November Market Update


The market has slowed down a bit, but it feels like a seasonal slowdown, rather than a dead market.  The posted sales in October saw prices move in a downward trend, and the volume was up, at 73 single-family homes sold. November sales have rolled back to a lower volume of 55 homes sold, which is quite a change from Nov 2021, where we saw 98 homes sold. 

We currently have 303 active single-family homes for sale in Nanaimo, compared to November 2018 when we had 313 active homes , and 312 single-family homes for sale in 2015. The market has an adequate number of homes leading into the winter months. As we get closer to the New Year, that number will fall and that will lead to a demand for homes to buy in early 2023. 

With all the talk of a looming recession, Goldman Sachs has some positive news for Canada, with the headline reading "Inflation will fall swiftly next year and Canada will narrowly avoid a recession, Goldman Sachs says in a new - and overall quite upbeat - outlook for the country in 2023."

Here are some highlights of the report:

“Inflation appears to be making genuine progress, and the housing market – the largest vulnerability – is making a controlled descent. We expect the BoC to achieve a soft (enough) landing in 2023.”

“We expect below-trend +0.7% Q4/Q4 growth in 2023 and think Canada will narrowly avoid a recession because growth momentum is stronger than it appeared a few months ago, the negative impulses from financial conditions and real income growth have likely bottomed, excess savings can cushion negative housing wealth effects, and structural demand should support residential investment. If there is a recession, it would most likely be mild.”

“We are also confident that recent improvements in inflation will be sustained and forecast 2.8% year-over-year headline inflation in December 2023. We expect falling house prices to weigh on shelter inflation and for sequential core goods inflation to remain soft. In fact, we expect sequential ex. food, energy, and mortgage interest cost inflation to be below 2% by next summer. Further, we think that both wage-sensitive services and goods inflation would need to materially surprise for sequential core inflation to be above 3% at this point.”

“As a result, we believe the BoC will stop hiking soon. We expect another 50bp hike in December as growth is holding up, BoC-preferred core inflation measures edged up in October, and the BoC likely wants to see more labor market rebalancing. We expect a final 25bp hike in January for a 4½% terminal rate but see a high risk that the cycle ends in December even if the BoC hikes 50bp then.”

“We do not expect any BoC cuts next year. Even in a resilient growth environment, the market may continue to price cuts as underlying sequential inflation pressures weaken. We think the BoC will look through this as growth should be picking up and some negative inflation impulses should be fading at this point, but the risk of a cut is higher than in other G10 economies.”

“The main risk to our soft landing forecast is a more severe housing downturn. However, we are not too worried about this risk yet because sequential house price declines are getting smaller, strong demand from high population growth should absorb new constructions, and the risk of mortgage delinquencies is low. We now expect an 18% peak-to-trough decline in house prices because downward momentum remains strong, mortgage rates have risen sharply and valuations remain stretched, and because the large number of houses under construction should boost supply next year. That said, the level of house prices should remain above its pre-pandemic trend at the end of next year because of high inflation, elevated nominal wage growth, and because housing supply will still not be loose by historical standards even after accounting for the better supply outlook.”"

The mortgage rates do affect home buyers directly, but most homeowners that bought prior to 2020 have quite a bit if equity as prices are still up 30%+ since that date, we are only seeing a real slowdown in entry-level priced homes, as this buyer typically have a lower downpayment and rates have pushed mortgage to be more than rent. The Bank of Canada rate will probably have one more bump later this year, or early 2023, and then hold steady until the end of 2023. At this point we should see rates come down. 

If you need any information or would like clarification on any of these comments, please reach out anytime. We look forward to hearing from you.
Kristin and Shawn 250-668-9565

Post a Comment