August 2023 Market Stats

In this article, we'll delve into the August 2023 real estate market statistics and explore the factors that influenced these trends. From increased borrowing expenses to ongoing economic uncertainty and decisions made by the Bank of Canada, we'll dissect the data to gain a better understanding of what's happening in the housing market. Let's start by examining the key highlights.

Home Sales Decline in August 2023

Increased borrowing expenses, ongoing economic uncertainty, decisions made by the Bank of Canada, and limited listing availability led to a decline in home sales in August 2023 when compared to the same month in 2022. During this period, the average selling price remained relatively stable. When considering monthly adjustments for seasonal factors, both sales and the average price experienced slight declines

Greater Toronto Area Statistics

In August 2023, REALTORS® in the Greater Toronto Area recorded 5,294 sales, marking a 5.2 percent decrease from August 2022. However, there was a positive development in new listings, which saw a 16.2 percent year-over-year increase, offering some relief in terms of supply. Nonetheless, when looking at year-to-date listings, there remains a significant decrease compared to the same period in the previous year. On a seasonally adjusted basis, sales showed a marginal one percent month-over-month decline when compared to July 2023, while new listings experienced a slight 1.3 percent increase compared to July.

Stability in Average Selling Prices

"During the summer, we witnessed more balanced market conditions compared to the tighter spring market. Consequently, selling prices remained relatively stable, hovering around last year's levels and showing a slight dip compared to July. The increase in interest rates, which resumed in May after a pause in the winter and early spring, necessitated adjustments from many buyers to meet higher monthly payment requirements. Notably, not all sellers chose to accept prices lower than their expectations, leading to a reduction in the number of sales," explained TRREB Chief Market Analyst Jason Mercer.

In terms of statistics, the MLS® Home Price Index Composite benchmark for August 2023 demonstrated a year-over-year increase of 2.5 percent. Similarly, the average selling price experienced an uptick, albeit a modest one, of less than one percent, reaching $1,082,496 over the same period. On a month-over-month, seasonally adjusted basis, the MLS® HPI Composite benchmark remained largely unchanged, while the average price declined by 1.6 percent.

Impact of Interest Rates on Affordability

"As higher interest rates have unquestionably affected affordability, the anticipation of increased taxes will additionally strain households' financial positions, particularly younger buyers who may have limited savings. As the City of Toronto deliberates raising the municipal land transfer tax (MLTT) rate for properties exceeding $3 million as a source of revenue, it should also contemplate offering support to first-time homebuyers grappling with the challenge of entering the market. Adjusting the tax rebate threshold to align with today's elevated home prices could be a viable solution," suggested TRREB CEO John DiMichele.

Tactics and Trends in Home Listings

On a side note - Over the past month, We’ve observed an increasing number of homes listed for sale at notably aggressive prices. In certain instances, sellers opt to list their homes with artificially low asking prices as a tactic to draw in multiple buyer offers. However, when the offer date arrives and they receive multiple offers, the sellers often reject all of them because none meet their price expectations. Subsequently, these sellers relist their homes at the desired price, resulting in their properties languishing on the market for weeks as buyers are unwilling to meet those price demands.

While some sellers are gradually reducing their asking prices, others are taking their homes off the market temporarily, with plans to relist them in September. Although this is a common approach among real estate agents during the summer months when buyer activity typically slows, it remains intriguing to see how effective this strategy will be this year, given potential shifts in the market beyond the usual seasonal patterns.

The Unique Challenges of 2023

The uniqueness of this year stems from a changing market influenced by today's significantly higher interest rates. Some buyers are hitting the pause button because they find it increasingly challenging to afford a home at the current interest rates, especially when undergoing stress testing for a mortgage at around 8%.

Source: Market Watch

For the latest updates and in-depth analysis of real estate trends, stay tuned to Market Watch.

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The State of the Canadian Economy in Q2 2023

In the latest data released by Statistics Canada (StatCan) this morning, the Canadian economy experienced stagnation during the second quarter of the year.

Key Economic Figures for Q2 2023

StatCan reports that the Canadian economy contracted by an annualized rate of 0.2% in Q2 2023, a figure significantly lower than the Bank of Canada's earlier prediction of 1.5% growth. Additionally, StatCan revised the growth rate for the first quarter, reducing it to an annualized rate of 2.6% from the previously reported 3.1%.

Factors Contributing to Second-Quarter Weakness

A significant contributing factor to this weakness was a 0.2% decline in output in June.

Impact of High Interest Rates and Housing Prices

As expected, given the prevailing high interest rates and housing prices, investment in the housing sector continued to decline in the second quarter, primarily due to reduced new construction activity.

Consumer Spending and Its Trends

Consumer spending showed a modest increase of 0.2%, but this was the smallest uptick since the pandemic lockdowns in Q2 2021. Furthermore, the growth in real household spending slowed to 0.1% in Q2, compared to 1.2% in the first quarter, reflecting the significant impact of inflation and higher borrowing costs.

Other Contributing Factors: Inventory and Exports

The data indicates that the second-quarter weakness can also be attributed to reduced inventory accumulation and a slower pace of growth in exports. Canada's exports of goods and services only increased by 0.1% in Q2, compared to a more substantial 2.5% increase in the first quarter.

Stability in July's GDP and the Rise in Inflation

Preliminary estimates suggest that the GDP for July remained relatively stable. In August, the country's inflation rate ticked higher as mortgage costs continued to rise for the fifth consecutive month, marking the most significant increase on record.

Anticipation for the Bank of Canada's Decision

Many Canadians are eagerly awaiting the Bank of Canada's (BoC) upcoming interest rate decision next week, especially after the BoC raised its key interest rate target by a quarter of a percentage point to 5% in July.

Impact of Higher Interest Rates and RBC's Insights

These latest statistics reveal that the effects of higher interest rates are beginning to have an impact, resulting in a cooling economy with reduced consumer spending – precisely the intended outcome of monetary policy. In response to the latest economic data released this morning, RBC Economics, in their Daily Economic Update, has indicated that these numbers are likely to strengthen the prevailing expectations that the Bank of Canada (BoC) will abstain from implementing another interest rate hike.

Analyzing RBC Economics' Perspective

The commentary in the update notes that the minor decline in the second quarter is not entirely unexpected, as previous early estimates of GDP have exhibited a tendency to be revised. Furthermore, there have been indications suggesting that the obstacles to economic growth resulting from elevated interest rates have been quietly accumulating beneath the surface.

The Path Forward for Interest Rates

RBC recognizes that the central bank is unlikely to overly emphasize a single data point and acknowledges that inflation remains persistently above the targeted levels. Nonetheless, a cooling economy may provide some relief for borrowers. The update contends that there is accumulating evidence that the delayed consequences of earlier interest rate hikes are starting to exert a more pronounced impact in moderating both GDP growth and labor markets. Consequently, this should lead to a gradual slowdown in inflationary pressures. The update further posits that policymakers will want to maintain the option of resuming rate hikes if necessary. However, if the unemployment rate continues to rise, as anticipated, a resumption of rate hikes may not be required.