AUGUST 2023
RARE MARKET REPORT
By DANIEL FOCH
Director of Economic Research
You're (not) Richer Than You Think
In August, all price metrics experienced a decline, and although some seasonal improvement is expected in September,
underlying prices are likely to continue their descent unless the market balance strengthens.
HOME SALES
- This year marks the slowest summer market we’ve seen in the last 5 years, comparably slow to last year, when prices were in freefall.
- With sales to new listings ratio in decline, it’s not long until we find ourselves with a buyer’s market, if we haven’t already.
INTEREST RATES
- The Bank of Canada elected to hold interest rates, but this means very little for buyers, as the Canada 5yr bond yield jumped up during the Bank’s rate announcement.
- The 5YR bond yield is the primary pricing mechanism for 5-year fixed rate mortgages, which 75% of buyers prefer to variable rates in the current market.
- Many are quick to assume that the fall market will be strong like this year’s spring market because rates are “paused” again. The distinct difference is that fixed rates are 100bps higher than they were in Q1.
- The Bank of Canada is really only gaming the supply side of the equation by squeezing existing owners, since buyers depend on the bond yield.
HOUSE PRICES
- The market has been quickly trying to erase the price gains of this year’s hot spring market. The market has technically washed 2 years of price volatility away, with August 2023 house prices coming in nearly identical to August 2022 and 2021.
- House prices have fallen for the 3rd consecutive month, and have outpaced their typical downward summer seasonality, which typically represents about a 2-4% drop from May to August.
