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TD Economic Report: Canadian Highlights

3/25/2024

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
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Canadian Home Prices See Sudden End to Declines in Advance of Spring Market

3/18/2024

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/
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Bank of Canada maintains policy rate, continues quantitative tightening

3/6/2024

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/
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CMHC announced on March 1 that The First-Time Home Buyer Incentive program will be ending

3/1/2024

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
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No respite for Canadian housing affordability in Q4 2023

2/23/2024

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
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Canadian Home Sales Showing Signs of Recovery

2/15/2024

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/
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Bank of Canada maintains policy rate, continues quantitative tightening

1/24/2024

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/
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Income gap widens as higher interest rates reduce income for lowest income households

1/22/2024

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
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Canadian Home Sales See Unexpected Surge to Close Out 2023

1/16/2024

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/
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Riding Out the Mortgage Tides is a 'Mission Possible' for Canadian Households

12/15/2023

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
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Home sales plummet in October as affordability remains an issue

12/15/2023

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
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Bank of Canada maintains policy rate, continues quantitative tightening

12/7/2023

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.
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Housing affordability: Significant deterioration in Q3 2023

11/10/2023

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
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Housing market slowed in September as interest rates weigh in

11/3/2023

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
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Bank of Canada maintains policy rate, continues quantitative tightening

10/26/2023

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/
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CMHC Housing Supply Report

10/13/2023

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
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Housing prices set to moderate in coming months

10/6/2023

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
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Housing Market Monitor: Housing market slowed in August as interest rates weigh in

9/29/2023

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
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Housing shortages in Canada: Updating how much housing we need by 2030

9/15/2023

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/
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Bank of Canada maintains policy rate, continues quantitative tightening

9/8/2023

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/
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Housing market stabilizing as rising interest rates weigh in July

9/1/2023

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
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Canada: Spectacular jump in house prices in July

8/25/2023

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
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Housing affordability: Recent improvement will not carry into H2 2023

8/11/2023

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
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CREA Updates Resale Housing Market Forecast

8/4/2023

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/
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Spectacular jump in house prices in June

7/26/2023

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
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Housing market stabilizing as rising interest rates weigh in June

7/21/2023

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
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Bank of Canada raises policy rate 25 basis points, continues quantitative tightening

7/14/2023

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/
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Provincial Housing Market Outlook - BoC Hikes to Send a Chill Through Buyers

7/7/2023

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
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Home prices rise for the first time in 11 months

7/4/2023

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
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Fourth consecutive monthly increase in home sales in May

6/23/2023

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
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CMHC Residential Mortgage Industry Report

6/14/2023

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
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Bank of Canada raises policy rate 25 basis points, continues quantitative tightening

6/8/2023

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/
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Housing affordability: Starting 2023 on a positive note

6/2/2023

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
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Home sales jumped in April as interest rates stabilized and population boomed

5/26/2023

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
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CMHC Housing Market Outlook - Spring 2023

5/18/2023

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
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CMHC Housing Supply Report

5/10/2023

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
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Canada: Record annual price decline in March

5/5/2023

From National Bank of Canada Even though the resale housing market is showing its first signs of stabilization and the non-seasonally adjusted Teranet-National Bank Index has seen its first monthly increase in ten months, it is still too early to say that the real estate market in Canada is on the rise. In fact, once adjusted for seasonal effects, the composite index contracted by 0.8% during the month, as price growth is generally stronger in the spring with the start of the high season. It should also be noted that, on an annual basis, the index in March fell by 6.9% compared to March 2022 and thus equaled the record contraction recorded during the 2008-2009 financial crisis. With the Bank of Canada expected to keep its policy rate in restrictive territory for much of 2023 and mortgage rates remaining high, we believe that the impact on property prices should continue to be felt in the coming months. All in all, we anticipate that the price correction that currently stands at 8.8% could continue through the end of 2023 (-5% additional), but this assumes that policy rate hikes are over, and declines begin at the end of the year. Although corrections are observed in all markets covered by the index (except Sherbrooke), the CMAs that have experienced the largest price growth over the past two years are also those that have recorded the sharpest declines to date. Ontario and British Columbia thus appear to be more vulnerable, while the Prairie markets are less so, as affordability problems are less acute. HIGHLIGHTS: The Teranet-National Bank Composite National House Price Index decreased 0.8% in March compared with the previous month and after adjusting for seasonal effects, the ninth consecutive monthly decline. After seasonal adjustment, 7 of the 11 markets in the composite index were down during the month: Victoria (-4.5%), Winnipeg (-2.4%), Toronto (-1.9%), Edmonton (-0.9%), Hamilton (-0 .1%) Conversely, prices increased during the month in Halifax (+2.3%), Montreal (+0.5%), Vancouver (+0.3%) and Calgary (+0.1%). From March 2022 to March 2023, the composite index decreased by 6.9%, matching the record annual decline observed during the 2008-2009 financial crisis. Price growth in Calgary (7.6%), Quebec City (4.1%) and Edmonton (2.2%) was more than offset by declines in Montreal (-0.8%), Ottawa-Gatineau (-4.7%), Halifax (-4.9%), Vancouver (-5.0%), Winnipeg (-6.3%), Victoria (-8.7%), Toronto (-12.1%) and Hamilton (-13.5%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-teranet.pdf
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Slight increase in sales for a second consecutive month

