Mary Carey

Canadas federal Finance Minister tabled Budget 2024 on April 16th. Gross new spending measures were substantially higher than signalled ahead of budget day, with equally substantial taxation measures partially offsetting the net impact. The budget adds a near-term boost to growth with major new spending, but it introduces another twist as it gives with one hand while taking with the other. While net new spending amounts to 0.4% f GDP over the next two years, gross outlays to Canadians adds up to a much more substantial $22.5 bn (0.7%), while syphoning off $9.5 bn from drivers of growth. This is additive to the $44 bn incremental spending provinces have announced in recent weeks. The budget clearly makes the Bank of Canadas job more difficult. The soft inflation print released into the budget risks fanning complacency around the risk of a resurgence in inflationary pressure particularly with a housing market rebound waiting in the wings (and more potential buyers on the margin after this budget). New spending is hardly focused. A gross $56.8 bn is spread widely across a range of priorities. The new Housing Plan reflects just 1/6th of new outlays. Others were channeled aheadmilitary spending, AI investments, and pharmacarewhile new pledges were tabled towards Aboriginal investments, community spending, and a new disability benefit among others. New tax measures will yield a $21.9 bn offsetnotably a big increase to the capital gains inclusion rate from one-half to two-thirds for individuals and corporations later this Spring. The net cost of new measures in this budget lands at $34.8 bn over the planning horizon. Near-term economic momentum has provided additional offsets ($29.1 bn), leaving the fiscal path broadly similar to the Fall Update. The FY24 deficit comes in on the mark at $40 bn (1.4% of GDP) and is expected to descend softly to $20 bn (0.6%) by FY29. Debt remains largely on a similar path of modest declines as a share of GDP over the horizon. The fiscal plan could have delivered on critical priorities including the Housing Plan, along with AI and Indigenous spending, while still adhering to its fiscal anchors without resorting to substantial new taxation measures that will dampen confidence and introduce further distortions to Canadas competitive landscape. It wont likely trigger an election, but it is clearly a warm-up lap as Canadians brace for the polls within the next 1218 months. The taps are unlikely to be turned off any time soon. Source: https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.fiscal-policy.fiscal-pulse.federal.federal-budget-analysis-.canadian-federal--2024-25-budget--april-16--2024-.html

The Bank of Canada held its target for the overnight rate at 5%, with the Bank Rate at 5% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening. The Bank expects the global economy to continue growing at a rate of about 3%, with inflation in most advanced economies easing gradually. The US economy has again proven stronger than anticipated, buoyed by resilient consumption and robust business and government spending. US GDP growth is expected to slow in the second half of this year, but remain stronger than forecast in January. The euro area is projected to gradually recover from current weak growth. Global oil prices have moved up, averaging about $5 higher than assumed in the January Monetary Policy Report (MPR). Since January, bond yields have increased but, with narrower corporate credit spreads and sharply higher equity markets, overall financial conditions have eased. The Bank has revised up its forecast for global GDP growth to 2% in 2024 and about 3% in 2025 and 2026. Inflation continues to slow across most advanced economies, although progress will likely be bumpy. Inflation rates are projected to reach central bank targets in 2025. In Canada, economic growth stalled in the second half of last year and the economy moved into excess supply. A broad range of indicators suggest that labour market conditions continue to ease. Employment has been growing more slowly than the working-age population and the unemployment rate has risen gradually, reaching 6.1% in March. There are some recent signs that wage pressures are moderating. Source:https://www.bankofcanada.ca/2024/04/fad-press-release-2024-04-10

Consumers believe inflation has slowed, but their expectations for inflation in the near term have barely changed. Consumers link their perceptions of slowing inflation with their own experiences of price changes for frequently purchased items, such as food and gas. Expectations for long-term inflation have increased, though they remain below their historical average. Relative to last quarter, consumers now think that factors contributing to high inflationparticularly high government spending and elevated home prices and rent costswill take longer to resolve. Canadians continue to feel the negative impacts of high inflation and high interest rates on their budgets, and nearly two-thirds are cutting or postponing spending in response. Although weak, consumer sentiment improved this quarter, with people expecting lower interest rates. As a result, consumers are less pessimistic about the future of the economy and their financial situation, and fewer think they will need to further cut or postpone spending. Improved sentiment is also evident in perceptions of the labour market, which have stabilized after easing over recent quarters. Workers continue to feel positive about the labour market and, with inflation expected to be high, they continue to anticipate stronger-than-average wage growth. Source: https://www.bankofcanada.ca/2024/04/canadian-survey-of-consumer-expectations-first-quarter-of-2024

Central bankers took the stage this week, but it was Canadian economic data that stole the show. A significant improvement in inflation for February and a weak reading on retail sales increased expectations for an earlier cut by the Bank of Canada (BoC). Adding to this was the release of the BoCs March deliberations that confirmed the Bank is preparing to cut rates later this year. While the exact timing of the first rate cut is still uncertain, market pricing has rallied around June/July, matching expectations on timing for other major central banks. The inflation reading this week showed a meaningful deceleration, with the headline measure remaining within the BoC 1% to 3% target band. But the big surprise was the heavy discounting on items like clothing, cell phone /internet plans, and food. For the latter, that was the first contraction in three years (seasonally adjusted)! As Deputy Governor Toni Gravelle said at a speech later in the week, this was very encouraging. What was even more promising was the progress on the BoCs preferred inflation metrics. While these have remained stubbornly high over the last few months, they too have started to ease and now sit just above the 3% band. These metrics are starting to follow other measures of inflation lower, including the Banks old preferred inflation measure, CPIX. This index excludes the eight most volatile inflation items such as mortgage interest costs. Importantly, this measure has now reached the BoCs 2% target. Source: TD Economics https://economics.td.com/ca-weekly-bottom-line

Canadian home prices as measured by the seasonally adjusted Aggregate Composite MLS Home Price Index (HPI) were flat on a month-over-month basis in February 2024, ending a streak of five declines that began last fall, according to the latest data from the Canadian Real Estate Association (CREA). The fact that prices were unchanged from January to February was noteworthy given they had dropped 1.3% from December to January. Considering how stable the seasonally adjusted MLS HPI tends to be, shifts this abrupt are exceedingly rare. There have only been three other times in the last 20 years that have shared a sudden improvement or increase in the month-over-month percentage change from one month to the next of this size; all at various points in the last four years when demand was coming off the sidelines. Its looking like February may end up being the last relatively uneventful month of the year as far as the 2024 housing story goes, said Shaun Cathcart, CREAs Senior Economist. With so much demand having piled up on the sidelines, the story will likely be less about the exact timing of interest rate cuts and more about how many homes come up for sale this year. Home sales activity recorded over Canadian MLS Systems dipped 3.1% between January and February 2024, giving back some of the cumulative 12.7% increase in activity recorded in December 2023 and January 2024. That said, the general trend has been somewhat higher levels of activity over the last three months compared to a quiet fall market in 2023. Source: https://stats.crea.ca/en-CA/

The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening. Global economic growth slowed in the fourth quarter. US GDP growth also slowed but remained surprisingly robust and broad-based, with solid contributions from consumption and exports. Euro area economic growth was flat at the end of the year after contracting in the third quarter. Inflation in the United States and the euro area continued to ease. Bond yields have increased since January while corporate credit spreads have narrowed. Equity markets have risen sharply. Global oil prices are slightly higher than what was assumed in the January Monetary Policy Report (MPR). In Canada, the economy grew in the fourth quarter by more than expected, although the pace remained weak and below potential. Real GDP expanded by 1% after contracting 0.5% in the third quarter. Consumption was up a modest 1%, and final domestic demand contracted with a large decline in business investment. A strong increase in exports boosted growth. Employment continues to grow more slowly than the population, and there are now some signs that wage pressures may be easing. Overall, the data point to an economy in modest excess supply. Source: https://www.bankofcanada.ca/2024/03/fad-press-release-2024-03-06/

