I’ll start off by saying that I am not breaking any news by stating that the market has slowed significantly in recent days. We can blame interest rates, but the reality is that this same slowdown happens every December, and January. The combination of the holidays and the start of winter weather means people are choosing to relax, enjoy the season, and maybe do a little hibernating.
However, with the holiday season upon us, I wanted to shed some much-needed positive light on what the market looks like going into the new year.
The news has bombarded us with statements like “lowest sales in over a decade,” and “when will the crash happen?” It’s not hard to see why people might have a negatively-skewed view of the market today. But does the data actually support this?
To be frank, the data tells a much less dramatic story. In Waterloo Region, we saw 12 less sales overall in November than the previous year. Considering we typically sell between 400 and 500 properties in the month, a difference of 12 may not be quite as extreme as the media would have us believe. We’ve consistently maintained both number of sales as well as price point, and if anything, this points to how resilient our local market has been over the past 5 months.
Inflation and interest rates give us a little more light at the end of the tunnel. For the third time in a row, the Bank of Canada held its overnight rate at 5%. That’s positive news, but even more so when we take a long-term look at what it means.
A popular speculation is that the Bank of Canada will lower their rate a lot earlier in 2024 than has been anticipated. We have already seen some banks lowering their rates as Bond yields fall. This is crucial for getting buyer confidence back, which is a key component to a healthy market. In April 2023, when the Bank of Canada announced a hold in interest rate increases, the public was quick to jump back into the market however there is now a definite “fool me once” mentality. People are wearier and therefore we will need to see a drop from the Bank of Canada, hopefully in early 2024, to regain that confidence.
Inventory in the meantime has been building. In the past few months, we have seen more properties listed, both for sale and for rent, than we have seen in a very long time. While that statement could scare some people, I believe it is a sign of a healthier market to come. Activity is a good thing. Once the Bank of Canada lowers their rate, we will need said increased inventory to maintain the market and avoid the uber competitive seller’s market that we saw in the past.
With that being said, right now, all signs are pointing to the idea that a busier spring market may be ahead of us in 2024. Combine that with the expected interest rate cuts in 2024, and we have a very positive outlook for the 2024 real estate market in Waterloo Region.
Happy Holidays from all of us at Chestnut Park West!