4/28/2023

From National Bank of Canada Summary On a seasonally adjusted basis, home sales increased 1.4% from February to March, the first time since February 2022 that they experienced two consecutive monthly increases. Unlike the previous month, the increase in sales was not spread across all provinces. On the supply side, new listings dropped by 5.8% in the month, a seventh decrease in nine months. Still, we continue to see that there is a high proportion of sellers who are changing their minds, as we estimate that 19% of listings have been withdrawn in the last three months. Overall, supply decreased in Canada as testified by the number of months of inventory (active-listings to sales) decreasing from 4.1 to 4.9 in March. 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 average in the majority of Canadian provinces, with only Manitoba indicating a ratio above average. Housing starts in Canada decreased in March (-27.1K to 213.9K, seasonally adjusted and annualized), which was below consensus expectations calling for a 237.5K print. This drop almost fully erased Februarys 27.9K gain. In urban areas, decreases in housing starts were seen in Ontario (-20.7K to 75.4K), the Prairies (-8.0K to 35.9K), Quebec (-11.8K to 27.0K) and the Maritimes (-0.3K to 6.3K). Starts in BC (+13.6K to 48.0K), meanwhile, increased after reaching their lowest level since March 2022 in February, thanks to a gain in multiples (+14.1K to 43.2K) while single units starts were essentially steady (-0.5K to 4.8K). The Teranet-National Bank Composite National House Price Index decreased 0.8% in March compared with the previous month and after adjusting for seasonal effects, the ninth consecutive monthly decline. After seasonal adjustment, 7 of the 11 markets in the composite index were down during the month: Victoria (-4.5%), Winnipeg (-2.4%), Toronto (-1.9%), Edmonton (-0.9%), Hamilton (-0.1%) Conversely, prices increased during the month in Halifax (+2.3%), Montreal (+0.5%), Vancouver (+0.3%) and Calgary (+0.1%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf
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Canada: Slight increase in sales for a second consecutive month

4/19/2023

From National Bank of Canada On a seasonally adjusted basis, home sales increased 1.4% from February to March, the first time since February 2022 that they experienced two consecutive monthly increases. Unlike the previous month, the increase in sales was not spread across all provinces. In fact, this growth is largely explained by a notable jump of 10.0% in sales in B.C. and to a lesser extent by increases in Manitoba (1.2%), Ontario (1.1%) and Quebec (0.8%). Despite signs of stabilization, the level of sales in Canada remains very low on a historical basis and has declined by 39.5% since the start of the monetary tightening. As we expect the Bank of Canada to keep its policy rate at its current restrictive level for most of 2023, the outlook for a recovery in the housing market remains limited. As a result, sales are expected to remain below their historical average in the coming months and it is still too early to interpret recent increases in sales as a rebound in the housing Market. On the supply side, new listings dropped by 5.8% in the month, a seventh decrease in nine months. Still, we continue to see that there is a high proportion of sellers who are changing their minds, as we estimate that 19% of listings have been withdrawn in the last three months. Overall, supply decreased in Canada as testified by the number of months of inventory (active-listings to sales) decreasing from 4.1 to 4.9 in March. This remains up from the trough of 1.7 reached in the pandemic but remains low on a historical basis. As a result, 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. On a year-over-year basis, home sales were down 34.4% compared to the second-strongest month of March in history last year. Sales were down in every province on a year-over-year basis, with the largest decline observed in Alberta (-41.3%) and the smallest in Saskatchewan (-20.2%). For the first quarter of 2023, cumulative sales were down 37.0% compared to the same period last year. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-canada.pdf
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Bank of Canada maintains policy rate, continues quantitative tightening