The deadline for submitting new or updated applications for the First-Time Home Buyer Incentive is March 21, 2024, at midnight ET. No new approvals will be granted after March 31, 2024. Initially designed to alleviate the burden of monthly mortgage payments for first-time buyers, the program involved the government acquiring partial ownership of a property. Under the program, the government provided a loan of up to 10 percent of the purchase price, which could be put towards a larger down payment, thereby reducing monthly payments. However, homeowners were required to repay the incentive after 25 years or upon selling the property, with the repayment amount adjusted to reflect changes in the propertys value. Source:https://www.cmhc-schl.gc.ca/consumers/home-buying/first-time-home-buyer-incentive

From National Bank of Canada The fourth quarter of 2023 witnessed a second consecutive deterioration for housing affordability in Canada. The degradation was widespread with every single market experiencing an increase in their mortgage payment as a percentage of income (MPPI) due to both higher interest rates and rising home prices. This worsening has practically eliminated recent improvements in affordability and our index at the national level is almost back to its worst affordability since the 1980s. That said, the headline index dissimulates a more worrisome picture. Indeed, the condo sub-index has reached its highest level of unaffordability in at least two decades. In other words, it would take nearly half of pre-tax median household income to service the median condo mortgage. With the condo market typically being the entry point for first-time homebuyers it leaves the latter with few options. While homeownership is becoming untenable, the rental market offers little respite. Our rental affordability index has never been worse. It would take nearly one third of pre-tax household income to pay for the average rent of a two-bedroom condo. The outlook for the coming year is fraught with challenges. While mortgage interest rates are showing signs of waning in the face of expected rate cuts by the central bank, housing demand remains supported by unprecedented population growth. As a result, we expect some upside to prices in 2024. On the rental side, in a recently released report by the CMHC, Canada`s rental market vacancy stumbled to a record low of 1.5% which leaves little room for an improvement in rents. Supply for any segment of the market isn`t expected to pick up anytime soon as building permits in many Canadian cities has plummeted at the end of 2023. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/housing-affordability.pdf

Following a weak second half of 2023, home sales over the last two months are showing signs of recovery, according to the latest data from the Canadian Real Estate Association (CREA). Home sales activity recorded over Canadian MLS Systems rose 3.7% between December 2023 and January 2024, building on the 7.9% month-over-month increase recorded the month prior. While activity is now back on par with 2023s relatively stronger months recorded over the spring and summer, it begins 2024 about 9% below the 10-year average. Sales are up, market conditions have tightened quite a bit, and there has been anecdotal evidence of renewed competition among buyers; however, in areas where sales have shot up most over the last two months, prices are still trending lower. Taken together, these trends suggest a market that is starting to turn a corner but is still working through the weakness of the last two years, said Shaun Cathcart, CREAs Senior Economist. https://stats.crea.ca/en-CA/

The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening. Global economic growth continues to slow, with inflation easing gradually across most economies. While growth in the United States has been stronger than expected, it is anticipated to slow in 2024, with weakening consumer spending and business investment. In the euro area, the economy looks to be in a mild contraction. In China, low consumer confidence and policy uncertainty will likely restrain activity. Meanwhile, oil prices are about $10 per barrel lower than was assumed in the October Monetary Policy Report (MPR). Financial conditions have eased, largely reversing the tightening that occurred last autumn. The Bank now forecasts global GDP growth of 2% in 2024 and 2% in 2025, following 2023s 3% pace. With softer growth this year, inflation rates in most advanced economies are expected to come down slowly, reaching central bank targets in 2025. In Canada, the economy has stalled since the middle of 2023 and growth will likely remain close to zero through the first quarter of 2024. Consumers have pulled back their spending in response to higher prices and interest rates, and business investment has contracted. With weak growth, supply has caught up with demand and the economy now looks to be operating in modest excess supply. Labour market conditions have eased, with job vacancies returning to near pre-pandemic levels and new jobs being created at a slower rate than population growth. However, wages are still rising around 4% to 5%. Source: https://www.bankofcanada.ca/2024/01/fad-press-release-2024-01-24/

Income inequality increased in the third quarter as the gap in the share of disposable income between households in the two highest income quintiles (top 40% of the income distribution) and two lowest income quintiles (bottom 40% of the income distribution) reached 44.9%, up 0.5 percentage points from the third quarter of 2022. The lowest income householdsthose in the bottom 20% of the income distributionwere the only income group to reduce their average disposable income in the third quarter of 2023 relative to the same quarter of 2022 (-1.2%). Gains in average wages and salaries for the lowest income households (+3.0%) were more than offset by reductions in net investment income (-43.4%). While higher interest rates can lead to increased borrowing costs for households, they can also lead to higher yields on saving and investment accounts. The lowest income households are more likely to have a limited capacity to take advantage of these higher returns, as on average they have fewer resources available for saving and investment. Higher interest rates weighed on average disposable income for the lowest income households in the third quarter. Along with a doubling of the Bank of Canadas policy interest rate from 2.5% in July 2022 to 5.0% as of July 2023, net investment income declined for the lowest income households in the third quarter of 2023 relative to a year earlier. The lowest income earners reduced their net investment income as increased interest payments, more than half of which was due to consumer credit, outweighed gains in investment earnings. Source: https://www150.statcan.gc.ca/n1/daily-quotidien/240122/dq240122a-eng.htm?HPA=1

Home sales activity recorded over Canadian MLS Systems rose 8.7% between November and December 2023, putting it on par with some of last years relatively stronger months recorded over the spring and summer. The actual (not seasonally adjusted) number of transactions came in 3.7% above December 2022, the largest year-over-year gain since August. On an annual basis, home sales totalled 443,511 units in 2023, a decline of 11.1% from 2022. It was technically the lowest annual level for national sales activity since 2008; although it was very close to levels recorded in each of the five years following the 2008 financial crisis, as well as the first year the uninsured stress test was implemented in 2018. While December did offer up a bit of a surprise in sales numbers to cap the year, the real test of the markets resilience will be in the spring, said Larry Cerqua, Chair of CREA. There are only a couple of months left until that gets underway. If youre looking to buy or sell a property in the 2024, youll want a game plan, so contact a REALTOR in your area today, continued Cerqua. Was the December bounce in home sales the start of the expected recovery in Canadian housing markets? Probably not just yet, said Shaun Cathcart, CREAs Senior Economist. It was more likely just some of the sellers and buyers that were holding onto unrealistic pricing expectations last fall finally coming together to get deals done before the end of the year. Were still forecasting a recovery in housing demand in 2024, but well have to wait a few more months to get a sense of what that ultimately looks like. Source: https://www.crea.ca/media-hub/news/canadian-home-sales-see-unexpected-surge-to-close-out-2023/

Higher borrowing costs are leaving a permanent mark on the Canadian families who by the end of 2024 would have to budget for a roughly 30% increase in their monthly mortgage payments, on average. On aggregate, mortgage payments growth is forecast to slow next year, remain relatively flat in 2025 but pick up again in 2026, even if Canadian economy falls into a mild recession in 2024. Elevated mortgage payments will create an enduring drag on consumption and broader economic growth. Despite this, a relatively more resilient job market and largely unspent excess deposits should provide enough support for an average Canadian family to manage an increased debt servicing cost. https://economics.td.com/ca-mortgage-tides-canada-households

