We’ve finally rounded out the year, and taken a welcome step into 2023. What a year it has been as well. It seems we went from record highs, to record lows in such a short space of time. So let’s recap the year a little and then we can break down December of 2022.
At the forefront of discussion for last year is the Bank of Canada. Out of the Eight(8) announcements throughout the year, they chose to increase rates Seven(7) times!! That’s a whopping amount, and the fastest rate hike in such a short amount of time. It’s easy to forget the speed in these rate hikes played a huge factor, not just the hikes themselves. Essentially giving people no time at all to adjust to higher payments. So what did that translate to in the market?
- 34% Decrease in sales vs 2021
- 6.6% Decrease in sales vs. 2020
- 13.5% Decrease in listings vs 2021
- 0.8% decrease in listings vs 2020
Pretty significant drops overall, and it’s not surprising. The low inventory has been a key talking point across the industry, social media, and news outlets for a while now. This is our first glance of what happened over the full year. 2023 remains another challenge, as we had a very busy first quarter or so in 2022, which somewhat tilted the skew of last year. We head into this new year with high interest rates abound, and the hope of stabilisation at best when it comes to rates.
So how did December look, and what has that set us up for in January of 2023?
Let’s start off with some shocking numbers shall we? Sales are down 51.8% year-over-year, with new listings down 38%. Now yes these are some big numbers, and I’m not saying they don’t matter. However when the market was searing hot and we were telling you to relax as we are comparing normal numbers, to a Covid/Low Rates/Easy Access to credit induced market, the same applies in reverse here. We’re all aware at this point the market is shifting, has shifted, and probably has more to go. Looking TOO much into these numbers can put you on the wrong path.
A good follow up to this is the Sale- to-Active Listings ratio. It’s sitting at 17.5% (for all properties). This is balanced market territory. You’d be forgiven for looking at home sale numbers, then this ratio and being confused. It’s important to remember these numbers are delayed as well. Right now we are discussing December numbers, being almost half way through January.
You’ll see a lot of the same repeated story in these numbers. Real Estate works in longer cycles and cycles do not just come and go, that goes against its purpose. As for 2023, it actually seems to have started off more positively than the December numbers above show.There is significant sentiment in the industry that activity has increased. More listings have certainly come to market (more on that when the official numbers are released). So the question then becomes why? With the above numbers, what are we seeing these changes for?
That can be answered by a couple of points. It should also be noted these are the first sign of trends we are seeing, and it remains to be seen if they will continue and to what extent:
- Talks on interest rates have mellowed. Even though rates have not come down yet, the previous talk from BOC was very aggressive, that seems to have simmered down. This gives the market confidence.
- December is always quiet. Christmas, New Year etc. People put the search or the listing of their home on pause due to the holidays. It’s understandable that when this time has passed those who delayed want to press the go button!
- Respect the cycle. Real Estate Markets do work on cycles. In fact, the cooling of the market started to happen naturally before any of these interest rate changes etc were put in place. January typically always sees more activity than December, even in slower markets.
Please don’t forget where we are aiming for as well. A rebound in the market does not mean prices are going up again. Property has seen a significant decrease (depending on type/area etc) in price. We want to balance things out and come to a smooth point. In my opinion, I can see that balancing meaning a slowing of price decreases. That’s not to be confused with NO MORE price decreases. I still think the market has some adjusting to do, just at a slower rate.
As always, thanks for reading along! You can check out the video version of this update here! Feel free to send any comments or questions you may have our way.