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Calm Before the Storm?
Posted July 14th, 2023 under market updates.
Is today's market the calm before the storm of a price adjustment? Or just another brief pause in what feel like never-ending price rises?
We are in a most baffling time. On the one hand, we have rising in interest rates, which would normally cool prices. On the other hand, listings have declined from 10,000 at this time in 2022 to only 6,200 today, which normally creates upward pressure.
At the same time, sales have dropped from 4,500 at this time in 2022 to only 3,400 today. Overall, the sales-to-listings ratio, which was around 40% in June and is now at less than 30%. This is an extremely low ratio that normally indicates the market should be strongly tilted toward Buyers, again suggesting downward pressure on prices.
And yet, despite these factors which would normally push prices down, we have actually seen prices hold steady since beginning of June. And if we look as far back as April, they have actually risen by a few thousand dollars.
| Dec 2022 | Apr 2023 | Jul 2023 | |
|---|---|---|---|
| Apartment | $619,500 | $559,700 | $571,000 |
| Townhouse | $797,000 | $710,400 | $731,500 |
| Semi-Detached | $1,067,000 | $945,600 | $990,500 |
| Detached | $1,390,300 | $1,230,600 | $1,272,900 |
I had hoped at the beginning of this year that we were entering a period of gradual price adjustments that would not be too disruptive.
However, the last two months are giving me an eerie feeling of déjè vu, taking me back to the moments just before the crash of 1989/90, when prices continued to rise against all predictions.
That was the precursor of a six-year continuing decline that saw home prices drop from 30-40%, depending on type and area.
Ironically, even if we were to experience a price drop of 30-40% today, that would only take us back to the prices that existed prior to the huge increases of early 2022. Prices would still be ahead of inflation over the last five years.
Want to know more about the state of the market? Just ask me, I'll be happy to help.