Summary On a seasonally adjusted basis, home sales dropped 5.6% from September to October, a fourth monthly contraction in a row and the sharpest slowdown in sales since June 2022. On the supply side, new listings decreased 2.3% in October, a first decline in seven months. Active listing increased by 4.6%, a fourth monthly gain in a row. As a result the number of months of inventory (active-listings to sales) increased from 3.7 in September to 4.1 in October and is now roughly back in line with its pre-pandemic level. The market conditions loosened during the month but remained tighter than its historical average in 7 provinces, while market conditions were balanced in B.C. and Manitoba, and looser than average in Ontario. Housing starts rose 4.0K in October to a 4-month high of 274.7K (seasonally adjusted and annualized), a result comfortably above the median economist forecast calling for a 255.0K print. Urban starts advanced 6.1K (to 257.4K) on gains in both the multi-family (+2.1K to 209.9K) and the single-family segment (+4.0K to 47.5K). Starts decreased in Toronto (-13.9K to 44.6K), Montreal (-13.6K to 18.2K), and Calgary (-9.0K to 34.8K), while they increased in Vancouver (+9.0K to 34.8K). The Teranet-National Bank Composite National House Price Index decreased by 0.4% in October after seasonal adjustment. seven of the 11 markets in the composite index were still up during the month: Montreal (+3.7%), Halifax (+1.1%), Winnipeg (+1.0%), Quebec City (+0.9%), Calgary (+0.6%), Victoria (+0.3%) and Hamilton (+0.2%). Conversely, prices were down in Toronto (-1.6%), Edmonton (-1.2%), Vancouver (-1.1%) and Ottawa-Gatineau (-1.1%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening. The global economy continues to slow and inflation has eased further. In the United States, growth has been stronger than expected, led by robust consumer spending, but is likely to weaken in the months ahead as past policy rate increases work their way through the economy. Growth in the euro area has weakened and, combined with lower energy prices, this has reduced inflationary pressures. Oil prices are about $10-per-barrel lower than was assumed in the October Monetary Policy Report (MPR). Financial conditions have also eased, with long-term interest rates unwinding some of the sharp increases seen earlier in the autumn. The US dollar has weakened against most currencies, including Canadas. In Canada, economic growth stalled through the middle quarters of 2023. Real GDP contracted at a rate of 1.1% in the third quarter, following growth of 1.4% in the second quarter. Higher interest rates are clearly restraining spending: consumption growth in the last two quarters was close to zero, and business investment has been volatile but essentially flat over the past year. Exports and inventory adjustment subtracted from GDP growth in the third quarter, while government spending and new home construction provided a boost. The labour market continues to ease: job creation has been slower than labour force growth, job vacancies have declined further, and the unemployment rate has risen modestly. Even so, wages are still rising by 4-5%. Overall, these data and indicators for the fourth quarter suggest the economy is no longer in excess demand.

From National Bank of Canada The third quarter of 2023 witnessed a considerable deterioration for housing affordability in Canada. This degradation follows three consecutive quarters of improvements and deletes nearly two thirds of the progress that had been made so far. The worsening was widespread with every single market experiencing an increase in their mortgage payment as a percentage of income (MPPI). At the national level the deterioration stemmed from a surge in home prices of 4.6%, the largest in 6 quarters and partially erasing the decline over the last year. A rebound in home prices during a period of rising interest rates could initially appear perplexing. That said, a chronic lack of supply in the resale market compounded by record population growth has allowed prices to rise. Also contributing to lessening affordability, mortgage interest rates rose 32 basis points in the quarter, more than eliminating the two prior declines. While still rising income was a partial offset in the third quarter, it did little to assuage the situation. Looking ahead, we see a moribund outlook for affordability. At the very least, a further worsening is in the cards for the last quarter of the year. Mortgage interest rates have steadily trended up in October on the back of rising longer-term interest rates. If interest rates hold at their current level, it would only take a home price increase of 2% in the fourth quarter to surpass the worst level of affordability in a generation. The outlook remains particularly challenging for first-time homebuyers. HIGHLIGHTS: Canadian housing affordability posted a worsening in Q323 following three consecutive improvements. The mortgage payment on a representative home as a percentage of income (MPPI) rose 4.0 points, more than erasing the previous pullback of 1.6-points in Q223. Seasonally adjusted home prices increased 4.6% in Q323 from Q223; the benchmark mortgage rate (5-year term) surged 32 bps, while median household income rose 1.2%. Affordability deteriorated in all of the ten markets covered in Q3. On a sliding scale of markets from worst deterioration to least: Vancouver, Toronto, Victoria, Hamilton, Calgary, Montreal, Quebec, Ottawa-Gatineau, Winnipeg, and Edmonton. Countrywide, affordability worsened 2.5 pp in the condo portion vs. a 4.5 pp degradation in the non-condo segment. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/housing-affordability.pdf

Summary On a seasonally adjusted basis, home sales decreased 1.9% from August to September, a third monthly contraction in a row following the renewed monetary tightening cycle of the Bank of Canada and the surge in long-term interest rates. On the supply side, new listings jumped 6.3% in September, a sixth consecutive monthly increase. Overall, active listing increased by 3.7%, a third monthly gain in a row. As a result the number of months of inventory (active-listings to sales) increased from 3.5 in August to 3.7 in September. This continues to be higher than the trough of 1.7 reached in the pandemic but remains low on a historical basis. The active-listings to sales ratio loosened during the month but remained tighter than its historical average in every province except Ontario, which now indicated a slightly less tight market than the average. Housing starts rose 20.1K in September to a 3-month high of 270.5K (seasonally adjusted and annualized), a result comfortably above the median economist forecast calling for a 240.0K print. At the provincial level, total starts went up in Ontario (+19.3K to 103.6K), Alberta (+8.7K to a seven-and-a-half-year high of 49.1K) and Nova Scotia (+5.1K to 8.1K). Alternatively, declines were recorded in British Columbia (-8.6K to a 7-month low of 40.5K) and Saskatchewan (-2.7K to 3.4K). The Teranet-National Bank Composite National House Price Index rose 0.7% in September after seasonal adjustment. All 11 markets in the composite index were up during the month: Halifax (+1.9%), Ottawa-Gatineau (+1.7%), Victoria (+1.7%), Vancouver (+1.1%) and Calgary (+0. 9%) posted stronger-than-average growth, while Winnipeg (+0.7%) matched the composite index, and Montreal (+0.1%), Hamilton (+0.1%), Edmonton (+0.2%), Toronto (+0.5%) and Quebec City (+0.5%) saw less vigorous increases. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

