As we anticipated in this column last month, housing sales in the Â鶹´«Ã½Ó³»Region slowed in July while inventory, as a result of decreased demand (and more new listings), continued to expand.
Directionally, these changes are mostly in line with the expected seasonal trend; the magnitude of the market adjustments, however, reveal the “macro-ality” in our market -- that is, the outsized influence that inflation (indirectly) and interest rates (more directly) are imposing.
Let’s consider some specific numbers. Home sales across our market dipped by more than 1,000 between June and July, landing at just over 3,700 last month. While sales typically do decline between these two months (by 9 per cent), this year the drop was 22 per cent. In other words, a good number of buyers just ghosted last month, way more than is typical.
On the inventory front, listings rose for the sixth straight month, the first time that’s happened since 2019. Furthermore, while inventory typically remains stagnant into and through the summer months (in fact, contracting by 0.1 per cent between June and July, per the past 10-year average), it rose by more than 3 per cent this past month. This provided a bookend to an interesting trend that emerged through the first half of the year: MLS inventory in the Â鶹´«Ã½Ó³»Region rose more in Q2 (by 23 per cent) than in Q1 (11 per cent) for only the fourth time in almost 35 years (and one of those times was during the first few months of the pandemic).
These changes we’re experiencing are clearly atypical, reflecting less a seasonal cadence and more the tightening vice grip of interest rates: buyers are finding it more expensive (read: difficult) to purchase, and owners are finding it both more expensive to own (thus, some are listing their homes for sale) and more difficult to sell at the price they desire.
To put a finer point on the recent impact of interest rates (and changing prices), it cost $550 per month to borrow $100,000 (at a 4.39 per cent, five-year fixed mortgage rate over a 25-year amortization) at the beginning of this year; as of today, that same loan costs $595—an 8 per cent increase. Compound that by the rising price of homes and the composite benchmark price in the Â鶹´«Ã½Ó³»Region is up 10 per cent from the start of 2023. It’s easy to understand why we’re seeing our housing market evolve the way that it is.
With home sales having sluggishly gotten out of the gate in August while new listings remain elevated compared to last year, we anticipate that our housing market will continue to be driven by macro-ality, i.e. interest rates (and jobs) for the rest of this year and into next.
Ryan Berlin is Vice President, Intelligence, and Senior Economist at Rennie.
