We are almost near the end of 2023 and a lot of people are trying to make predictions in the real estate market. The question you must ask yourself is how the will the interest rate increases will further affect the economy. Will we have a hard landing, which means a severe recession or a soft landing, a slowing economy without going into a recession. Another thing to worry about is what is going on in the U.S. Their economy seems to be moving along as it grew at a healthy 5.2% from July to September. If the U.S. economy continues to grow at its current pace, we could get another rate increase from the Federal Reserve. However, according to Benjaman Tal, CIBC Economist, the U.S. economy will slowdown sharply in the last quarter of 2023.

Here are some data on the U.S. economy from BNN’s article Nov 29, 2023 – Author Paul Wiseman:

• Consumer spending rose 3.6% from July to September
• Private spending rose 10.5% - this includes housing investment rising 6.2%

Recently the U.S. economy added 199,000 jobs, not bad. The good news is job growth is slowing from the over 200,000 averages from the previous quarter. Obviously, this is something that the Fed wants to see because it indicates that the previous rate increases are working.

So how does the U.S. economy affect Canada? If the Fed raises rates, the Bank of Canada may have to follow suit to prevent import inflation. We buy a lot of goods from the U.S. so if the U.S. raise their rates, their dollar may appreciate in relation to the Canadian dollar. This means it will cost us more to buy American goods because we will lose purchasing power.

The Canadian economy is showing signs of slowing down. Growth has deteriorated and unemployment is rising. According to the Bank of Canada, the Canadian economy is no longer “overheated”. However, the Bank of Canada is in no hurry to lower rates despite what David Rosenburg, Head of Rosenburg Research, said the current levels of interest rates are not “sustainable”. In my previous blog article, I said rates will not go down next year even though experts think it will start to drop in the second half of 2024. My feelings are the Bank of Canada will exercise caution when deciding to lower rates because they want to make sure inflationary pressures are beaten. This was expressed in their last announcement.

How does this translate into the real estate market? Currently I see market prices are showing signs of weakening. I noticed in some neighbourhoods sellers are not getting what they are asking for. Therefore, I still see a buyer’s market and a slowdown in activity to continue into the first quarter of 2024. I do not see a market crash because nothing has changed. We still have a housing shortage, strong immigration, and a decent economy. Time will tell how the real estate market will unfold next year. Right now, I see a good opportunity for buyers because they will have more control with their offers. Thinking of buying or selling a home, call or dm me. Happy Holidays!!