On January 25th, the Bank of Canada (BOC) made its latest rate announcement. The 25-basis point increase was the lowest increase since March. Further good news is that the Governor has said they expect to take a pause on further hikes while they assess the impact that the policy has had on inflation. 

Already, the big banks are factoring in future rate declines in their models. At a recent meeting with RBC, it was relayed to the Kalles team that their 5-year fixed rate has decreased by a quarter percent and may be lowered further, pending additional news out of the BOC. This is very encouraging and should lead to a positive impact on the market.

Certainly, the market is not on fire like it was 12 months ago, but our company’s showing appointments for January have more than doubled from December. We are also seeing more internal examples where Kalles clients are buying properties before they reach market. Even in a traditionally quieter month like January, there are still 100 sales a day across the Board, so homes are transacting, albeit at a slower pace than experienced in Q1 2022. 

I’ll use that as a segue to reflect on a separate challenge. If you give a cursory look at any newspaper today, you’ll see home sales for January are down 44.6% year-over-year. As a reminder, last January was the second busiest on record, and it simply does not make for an ideal comparison. If we look at January 2023 within the context of a 10-year average, sales are down 34%. And, if we remove 2021 and 2022 from the 10-year average, comparing 2023 to more normal markets from the past decade, sales are down a more meaningful 27%. Finally, if you view the market last month against the sales in December 2022, there is no change at all in sales volume.

The same conversation can be had about home valuation. We often use average price as an indicator of value, but more accurately, it is an indicator of the type of home that transacted in a given month. So, where average sales price is down 16.4% year-over-year, it’s important to note that nearly half of all sales last month took place between $600,000 and $1,000,00. A year earlier, that number was closer to 35%. Similarly, only 5.3% of all home sales in January 2023 exceeded $2,000,000. In January 2022, 10.5% of sales were over $2,000,000. 

Really, the best gauge we have for property value is the MLS Home Price Index. It offers a much more accurate and localized depiction of change in value than average sales prices can offer. I would encourage you to speak with a member of our team to review the index so that you are better equipped to understand housing trends in your neighbourhood and housing type of choice. 

In my opinion, the first year-over-year comparison that is going to be relevant for this market will be in April. At that time, we can compare sales volume and pricing data between markets with more similar lending environments. Until then, if you have any questions about market activity, please speak with a member of our sales team or email me directly at mike@hkre.ca. Our sales representatives are here to help you stay informed and up to date in this rapidly changing real estate market.