4/12/2023

The Bank of Canada today held its target for the overnight rate at 4%, with the Bank Rate at 4% and the deposit rate at 4%. The Bank is also continuing its policy of quantitative tightening. Inflation in many countries is easing in the face of lower energy prices, normalizing global supply chains, and tighter monetary policy. At the same time, labour markets remain tight and measures of core inflation in many advanced economies suggest persistent price pressures, especially for services. Global economic growth has been stronger than anticipated. Growth in the United States and Europe has surprised on the upside, but is expected to weaken as tighter monetary policy continues to feed through those economies. In the United States, recent stress in the banking sector has tightened credit conditions further. US growth is expected to slow considerably in the coming months, with particular weakness in sectors that are important for Canadian exports. Meanwhile, activity in Chinas economy has rebounded, particularly in services. Overall, commodity prices are close to their January levels. The Banks April Monetary Policy Report (MPR) projects global growth of 2.6% this year, 2.1% in 2024, and 2.8% in 2025. In Canada, demand is still exceeding supply and the labour market remains tight. Economic growth in the first quarter looks to be stronger than was projected in January, with a bounce in exports and solid consumption growth. While the Banks Business Outlook Survey suggests acute labour shortages are starting to ease, wage growth is still elevated relative to productivity growth. Strong population gains are adding to labour supply and supporting employment growth while also boosting aggregate consumption. Housing market activity remains subdued. https://www.bankofcanada.ca/2023/04/fad-press-release-2023-04-12/?fbclid=IwAR0a-4yHJVIhZA_NbWespXWZn49Q7XwhCTvrCV92O8ATLiiGCG0Rwi0K6Vg
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Canadian home sales rise in February despite drop in new supply

4/5/2023

Statistics released by the Canadian Real Estate Association (CREA) show national home sales were up on a month-over-month basis in February 2023. Highlights: National home sales rose 2.3% month-over-month in February. Actual (not seasonally adjusted) monthly activity came in 40% below February 2022. The number of newly listed properties dropped 7.9% month-over-month. The MLS Home Price Index (HPI) edged down 1.1% month-over-month and was down 15.8% year-over-year. The actual (not seasonally adjusted) national average sale price posted an 18.9% year-over-year decline in February. Home sales recorded over Canadian MLS Systems posted a 2.3% increase from January to February 2023. Gains were led by the Greater Toronto Area (GTA) and Greater Vancouver. The actual (not seasonally adjusted) number of transactions in February 2023 came in 40% below an incredibly strong month of February in 2022. The February 2023 sales figure was comparable to what was seen for that month in 2018 and 2019. https://stats.crea.ca/en-CA
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Home sales up in February, while new listings still down

3/30/2023

Summary On a seasonally adjusted basis, home sales increased 2.3% from January to February, a third monthly gain in five months. The increase was widespread across provinces, with only Manitoba (-7.9%), Nova Scotia (-0.9%), and Alberta (-0.4%) registering decreases. On the supply side, new listings dropped by 7.9% in the month, a sixth decrease in eight months. Still, we continue to see that there is a high proportion of sellers who are changing their minds, as we estimate that about one in five listings have been withdrawned in the last three months. Overall, supply decreased slightly in Canada as testified by the number of months of inventory (active listings to sales) decreasing from 4.2 to 4.1 in February. 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 average in the majority of Canadian provinces, with only B.C. and Manitoba indicating a ratio above average. Housing starts in Canada increased in February (+27.4K to 244.0K, seasonally adjusted and annualized), which was above consensus expectations calling for a 220K print. This jump almost fully erased Januarys 32.4K pullback. In urban areas, increases in housing starts were seen in Ontario (+26.4K to 98.4K), the Prairies (+10.5K to 43.8K), Quebec (+5.1K to 40.4K) and the Maritimes (+0.8K to 5.8K). Starts in BC (-12.8K to 33.7K), meanwhile, declined to their lowest level since March 2022 on a weakness in multiples (-12.3K to 28.4K) while single units starts were essentially steady (-0.5K to 5.3K). The Teranet-National Bank Composite National House Price Index decreased by 0.5% in February compared to the previous month and after seasonal adjustment, the tenth consecutive monthly decrease. After seasonal adjustment, 7 of the 11 markets in the composite index were down during the month: Toronto (-2.7%), Calgary (-2.4%), Halifax (-1.8%), Edmonton (-0.8%), Hamilton (-0.3%), Montreal (-0.3%) and Ottawa-Gatineau (-0.2%). Conversely, prices increased in Vancouver (+3.8%), Victoria (+1.9%) and Quebec City (+0.1%). while they remained stable in Winnipeg. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf
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Canada: Prices still down in February

