Interest Rates Rise Yet Again and are Expected to Rise Again in July
On June 7th, the Bank of Canada raised the key interest rate 25 basis points, bringing the key rate to 4.75%. This is the highest key interest rate Canada has seen since 2001. The prime rate now sits at 6.95%. According to the Bank of Canada, our stronger-than-expected economy is the reasoning behind the most recent rate hike. Core inflation remains elevated, unemployment is near record lows, and GDP continues to rise despite the Bank of Canada's aggressive monetary policy. The Bank of Canada paused its interest rate hikes back in January, but were clear about continuing to raise the rate if inflation does not continue to trend downwards. Canada's inflation rate climbed to 4.4% in May, which prompted the most recent rate hike. However, in recent days, the labour market saw a small crack appear. The unemployment rate rose for the first time in nine months, which signals that the interest rate hikes are beginning to take effect. Unemployment stands at 5.2%, up from 5.0% since the beginning of 2023. Analysts are seeing deeper signs of a softening economy with weakness in total employment and a monthly decline in hours worked. It is unclear whether this will be enough to hold off on another interest rate increase come July 12th. The Greater Toronto Area real estate market has proven resilient regardless of the elevated interest rates. Buyer demand has picked up considerably since the winter, and is expected to remain strong throughout the summer. Entry level condos in the downtown core, as well as starter homes in the 905 are seeing the greatest amount of demand with multiple offers and sales typically exceeding list price. Larger higher priced detached homes in the 905 are seeing far less buyer demand, with longer days on market and less offers. The major underlying factor that contributes to the resilient market in the GTA are the low levels of inventory of homes for sale. On the other hand, the rental market in the Greater Toronto Area is the strongest it has ever been. As more prospective buyers are getting priced out of the market as interest rates rise, demand in the rental market continues to increase to unprecedented levels. Multiple offers above list price for rentals is the standard across the Greater Toronto Area, and it is only expected to get worse if the Bank of Canada raises interest rates again in July. Buyers that are sitting on the fence are strongly advised to get into the market sooner rather than later, before interest rates rise again and when competition remains manageable. For those looking for an investment, it may be the right time to buy, as the rental market is extremely hot at the moment. Depending on how large your mortgage is and depending on the individual property, there is potential for a cash flow positive investment. If you want to learn more about how the elevated interest rate affects your real estate goals, click the link below to schedule a call with me. https://calendly.com/davidrizzuto/consultation-call?back=1&month=2023-06
May 2023 Market Update
From a sales perspective, the Greater Toronto Area housing market continued to improve in May 2023. However, the supply of homes available for sale did not keep up with the demand for home ownership. Competition between buyers has increased substantially compared to the same time last year, bringing the average selling price in the GTA to $1,200,000. Despite the recent positive policy direction by the Bank of Canada, housing supply continues to be a major issue that is contributing to unaffordability for buyers. May 2023 saw a 24.7% increase in sales compared to May 2022, but new listings were down 18.7% over the same period. It is clear that the demand for home ownership has increased dramatically in recent months, as homebuyers have recalibrated after many interest rate hikes and are moving back into the market. Strong rent growth combined with record population growth and immigration in the Greater Toronto Area also continues to put upward pressure on home prices. To see how prices have been affected in your area, please click the link below to get access to TRREB's May Market Statistics for all areas in the GTA. The stats are broken down by average sales price, number of homes sold, number of new listings, and average days on market for each property type; detached, semi-detached, townhouses, and condos. https://trreb.ca/files/market-stats/market-watch/mw2305.pdf If you want to know more about what is happening in your specific area, you can book a call with me by clicking the link below. https://calendly.com/davidrizzuto/consultation-call?back=1&month=2023-06
April 2023 Market Update
The GTA housing market continued to tighten in April 2023. On a year-over-year basis, sales were down and new listings were down by more than one-third. Fewer listings relative to sales meant there was more competition between buyers, supporting higher selling prices compared to the beginning of this year. Many buyers have come to terms with higher borrowing costs and are taking advantage of lower selling prices compared to this time last year. The issue moving forward will not be the demand for ownership housing, but rather the ability to meet this demand with adequate supply. The average selling price in the GTA was $1,153,269 in April 2023 – down 7.8 per cent compared to $1,250,704 in April 2022. However, the average selling price in April 2023 has increased compared to March 2023. For a short period of time, higher borrowing costs outweighed the impact of the constrained housing supply in the GTA. Renewed competition between buyers is once again shining the spotlight on the persistent lack of listings and resulting impact on affordability. To see how prices have been affected in your area, please click the link below to get access to TRREB's April Market Statistics for all areas in the GTA. The stats are broken down by average sales price, number of homes sold, number of new listings, and average days on market for each property type; detached, semi-detached, townhouses, and condos. https://trreb.ca/files/market-stats/market-watch/mw2304.pdf If you want to know more about what is happening in your specific area, you can book a call with me by clicking the link below. https://calendly.com/davidrizzuto/consultation-call?back=1&month=2023-05
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