The Bank of Canada yesterday held its target for the overnight rate at 5%, with the Bank Rate at 5% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening. The global economy is slowing and growth is forecast to moderate further as past increases in policy rates and the recent surge in global bond yields weigh on demand. The Bank projects global GDP growth of 2.9% this year, 2.3% in 2024 and 2.6% in 2025. While this global growth outlook is little changed from the July Monetary Policy Report (MPR), the composition has shifted, with the US economy proving stronger and economic activity in China weaker than expected. Growth in the euro area has slowed further. Inflation has been easing in most economies, as supply bottlenecks resolve and weaker demand relieves price pressures. However, with underlying inflation persisting, central banks continue to be vigilant. Oil prices are higher than was assumed in July, and the war in Israel and Gaza is a new source of geopolitical uncertainty. In Canada, there is growing evidence that past interest rate increases are dampening economic activity and relieving price pressures. Consumption has been subdued, with softer demand for housing, durable goods and many services. Weaker demand and higher borrowing costs are weighing on business investment. The surge in Canadas population is easing labour market pressures in some sectors while adding to housing demand and consumption. In the labour market, recent job gains have been below labour force growth and job vacancies have continued to ease. However, the labour market remains on the tight side and wage pressures persist. Overall, a range of indicators suggest that supply and demand in the economy are now approaching balance. After averaging 1% over the past year, economic growth is expected to continue to be weak for the next year before increasing in late 2024 and through 2025. The near-term weakness in growth reflects both the broadening impact of past increases in interest rates and slower foreign demand. The subsequent pickup is driven by household spending as well as stronger exports and business investment in response to improving foreign demand. Spending by governments contributes materially to growth over the forecast horizon. Overall, the Bank expects the Canadian economy to grow by 1.2% this year, 0.9% in 2024 and 2.5% in 2025. CPI inflation has been volatile in recent months2.8% in June, 4.0% in August, and 3.8% in September. Higher interest rates are moderating inflation in many goods that people buy on credit, and this is spreading to services. Food inflation is easing from very high rates. However, in addition to elevated mortgage interest costs, inflation in rent and other housing costs remains high. Near-term inflation expectations and corporate pricing behaviour are normalizing only gradually, and wages are still growing around 4% to 5%. The Banks preferred measures of core inflation show little downward momentum. In the Banks October projection, CPI inflation is expected to average about 3% through the middle of next year before gradually easing to 2% in 2025. Inflation returns to target about the same time as in the July projection, but the near-term path is higher because of energy prices and ongoing persistence in core inflation. With clearer signs that monetary policy is moderating spending and relieving price pressures, Governing Council decided to hold the policy rate at 5% and to continue to normalize the Banks balance sheet. However, Governing Council is concerned that progress towards price stability is slow and inflationary risks have increased, and is prepared to raise the policy rate further if needed. Governing Council wants to see downward momentum in core inflation, and continues to be focused on the balance between demand and supply in the economy, inflation expectations, wage growth and corporate pricing behaviour. The Bank remains resolute in its commitment to restoring price stability for Canadians. Information note The next scheduled date for announcing the overnight rate target is December 6, 2023. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR on January 24, 2024. https://www.bankofcanada.ca/2023/10/fad-press-release-2023-10-25/

HIGHLIGHTS Total housing starts across the countrys 6 largest census metropolitan areas (CMAs) increased slightly in the first half of 2023. Significant changes were observed for individual dwelling types and CMAs. Notable strength in apartment starts offset declines in all other dwelling types (single-detached, semi-detached and row homes). Apartment starts were concentrated in Toronto and Vancouver. This led to strong growth in total starts in those CMAs, offsetting lower starts in other CMAs, particularly Montral. As a result, in Toronto and Vancouver, housing starts in the first half of 2023 were well above levels observed over the past 5 years. In most other large centres, meanwhile, they were below these levels. Montral tends to build more small and low-rise apartment structures than Toronto and Vancouver. Because of their smaller size, these structures take less time to plan and build. The decline in housing starts in Montral was, therefore, more reflective of the recent deterioration in financial conditions. Elevated rates of apartment construction are not likely to be sustainable due to various challenges facing developers. These challenges include higher construction costs and higher interest rates. Significant increases in construction productivity are critical to addressing the countrys affordability and housing supply crisis over the longer term. The level of new construction activity remains too low. cmhc-schl.gc.ca

With renewed activity in the residential real estate market in recent months, the seasonally adjusted Teranet-National Bank composite index rose by 1.6% from July to August, the fourth consecutive monthly increase. As a result, the composite index is now just 2.1% below its all-time peak of April 2022, following a record cumulative decline of 8.6% over one year. The widespread nature of Augusts rise is also noteworthy, as this is the first time since March 2021 that monthly increases have been observed in all the CMAs included in the composite index. However, there is reason to believe that this strength is likely to be short-lived, given the slowdown observed in the resale market over the last two months in connection with the renewal of the Bank of Canadas monetary tightening cycle. Although price declines are expected in the coming months due to the growing impact of interest rates and the less favourable economic context, property price decreases should remain limited thanks to the support of historical demographic growth and the persistent lack of housing supply. HIGHLIGHTS: The Teranet National Bank Composite National House Price IndexTM rose by 1.6% in August after seasonal adjustment. After seasonal adjustment, all 11 markets in the composite index were up during the month: Calgary (+3.5%), Vancouver (+2.8%) and Hamilton (+2.4%) reported stronger-than-average growth, while growth Halifax (+1.4%), Quebec City (+1.3%), Toronto (+1.2%), Ottawa-Gatineau (+1.1%), Edmonton (+1.1%), Winnipeg (+0.7%), Montreal (+0.7%) and Victoria (+0.2%) were less vigorous. From August 2022 to August 2023, the composite index rose by 1.1%, the first annual increase in nine months. Growth was seen in Calgary (+6.2%), Halifax (+5.1%), Quebec City (+3.6%), Vancouver (+2.7%) and Toronto (+1.4%), while prices were still down in Edmonton (-0.3%), Victoria (-1.5%), Montreal (-1.7%), Hamilton (-1.7%), Ottawa-Gatineau (-2.3%) and Winnipeg (-3.6%) https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-teranet.pdf

Summary On a seasonally adjusted basis, home sales decreased 4.1% from July to August, a second monthly contraction in a row following the renewed monetary tightening cycle of the Bank of Canada. On the supply side, new listings increased 0.8% in August, a fifth consecutive monthly increase. Another sign of a loss of momentum in the real estate market is the proportion of listings cancelled during the month, which continues to rise, a sign that some sellers are discouraged by recent interest rate hikes. Overall, active listing increased by 1.9%, a third monthly gain in a row. As a result the number of months of inventory (active-listings to sales) increased from 3.2 in July to 3.4 in August. This continues to be higher than the trough of 1.7 reached in the pandemic but remains low on a historical basis. The active-listings to sales ratio is still tighter than its historical average in every province. Housing starts in Canada decreased slightly in August (-2.4K to 252.8K, seasonally adjusted and annualized), beating consensus expectations calling for a 250K print. Decreases in housing starts were seen in Ontario (-14.9K to 84.6K), Manitoba (-3.2K to 6.8K), and Nova Scotia (-2.5 to 3.2K). Meanwhile, increases were registered in Quebec (+14.8K to 53.1K), New Brunswick (+2.1 to 7.1K), Alberta (+1.1K to 39.6K), and Saskatchewan (+0.2K to 5.5), while starts in Newfoundland (1.1K), P.E.I. (1.2K), and B.C. (50.7K) remained unchanged. The Teranet-National Bank Composite National House Price Index rose by 1.6% in August after seasonal adjustment. All 11 markets in the composite index were up during the month: Calgary (+3.5%), Vancouver (+2.8%) and Hamilton (+2. 4%) reported stronger-than-average growth, while Halifax (+1.4%), Quebec City (+1.3%), Toronto (+1.2%), Ottawa-Gatineau (+1.1%), Edmonton (+1.1%), Winnipeg (+0.7%), Montreal (+0.7%) and Victoria (+0.2%) were less vigorous. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

From CMHC Key Highlights To restore affordability, we maintain our 2022 projection that Canada will need 3.5 million more units on top of whats already being built. Weve adjusted our 2030 projection for how many housing units there will be in Canada in 2030 based on current rates of new construction. Our most recent projection is 18.2 million units, down from our 2022 estimate of 18.6 million. This is largely due to the shortfall in housing construction. About 60% of the 3.5 million housing unit gap is in Ontario and British Columbia. This is because housing supply hasnt kept up with demand over the past 20 years in some of the largest urban centres. Additional supply will also be needed in Quebec. Once considered affordable, the province has become less affordable over the last few years. More supply need is also projected for Alberta due to strong economic growth. Other provinces remain affordable to households with an average level of disposable income. However, challenges remain for low-income households in accessing housing that is affordable across Canada. In addition to our baseline scenario of 3.5 million additional units being needed to restore affordability by 2030, we offer 2 alternate scenarios: a high-population- growth scenario and a low-economic-growth scenario. We provide regional highlights for areas across the country. https://assets.cmhc-schl.gc.ca/

The Bank of Canada on Wednesday held its target for the overnight rate at 5%, with the Bank Rate at 5% and the deposit rate at 5%. The Bank is also continuing its policy of quantitative tightening. Inflation in advanced economies has continued to come down, but with measures of core inflation still elevated, major central banks remain focused on restoring price stability. Global growth slowed in the second quarter of 2023, largely reflecting a significant deceleration in China. With ongoing weakness in the property sector undermining confidence, growth prospects in China have diminished. In the United States, growth was stronger than expected, led by robust consumer spending. In Europe, strength in the service sector supported growth, offsetting an ongoing contraction in manufacturing. Global bond yields have risen, reflecting higher real interest rates, and international oil prices are higher than was assumed in the July Monetary Policy Report (MPR). The Canadian economy has entered a period of weaker growth, which is needed to relieve price pressures. Economic growth slowed sharply in the second quarter of 2023, with output contracting by 0.2% at an annualized rate. This reflected a marked weakening in consumption growth and a decline in housing activity, as well as the impact of wildfires in many regions of the country. Household credit growth slowed as the impact of higher rates restrained spending among a wider range of borrowers. Final domestic demand grew by 1% in the second quarter, supported by government spending and a boost to business investment. The tightness in the labour market has continued to ease gradually. However, wage growth has remained around 4% to 5%. Recent CPI data indicate that inflationary pressures remain broad-based. After easing to 2.8% in June, CPI inflation moved up to 3.3% in July, averaging close to 3% in line with the Banks projection. With the recent increase in gasoline prices, CPI inflation is expected to be higher in the near term before easing again. Year-over-year and three-month measures of core inflation are now both running at about 3.5%, indicating there has been little recent downward momentum in underlying inflation. The longer high inflation persists, the greater the risk that elevated inflation becomes entrenched, making it more difficult to restore price stability. https://www.bankofcanada.ca/2023/09/fad-press-release-2023-09-06/

Summary On a seasonally adjusted basis, home sales decreased 0.7% from June to July, a first monthly contraction in six months following the renewed monetary tightening cycle of the Bank of Canada. On the supply side, new listings jumped 5.6% in July, a fourth consecutive monthly increase. Another sign of a loss of momentum in the real estate market is the proportion of listings cancelled during the month, which is back on the rise, a sign that some sellers are discouraged by recent interest rate hikes. Overall, active listing increased by 2.5%, the second monthly gain in a row. As a result, the number of months of inventory (active-listings to sales) increased from 3.1 in June to 3.2 in July. This continues to be higher than the trough of 1.7 reached in the pandemic but remains low on a historical basis. The active-listings to sales ratio is still tighter than its historical average in the majority of Canadian provinces, with only Manitoba indicating a ratio slightly above historical norm. Housing starts in Canada decreased in July (-28.5 to 255.0K, seasonally adjusted and annualized), beating consensus expectations calling for a 244K print. This decline follows the strongest growth ever recorded the previous month. Decreases in housing starts were seen in Ontario (-21.8K to 99.5K), British Columbia (-15.2K to 50.7K), Nova Scotia (-8.1K to 5.8K) and Saskatchewan (-1.9K to 5.3K). Meanwhile, increases were registered in Alberta (+11.9K to 38.5K), Quebec (+3.1K to 38.0K), Manitoba (+2.1K to 10K), New Brunswick (+0.6K to 5.0K), P.E.I. (+0.6K to 1.2K), while starts in Newfoundland (+0.1K to 1.1K) remained essentially unchanged. The Teranet National Bank Composite National House Price Index rose by 2.4% in July after seasonal adjustment. Eight of the 11 markets in the composite index were up during the month: Halifax (+4.9%), Hamilton (+4.4%), Vancouver (+3.9%), Toronto (+3.5%), Victoria (+1.6%), Winnipeg (+1.3%), Ottawa-Gatineau (+0.6%) and Edmonton (+0.3%). Conversely, prices fell in Quebec City (-1.2%), Montreal (-0.9%) and Calgary (-0.3%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

Following the recovery of the residential real estate market in recent months, the Teranet-National Bank composite index jumped by 2.4% from June to July, the fourth consecutive monthly increase, but also the second highest price increase ever recorded in a single month after the one observed in July 2006. After a cumulative decline of 8.6% since peaking in April 2022, recent rises in the composite index have erased a part of this correction, which now stands at just 3.8%. Interestingly, the recent upturn in prices has been greatest in the cities that have seen the biggest corrections. However, only four of the 32 CMAs covered have completely erased their price declines: Saint John, Lethbridge, Quebec City and Trois-Rivires. Prices could continue to rise in the third quarter, supported by strong demographic growth and the lack of supply of properties on the market. That said, the deterioration in affordability with recent interest rate hikes in a less buoyant economic context should represent a headwind for house prices thereafter. HIGHLIGHTS: The Teranet National Bank Composite National House Price IndexTM rose by 2.4% in July after seasonal adjustment. After seasonal adjustment, 8 of the 11 markets in the composite index were up during the month: Halifax (+4.9%), Hamilton (+4.4%), Vancouver (+3.9%), Toronto (+3.5%), Victoria (+1.6%), Winnipeg (+1.3%), Ottawa-Gatineau (+0.6%) and Edmonton (+0.3%). Conversely, prices fell in Quebec City (-1.2%), Montreal (-0.9%) and Calgary (-0.3%). From July 2022 to July 2023, the composite index fell by 1.9%, a smaller contraction than in the previous month. Price increases in Calgary (+3.3%), Halifax (+2.1%) and Quebec City (+1.1%) were more than offset by declines in Edmonton (-0.1%), Vancouver (-0.6%), Toronto (-2.1%), Montreal (-2.6%), Victoria (-2.7%), Winnipeg (-5.2%), Ottawa-Gatineau (-5.4%) and Hamilton (-7.9%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-teranet.pdf

From National Bank of Canada The second quarter of 2023 saw housing affordability in Canada post a third consecutive improvement. While not as substantial as the previous two betterments, it still marked an advancement for 9 of the 10 markets covered. Taken together, the last three quarters represent a 7.1 percentage point decline for the mortgage payment as a percentage of income (MPPI). While that was a positive development, it pales in light of the 24.6pp worsening in affordability in the two previous years and only brings affordability back to levels last seen a year ago. The MPPI now stands at 59.3%, still way off the average since 2000 of 42.5%. The improvement mostly stemmed from a decrease in home prices. The latter declined 1.2% in the quarter which brings the cumulative decline over the last year to 8.1%. This pullback is the largest observed in a generation but could have bottomed out according to house price index data. The Teranet-National Bank Composite HPI rose 2.2% seasonally adjusted in June, and momentum is expected to continue into the third quarter on the back of strong demographics and a lack of supply in the resale market. Compounding that headwind, after providing marginal respite in Q2 (-3 basis points), mortgage interest rates in July have crept up on the back of further tightening by the Bank of Canada and should be detrimental to affordability in the next report. Moreover, the flip side of restrictive monetary policy is a weakening economic outlook. In such a high interest rate environment, we cannot count on significant wage gains to improve affordability, as we expect the labour market to cool in the second half of the year. HIGHLIGHTS: Canadian housing affordability posted a third consecutive improvement in Q223. The mortgage payment on a representative home as a percentage of income (MPPI) declined 1.6 points, a further pullback following the 3.2-point decrease in Q123. Seasonally adjusted home prices decreased 1.2% in Q223 from Q122; the benchmark mortgage rate (5-year term) edged down 3 bps, while median household income rose 1.2%. Affordability improved in 9 of the ten markets covered in Q2. On a sliding scale of markets from best improvement to deterioration: Toronto, Hamilton, Ottawa-Gatineau, Victoria, Vancouver, Winnipeg, Edmonton, Calgary, Montreal, and Quebec. Countrywide, affordability improved 1.2 pp in the condo portion vs. a 1.8 pp improvement in the non-condo segment. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/housing-affordability.pdf

The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity and average home prices via Multiple Listing Service (MLS) Systems of Canadian real estate boards and associations for 2023 and 2024. As expected, national home sales came flying out of the gates in April 2023. Buyers who had been sitting on the fence responded to the twin signals of interest rates looking like they were at a top and property values hitting bottom. With the Bank of Canada unexpectedly ending its pause on rate hikes in June and hiking again in July, a major source of uncertainty has returned to the housing market. That said, even before the resumption of rate hikes, the recent sales rally had already shown signs of losing steam. The biggest month-over-month increase in sales activity was back in April, followed by an increase only half as big in May, then by a small 1.5% gain in June. This was likely because new listings had fallen to a 20-year low, which was reflected in month-over-month price gains in April, May, and June that were only bested by those seen during the COVID-19 pandemic. New listings are now catching up to sales, although this isnt expected to translate into further big gains in activity as some buyers will likely be moving back to the sidelines, as they did in 2022, to wait for additional signals from the Bank of Canada and the data it bases policy on. Looking further out, theres also a growing consensus that rates will not just be higher, but likely for longer well into 2024. As a result, CREA has downgraded its forecast for home sales in 2023 and 2024 compared to its April 2023 outlook, along with the trajectory for prices. Thats not to say either are necessarily expected to return to declines on a month-to-month basis, but rather to stabilize or rise at a slower pace than they have in recent months. https://www.crea.ca/housing-market-stats/canadian-housing-market-stats/quarterly-forecasts/

Following the recovery of the residential housing market in recent months, the Teranet-National Bank composite HPI jumped 2.2% from May to June, marking the third consecutive monthly increase, but also the largest price rise in a single month since November 2006. After a cumulative decline of 8.7% since peaking in April 2022, recent rises in the composite index have erased part of this correction, which now stands at just 6.2%. This rebound is even more impressive given that 81% of cities covered in June saw an increase during the month, the best diffusion of growth since the composite index peaked last year. While prices could continue to be supported by strong demographic growth and the lack of supply of properties on the market, and continue to rise in the third quarter, the Bank of Canadas recent rate hikes and the economic weakness expected in subsequent quarters will represent a headwind for house prices thereafter. HIGHLIGHTS: The Teranet-National Bank Composite National House Price Index rose by 2.2% in June after seasonal adjustment. After seasonal adjustment, 9 of the 11 markets in the composite index were up during the month: Toronto (+2.9%), Vancouver (+2.6%), Quebec City (+2.6%), Halifax (+2.3%), Calgary (+2.1%), Victoria (+1.9%), Montreal (+1.4%). Ottawa-Gatineau (+1.0%) and Edmonton (+0.2%). Conversely, prices fell in Winnipeg (-0.2%), while remaining stable in Hamilton. From June 2022 to June 2023, the composite index fell by 5.1%, a smaller contraction than in the previous month. Price growth in Calgary (+6.5%). Quebec City (+5.2%) and Edmonton (+1.3%) was more than offset by declines in Montreal (-3.6%), Victoria (-3.8%), Vancouver (-5.0%). Halifax (-5.6%), Winnipeg (-5.7%). Toronto (-6.7%), Ottawa-Gatineau (-8.4%) and Hamilton (-13.4%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-teranet.pdf

Summary On a seasonally adjusted basis, home sales increased 1.5% from May to June, a fifth consecutive monthly increase. However, this was a much smaller rise than the 4.6% in May and 11.1% in April, a slowdown that could have been induced by the additional tightening of the Bank of Canada. On the supply side, new listings jumped 5.9% in June, a third consecutive monthly increase. Overall, active listing increased marginally by 1.5% in Canada, keeping the number of months of inventory (active-listings to sales) unchanged at 3.1 in June. This continues to be higher than the trough of 1.7 reached in the pandemic but remains low on a historical basis. The active-listings to sales ratio is still tighter than its historical average in the majority of Canadian provinces, with only Manitoba indicating a ratio above average. Housing starts in Canada increased in June (+81.4K to 281.4K, seasonally adjusted and annualized), beating consensus expectations calling for a 220.0K print. This increase more than offset Mays 58.9K decrease and was the sharpest ever. In urban areas, increases in housing starts were seen in Ontario (+50.2K to 116.8K), British Columbia (+24.9K to 63.6K), Quebec (+3.7K to 25.0K) and the Maritimes (+8.9K to 17.6K). Meanwhile, a decrease was registered in the Prairies (-5.5K to 39.2K) on gains in Saskatchewan (+4.6K to 6.7K) which were offset by losses in Alberta (-10.1K to 25.7K) while starts in Manitoba (-0.1K to 6.7K) remained essentially unchanged. The Teranet-National Bank Composite National House Price Index rose by 2.2% in June after seasonal adjustment. Nine of the eleven markets in the composite index were up during the month: Toronto (+2.9%), Vancouver +2.6%), Quebec City (+2.6%), Halifax (+2.3%), Calgary (+2.1%), Victoria (+1.9%), Montreal (+1.4%). Ottawa-Gatineau (+1.0%) and Edmonton (+0.2%). Conversely, prices fell in Winnipeg (- 0.2%), while remaining stable in Hamilton. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

The Bank of Canada increased its target for the overnight rate to 5%, with the Bank Rate at 5% and the deposit rate at 5%. The Bank is also continuing its policy of quantitative tightening. Global inflation is easing, with lower energy prices and a decline in goods price inflation. However, robust demand and tight labour markets are causing persistent inflationary pressures in services. Economic growth has been stronger than expected, especially in the United States, where consumer and business spending has been surprisingly resilient. After a surge in early 2023, Chinas economic growth is softening, with slowing exports and ongoing weakness in its property sector. Growth in the euro area is effectively stalled: while the service sector continues to grow, manufacturing is contracting. Global financial conditions have tightened, with bond yields up in North America and Europe as major central banks signal further interest rate increases may be needed to combat inflation. The Banks July Monetary Policy Report (MPR) projects the global economy will grow by around 2.8% this year and 2.4% in 2024, followed by 2.7% growth in 2025. Canadas economy has been stronger than expected, with more momentum in demand. Consumption growth has been surprisingly strong at 5.8% in the first quarter. While the Bank expects consumer spending to slow in response to the cumulative increase in interest rates, recent retail trade and other data suggest more persistent excess demand in the economy. In addition, the housing market has seen some pickup. New construction and real estate listings are lagging demand, which is adding pressure to prices. In the labour market, there are signs of more availability of workers, but conditions remain tight, and wage growth has been around 4-5%. Strong population growth from immigration is adding both demand and supply to the economy: newcomers are helping to ease the shortage of workers while also boosting consumer spending and adding to demand for housing. https://www.bankofcanada.ca/2023/07/fad-press-release-2023-07-12/

From TD Economics Huge second-quarter upside surprises in both Canadian home sales and average home prices, relative to our March projection, have left their mark on our updated forecast. Our modelling had suggested that sales had undershot levels consistent with underlying fundamentals (such as income and population growth, for example). However, with the recent surge, this gap has effectively been closed. The sharp rise in prices also deteriorated affordability by more than we thought would take place, which is also a negative for go-forward activity. In light of resilient housing and consumer spending data, the Bank of Canada nudged its policy rate higher in June after a 4-month hiatus. By the time July is over, policymakers will have injected an additional 50 bps of tightening relative to our prior expectations. Beyond the direct hit to affordability from a higher policy rate, a more hawkish central bank should chill the psychology of buyers who were previously rushing into the market after the Bank went on pause earlier in the year. Indeed, Bank of Canada signaling appears to be playing a major role in shaping housing market dynamics. Our bond yield forecast has also been materially upgraded. We expect Canadian home sales to decline in the second half of this year, reversing part of their recent strength. Furthermore, we anticipate purchases growing at a slower quarter-on-quarter pace than previously envisioned in 2024. Tight markets amid restrained supply should keep Canadian average price growth positive in the third quarter, but we anticipate prices dropping slightly in Q4. Like sales, weve marked down our quarterly growth profile next year relative to our March forecast. https://economics.td.com/ca-provincial-housing-outlook