3/20/2023

From National Bank of Canada The Teranet-National Bank Index continued to decline in February so that the cumulative decline in prices since their peak in May 2022 totaled 11.2%, the largest contraction in the index ever recorded. The current decline in prices has even surpassed the 9.2% loss in value that occurred during the 2008 financial crisis. With the Bank of Canada expected to keep its policy rate in restrictive territory well into 2023 and mortgage rates remaining high, we believe that the impact on property prices should continue to be felt in the coming months. All in all, we still anticipate a total correction of about 15% nationally by the end of 2023, but this assumes that policy rate hikes are over and declines begin at year-end. Although corrections are being seen in all markets covered by the index, the CMAs that have seen the largest price growth over the past two years are also those that have seen the largest declines to date. Ontario, British Columbia and the Maritimes thus appear to be more vulnerable, while the Prairie markets are less vulnerable, as affordability issues are less acute. HIGHLIGHTS: The Teranet-National Bank Composite National House Price Index decreased by 0.5% in February compared to the previous month and after seasonal adjustment, the tenth consecutive monthly decrease. After seasonal adjustment, 7 of the 11 markets in the composite index were down during the month: Toronto (-2.7%), Calgary (-2.4%), Halifax (-1.8%). Edmonton (-0.8%), Hamilton (-0.3%), Montreal (-0.3%) and Ottawa-Gatineau (-0.2%). Conversely, prices increased in Vancouver (+3.8%), Victoria (+1.9%) and Quebec City (+0.1%), while they remained stable in Winnipeg. From February 2022 to February 2023, the composite index decreased by 4.7%, the second consecutive month in which the annual change in the index was in negative territory. Price increases in Calgary (8.8%), Quebec (5.0%). Edmonton (1.9%) and Montreal (0.8%) were entirely offset by decreases in Victoria (-1.4%), Ottawa-Gatineau (-2.3%), Winnipeg (-2.7%), Halifax (-3.2%), Vancouver (-3.9%), Toronto (-8.8%), and Hamilton (-14.0%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-teranet.pdf
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Housing affordability: First improvement in over 2 years

3/14/2023

For the first time in 9 quarters, housing affordability improved in Canada. Not only was it the largest improvement in over 3 years, but it also ended the longest sequence of declining home affordability since the 1986-89 episode. Still, that is not to say that the median home is now affordable in Canada as the mortgage payment as a percentage of income (MPPI) registered at 64.6%, the second highest level since 1981. Feeding into the refinement, home prices declined for a second consecutive quarter and did so at the fastest pace since 1990. Although our 5-year benchmark mortgage rate used to calculate affordability rose by 17 bps in the fourth quarter, that was more than compensated for by falling prices and still rising incomes. The slight rise in rates nonetheless brought the benchmark rate to its highest level since 2008. Preliminary data for the first quarter of 2023 as well as our outlook for monetary policy in Canada suggest that we may be peaking in terms of mortgage interest rates. The current level for interest rates is restrictive and signals that home price declines are not over yet. Moreover, incoming data for the first quarter of 2023 confirms that prices have weakened while resale market data from CREA indicates that sales have significantly declined with listings concurrently increasing. Given our view for further declines in home price and decreasing mortgage rates, we expect affordability to improve in the coming quarters. HIGHLIGHTS: Canadian housing affordability improved for the first time in 9 quarters in Q422. The mortgage payment on a representative home as a percentage of income (MPPI) declined 2.1 points, a pullback from the 4.0-point increase in Q322. Seasonally adjusted home prices decreased 3.9% in Q422 from Q322; the benchmark mortgage rate (5-year term) rose 17 bps, while median household income rose 1.0%. Affordability improved in 8 of the ten markets covered in Q4. On a sliding scale of markets from best improvement to deterioration: Victoria, Hamilton, Toronto, Vancouver, