condos, townhouses, and single families under 900,000 but as they say, a rising tide floats all ships.
In recent weeks we've started to see some downward pressure on the fixed rate mortgage rates. This seems to be the only factor helping affordability as the measures taken by both the provincial and federal government have done little to improve affordability. Increased inventory will improve affordability. This is basic supply and demand. Hopefully the regulators will see this and make policies to help increase density and inventory levels instead of keeping people out of the market with tools like the stress test.
The trend in 2019 of year over year sales growth continued in December with a 7.2% increase in sales volume from December 2018. Condo sales were up 17.5% and single family home sales grew 13.8%. The sales to active listings ratio for December was 20.6%, right on the threshold of a balanced and seller’s market and strong for what is traditionally the slowest month of the year. Sales of 402 units with 1952 active listings.