September 5, 2024: August Numbers & Navigating the Rate Decreasing Trend
Sales in the Greater Toronto Region edged up slightly in August from the previous month with 4,975 home sales reported through TRREB’s MLS? System. This volume, however, is still down about 5.3% from a year ago as new listings continue to inch up in the region (up 1.5% from a year ago). The average selling price was down by a 0.8% compared to August 2023 to $1,074,425. August saw a significant increase in a property and a listing's average Days on Market as well which is up 57% and 40% respectively.
According to Storeys.com, "most of August’s transactions were concentrated in the detached home segment, with 2,218 sales recorded (down 1% from last year), compared to 1,417 condo apartment sales (down 11.4%), 872 townhouse sales (down 6.1%), and 427 sales of semi-detached homes (down 3.4%)."
OUR TAKE
In our opinion, a key metric to keep an eye on is the Sales-to-New Listings Ratio, which currently sits at 40%—firmly placing the market in Buyers' Market territory. For context, once this ratio crosses the 55-60% threshold, we will technically start transitioning into a Sellers' Market.
It’s important to note that as inventory levels eventually decline due to price adjustments where warranted and anticipated interest rate cuts, more buyers are likely to re-enter the market. This could tighten the ratio and shift market dynamics.
The chart below illustrates the state of different Canadian provinces as of June 2024, categorizing them as either Buyers' Markets, Sellers' Markets, or Balanced Markets, providing a clearer picture of the regional market trends.
Source, Wowa and Vine Group.
Will This Rate Cut Kickstart Home Buying?
The Bank of Canada (BoC) continues on its path to ease the monetary policy with a 3rd 25 basis points rate cut in a row on September 4. As of today, the overnight rate is sitting at 4.25%. “As inflation gets closer to the target, we want to see economic growth pick up to absorb the slack in the economy, so inflation returns sustainability to the 2% target,” BoC Governor Tiff Macklem said in his remarks.
According to Phil Soper, CEO of Royal LePage, “This fall, we can expect more cautious Canadians to take the plunge, while those willing to take on the risk might hold out for further rate cuts"
OUR TAKE
At this point, all indications suggest that we’re likely to see further rate cuts in the remaining two Bank of Canada (BoC) announcements for this year—scheduled for October 23 and December 11—which could bring the overnight rate down to 3.75%.
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In light of these anticipated cuts, now is the ideal time for consumers to engage in detailed discussions with their financial institutions and advisors to explore how to best structure their mortgage financing, whether for existing mortgages or future purchases. According to Vine Group, a leading mortgage advisory firm, depending on individual needs, there are various strategies beyond the traditional fixed versus variable rate approach that could offer optimal solutions. Two strategies worth considering in a rate-cutting environment are the “Hedge” and “Cascade” strategies, which offer flexible options to better manage market conditions.
For those looking to navigate today’s market, consulting with a trusted mortgage advisor will provide valuable insights on the best options for your specific situation.
Source: Vine Group
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