After adjusting for seasonal effects, the Teranet-National Bank composite HPI resumed its upward trend (+0.6%) after ten consecutive monthly declines, which saw home prices correct by a total of 8.6%. This turnaround in property prices is due in particular to the rebound in the resale market over the past four months. This recovery is taking place against a backdrop of record demographic growth, which is accentuating the shortage of housing supply on the market. With domestic housing starts falling to their lowest level in three years in May, there is no reason to believe that the shortage of properties on the market will be resolved any time soon. However, the resumption of the monetary tightening cycle by the Bank of Canada in recent weeks and the expected slowdown in economic growth could moderate price growth later this year. HIGHLIGHTS: The Teranet-National Bank Composite National House Price Index rose by 0.6% in May after seasonal adjustment. After seasonal adjustment, 8 of the 11 markets in the composite index were up during the month: Toronto (+1.6%). Winnipeg (+1.5%), Victoria (+1.3%), Edmonton (+1.3%), Quebec City (+1.2%), Montreal (+1.0%), Hamilton (+0.5%) and Calgary (+0.1%). Conversely, prices fell during the month in Halifax (-2.6%), Vancouver (-1.2%) and Ottawa-Gatineau (-0.3%). From May 2022 to May 2023, the composite index fell by 7.6%, a smaller contraction than in the previous month. Price growth in Calgary (8.3%). Edmonton (4.9%) and Quebec City (3.1%) was more than offset by declines in Montreal (-3.0%), Winnipeg (-6.8%), Victoria (-8.4%), Halifax (-8.5%), Vancouver (-8.6%), Ottawa-Gatineau (-9.5%), Toronto (-10.3%) and Hamilton (-16.8%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-teranet.pdf

On a seasonally adjusted basis, home sales increased 5.1% from April to May, a fourth consecutive monthly increase. Sales growth continues to be widespread across the country again this month, with the biggest increases seen in P.E.I. (+22.3%), Saskatchewan (+9.2%) and Alberto (+8.0%). Conversely, Nova Scotia (+0.9%) and Manitoba (+1.0%) saw smaller increases. On the supply side, new listings jumped 6.8% in May, a second consecutive monthly increase. Overall, supply decreased in Canada as testified by the number of months of inventory (active-listings to sales) decreasing from 3.3 to 3.1 in May. This remains up from the trough of 1.7 reached in the pandemic but remains low on a historical basis. The active-listings to sales ratio is still tighter than its historical overage in the majority of Canadian provinces, with only Manitoba indicating a ratio above average. Housing starts in Canada decreased in May (-58.9K to 202.5K, seasonally adjusted and annualized), falling short of consensus expectations calling for a 240.0K print. This decline more than offset Aprils 47.8K increase and was the sharpest since December 2021. In urban areas, declines in housing starts were seen in Ontario (-43.1K to 67.7K), British Columbia (-20.1K to 38.2K), Quebec (-6.6K to 22.5K) and the Maritimes (-1.5K to 8.1K). Meanwhile, an increase was registered in the Prairies (+12.6K to 46.0K) on gains in Manitoba (+3.0K to 7.0K) and Alberta (+9.6K to 36.5K) while starts in Saskatchewan (+0.1K to 2.5K) remained essentially unchanged. The Teranet-National Bank Composite National House Price Index rose by 0.6% in May after seasonal adjustment. After seasonal adjustment, 8 of the 11 markets in the composite index were up during the month: Toronto (+1.6%), Winnipeg (+1.5%), Victoria (+1.3%), Edmonton (+1.3%). Quebec City (+1.2%), Montreal (+1.0%), Hamilton (+0.5%) and Calgary (+0.1%). Conversely, prices fell during the month in Halifax (-2.6%). Vancouver (-1.2%) and Ottawa-Gatineau (-0.3%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

Recent mortgage market trends High inflation, rapidly rising interest rates and cooling housing markets across Canada have resulted in decelerating mortgage growth in 2022. Mortgage activity by non-bank lenders accelerated up until 2022Q3 and has now reached the pace of mortgage growth in the banking industry. Despite increasing worries around the ability of Canadians to make their mortgage payments on time, mortgages in arrears remained at low levels. Mortgage borrowers are opting for shorter-term fixed rate mortgages, with fixed-rate 5-year mortgages falling to less than 15% of new mortgages, and variable-rate mortgages dropping to less than 20% of new mortgages. Housing finance research at a glance While demand surges, alternative lenders are lending more conservatively as the industry faces shifting investor appetite. Their risk profile remains at relatively low levels. A larger share of alternative loan mortgage borrowers are renewing their loans in this space as it is increasingly difficult to qualify for a conventional loan. Interest rate differences are not a significant source of inequality in the housing finance system. CMHC

The Bank of Canada today increased its target for the overnight rate to 4%, with the Bank Rate at 5% and the deposit rate at 4%. The Bank is also continuing its policy of quantitative tightening. Globally, consumer price inflation is coming down, largely reflecting lower energy prices compared to a year ago, but underlying inflation remains stubbornly high. While economic growth around the world is softening in the face of higher interest rates, major central banks are signalling that interest rates may have to rise further to restore price stability. In the United States, the economy is slowing, although consumer spending remains surprisingly resilient and the labour market is still tight. Economic growth has essentially stalled in Europe but upward pressure on core prices is persisting. Growth in China is expected to slow after surging in the first quarter. Financial conditions have tightened back to those seen before the bank failures in the United States and Switzerland. Canadas economy was stronger than expected in the first quarter of 2023, with GDP growth of 3.1%. Consumption growth was surprisingly strong and broad-based, even after accounting for the boost from population gains. Demand for services continued to rebound. In addition, spending on interest-sensitive goods increased and, more recently, housing market activity has picked up. The labour market remains tight: higher immigration and participation rates are expanding the supply of workers but new workers have been quickly hired, reflecting continued strong demand for labour. Overall, excess demand in the economy looks to be more persistent than anticipated. CPI inflation ticked up in April to 4.4%, the first increase in 10 months, with prices for a broad range of goods and services coming in higher than expected. Goods price inflation increased, despite lower energy costs. Services price inflation remained elevated, reflecting strong demand and a tight labour market. The Bank continues to expect CPI inflation to ease to around 3% in the summer, as lower energy prices feed through and last years large price gains fall out of the yearly data. However, with three-month measures of core inflation running in the 3-4% range for several months and excess demand persisting, concerns have increased that CPI inflation could get stuck materially above the 2% target. https://www.bankofcanada.ca/2023/06/fad-press-release-2023-06-07/

