You may have already heard that the Bank of Canada raised its benchmark interest rate by 0.5 per cent point to 4.25 per cent this morning. The central bank also signalled in a statement accompanying the decision that a pause in rate hikes could be coming. The prime rate is 6.45%.
The Bank of Canada’s key interest rate now sits at its highest level since 2008. The bank said in its statement Wednesday that it will be watching how interest rates are working to slow demand, how global supply challenges are resolving and whether inflation and expectations around rising prices are cooling to gauge the need for further rate hikes. The language used was in a more neutral, wait and see approach and a clear suggesting the bank may be getting ready to stand on the sidelines for a while.
November home sale and listing totals were below the region’s long term averages. The sales-to-active listings ratio for November 2022 is 17.6 per cent. The ratio is 13.2 per cent for detached homes, 19.7 per cent for townhomes, and 20.8 per cent for apartments. Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.
Despite the current market’s low inventory levels, there are still homes available for those looking to buy. The days a typical home is listed on the market may increase as fewer buyers qualify for a mortgage, and it also takes more time to find a buyer who qualifies. I predict that the housing inventory will continue to grow as affordability becomes more challenged.