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Guelph's Market Data Revealed!

Hey, welcome to another Market Update. My name is Steve Zahnd from The Zahnd Team Real Estate Advisors. Today is May the 4th, so May the 4th be with you. Alright, let's do a couple of things today. We're going to do a brief macroeconomic overview and how that affects the real estate market. We're going to do a Q1-2023 summary and compare that to Q4-2022. And we're going to wrap up the month of April as well and show you the month-over-month trends. So that's essentially what we're going to be covering today, so sit back, relax, and enjoy the market update.

Alright, so now let's do a macroeconomic overview. And we're going to kick off with a couple of key dates and numbers. The first thing we will talk about is when the Bank of Canada is meeting next for its key policy rate discussion, that will happen on June 7th. The last two times the banks came together, they held the key policy rate at 4.5%. So essentially, what a big bank does is they add interest rate points to that key policy rate. So BMO, RBC, Scotia Bank, etc., CIBC, they will add interest rates to that key policy rate. And right now their prime rate is 6.7%, meaning they're adding about 2.2% to the key policy rate.

Why is this important? Well, inflation, if it keeps going down and the economy keeps softening, you can see an interest rate coming in Q3 or Q4 of 2023. However, the banks in the US and in Canada are saying there's never going to be a rate cut in 2023, don't even think about it. But they have to say that because they can't unanchor inflation expectations. If people, the consumers, start thinking that the Bank of Canada and the US Fed will drop rates, that will give them the confidence to start purchasing again and borrowing money because they feel like interest rates will come down. And that's going to completely reverse all of the fighting they've done against inflation so far.

So no matter what they have to tell the public, don't worry, guys, we're not going to lower rates because we're not going to do that potentially until Q1 or Q2 of 2024. But if we enter into economic softening to a point where the economy is really starting to suffer, you're likely going to see an interest rate cut. So if they start cutting those rates, for example, they go from 4.5% down to 4, that prime rate is going to at least fall by half a percent. So that's how that all works out. Next, I want to cover the actual inflation numbers by Canada and the Canadian economy.

 In June of 2022, we were at 8.1%. And as you can see, we've fallen all the way down to 4.3% right now. According to the legend, this gray area is the Bank of Canada's target zone of inflation. So essentially, they want inflation between 3% and 1%. And we're finally getting pretty close, and we're 1.3% away to start entering that zone, that key target range for the Bank of Canada. So that is a positive sign. And with crude oil falling, with inflation potentially falling even more, it will start giving The Bank of Canada room to cut rates if the economy starts to really suffer.

 Now, what could trigger that? Again, the thing that we're watching the most right now is the fuel price because if it starts to go up, that will impact the inflation numbers. So what happens is, as fuel prices go up and people start paying more and more money, what ends up happening is the cost to produce things goes up. And once that cost to produce things goes up, companies pass that along to the consumers. And as they pass that along to the consumers, they will demand higher wages. Well, if the economy's softening, they might be able to get higher wages, but what's going to happen is they're going to cut jobs to make up for those higher wages. So again, it's a very fine balance. You don't want wages to go up too fast because then the employers are going to cut jobs. If wages go up too slowly, then people aren't able to pay for the products and services they're trying to purchase.

So now let's take a look at the month of April, let's take a look at the month-over-month numbers. Now, these are big numbers; these are important numbers, so take a look. These are numbers that you should be looking at every single month. So the first thing we want to talk about is the inventory levels. So the first thing we're going to look at is April versus the last five years, and we can see that in the last five years, we're at a 1.56% inventory to active listings ratio. This tells us that 1.56% of the inventory on the market right now is selling. So if you look at April, we're sitting at 0.67%, meaning that the inventory is still very low.

What's really cool is, if you look at April 2023 versus April 2018, 2019, 2020, 2021, and 2022, you'll notice that we are sitting at a lot lower of an inventory to active listings ratio. So again, this is all going to be relative to what you want to do with your property, where you want to sell, and what you're trying to sell. So there's a lot more information in here. I can give you guys this if you want; just let me know, and I can send you the full breakdown of April 2023, and even January all the way through April, if you guys are interested.

So the next thing I want to talk about is the pace of new listings, how many people are actually listing their property for sale, and how many people are actually going out there and buying. So let's take a look at the pace of new listings, and let's take a look at April's versus the last five years. So if you look at the last five years, you'll notice that we're about 15,000 new listings. If you look at this April, we're looking at about 12,000 new listings. So it looks like not that many people are listing their property for sale. So that tells us there's not much supply in the marketplace right there.

 And now, if you look at the pace of sales, the number of people actually going out there and buying, if you look at the last five years, we're about 9,500. If you take a look at this April, we're looking at about 9,700. So it's really close, it's really tight. The other thing that you can take a look at is the month of April versus the previous months, Q4-2022, and it looks like the pace of sales has definitely slowed down a little bit.

So, there you have it. That's a very brief overview of the market update. If you guys want a copy of this breakdown, I can send it to you. Just let me know in the comments, and I will get that out to you. Thank you so much for tuning in, guys. I really appreciate it. As always, I'm trying to educate you guys on the market. My whole goal is to get you guys making really good decisions in the market. Don't forget to hit that like button, if you guys have any questions or any suggestions on any future videos, drop them in the comments. Thank you so much for watching, have a great day, and as always, May the 4th be with you.

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