From National Bank of Canada Housing affordability in Canada in the first quarter of 2023 posted a second consecutive improvement. It marked the largest betterment in affordability in nearly 4 years as all markets covered saw a net amelioration (which was a first since 2020Q3). Nonetheless, the reversal of the worsening which occurred in the last two quarters was tepid compared to the slide that has occurred during the post-pandemic period. Indeed, after having reached its most unaffordable level in over 30 years, the mortgage payment as a percentage of income (MPPI) registered at a still elevated 60.9% in 2023Q1, down 5.4 points from the recent high mark. Feeding into the improvement, home prices declined for a third consecutive quarter. The retracement in home prices has now reached -7.3%, the biggest drawdown in a generation due to the restrictiveness in interest rates. The correction in prices was the sharpest in Vancouver, Hamilton and Toronto which translated into the biggest improvements in affordability during the quarter. Still, mortgage interest rates appear to be tapering out. In this latest report, our 5-year benchmark mortgage rate used to calculate affordability declined by 14bps, which helped contribute to the moderation. In addition, we note that still rising incomes also contributed to the enhancement. Looking ahead, for the second quarter of 2023, we expect a slight easing of pressure on the interest rate side. That said, a stabilization in home prices is likely given the pickup in activity with sales increasing while listings have moderated. However, we have doubts as to whether this price rise will be sustained, given restrictive monetary policy which is contributing to maintaining affordability at a challenging level. HIGHLIGHTS: Canadian housing affordability posted the largest improvement in 15 quarters in Q1`23. The mortgage payment on a representative home as a percentage of income (MPPI) declined 3.2 points, a consecutive pullback following the 2.2-point decrease in Q422. Seasonally adjusted home prices decreased 2.4% in Q123 from Q422; the benchmark mortgage rate (5-year term) fell 14 bps, while median household income rose 1.3%. Affordability improved in all ten markets covered in Q1. On a sliding scale of markets from best improvement to deterioration: Vancouver, Hamilton, Toronto, Victoria, Montreal, Winnipeg, Ottawa-Gatineau, Calgary, Edmonton, and Quebec. This was the first time in 10 quarters that all markets improved. Countrywide, affordability improved 1.8 pp in the condo portion vs. a 3.8 pp improvement in the non-condo segment. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/housing-affordability.pdf

The Rundown on Down Payments Making a down payment is one of the biggest decisions youll face when purchasing a home. Naturally, you may have a few questions about how the process works, such as: Whats the minimum amount you can put down? How will it affect your mortgage? And where can you get the money? Fortunately, we have all the answers to your down payment questions. What is a down payment? Simply put, a down payment is the amount of money you put towards the purchase of your home. This amount is then deducted from the total price of the home, with the remainder to be covered over the course of your mortgage. Whats the minimum amount that you can put down? In Ontario, the minimum down payment you can make on a house under $500,000 is 5%. For houses more than $500,000 but less than $1,000,000, the 5% minimum down payment applies to the first $500,000, while 10% is applied to the remainder. For example, if your home costs $700,000, your down payment for the first $500,000 would be 5% ($25,000), and 10% for the remaining $200,000 ($20,000) For houses over $1,000,000, the minimum down payment is 20%. What is mortgage loan insurance? Mortgage loan insurance (or default insurance) is designed to protect the lender in the event that youre unable to meet your mortgage payments. It is mandatory for those with a down payment lower than 20% to obtain mortgage insurance,though you may be required to do so under certain programs even if you have a 20% down payment. How does your down payment affect your mortgage? The higher your down payment, the lower your monthly mortgage payments. Likewise, higher down payments mean lower mortgage loan insurance rates, with premiums ranging from 0.6% to 4.5% the amount of your mortgage. With less than 20% down, you can only amortize your mortgage over 25 years. With more than 20% down you may qualify to up to 30 year amortization. Can you borrow the money for your down payment? Provided that you meet the lenders minimum requirements, in many cases you will be allowed to borrow some of the money for your down payment. There are a number of ways to go about doing this. The first is to take out a line of credit, a type of loan that allows you to borrow money up to a certain limit. Another, less common, option is to use a personal loan. However, doing so may affect your qualifying ratios. Can I use funds from family as my down payment? You can also use gifted funds from immediate family members for a down payment. These funds must be gifted without a re-payment plan. If youre looking to buy a new home or property and want to learn more about the process, including your down payment options, contactPersonal Choice Mortgage Servicesand schedule a free consultation with a knowledgeable and experienced mortgage broker who can answer all your questions and help steer you in the right direction. EMAIL:info@pcmortgages.com PHONE:905-318-1414 TOLL FREE:1-877-318-4141 By: Graeme Carey

Summary On a seasonally adjusted basis, home sales increased 11.3% from March to April, a third consecutive monthly increase and the first double-digit gain since the summer of 2020. Unlike the previous month, the increase in sales was spread across all provinces, with New Brunswick (-2.5%) and Newfoundland (-17.0%) being the exceptions. On the supply side, new listings increased by 1.6% during the month, a first increase in three months. Overall, supply decreased in Canada as testified by the number of months of inventory (active-listings to sales) decreasing from 3.8 to 3.3 in April. This remains up from the trough of 1.7 reached in the pandemic but remains low on a historical basis. The active-listings to sales ratio is still tighter than its historical overage in the majority of Canadian provinces, with only Manitoba indicating a ratio above average. Housing starts in Canada increased in April (+47.8K to 261.6K, seasonally adjusted and annualized), more than consensus expectations calling for a 220.0K print. This increase more than offset Marchs 27.7K decline and was the sharpest since November 2021. In urban areas, rises in housing starts were seen in Ontario (+35.8K to 110.7K), British Columbia (+9.9K to 58.1K), the Maritimes (+4.0K to 9.8K) and Quebec (+2.3K to 29.4K). Meanwhile, a decline was registered in the Prairies (-2.8K to 33.2K) on losses in Manitoba (-3.5K to 4.0K) and Saskatchewan {-0.3K to 2.4K) while starts in Alberta posted an increase (+1.1K to 26.8K). The Teranet-National Bank Composite National House Price Index remained relatively stable in April with a slight decrease of 0.1% compared with the previous month and after adjusting for seasonal effects. After seasonal adjustment, 5 of the 11 markets in the composite index were down during the month: Edmonton (-2.5%). Ottawa-Gatineau (-2.1%), Vancouver (-0.9%), Hamilton (-0.5%) and Montreal (-0.2%). Conversely, prices increased during the month in Quebec City (+1.2%), Toronto (+0.7%), Winnipeg (+0.5%), Calgary (+0.3%) and Victoria (+0.1%), while they remained stable in Halifax. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

From CMHC Key highlights from the 2023 release We expect house prices and supply in Canada to decrease between 2022 2023. Price declines are expected to end sometime in 2023 before increasing for the remainder of the forecast period. Our analysis forecasts a significant drop in housing starts in 2023 and we can see some recovery starting in 2023 to 2024 and onward. Rental affordability is also set to decline due to demand outstripping supply, especially in Vancouver and Toronto. Prairie provinces expect more positive housing market conditions due to interprovincial migration and affordable homeownership. Ontario, British Columbia and Qubec will see significant drops in housing starts compared to other regions. The Atlantic regions economy remains stable and moderate relative to other regions. https://assets.cmhc-schl.gc.ca/sites/cmhc/professional/housing-markets-data-and-research/market-reports/housing-market-outlook/2023/housing-market-outlook-spring-2023-en.pdf?rev=5c29bc91-2310-435f-b2c9-b801866d0ede

Highlights from the April 2023 Housing Supply Report: Growth in residential construction was mixed across Canadas 6 largest census metropolitan areas in 2022. Current new home inventories are at historic lows even though housing starts were strong during the pandemic. Housing starts increased in Toronto, Calgary, Edmonton and Ottawa. Starts were stable in Vancouver and decreased in Montral. New research completed by the University of British Columbia using CMHC data shows that most housing starts were built in low-amenity neighbourhoods. Apartments, however, tend to be in high-amenity areas . As interest rates increased, homebuyer purchasing power dropped. Prices decreased slightly in most markets. Apartment construction both purpose-built rental and condominiums continued to grow. https://assets.cmhc-schl.gc.ca/sites/cmhc/professional/housing-markets-data-and-research/market-reports/housing-supply-report/housing-supply-report-2023-04-en.pdf?rev=5558faea-840d-4a27-a9a3-c49e421abd1a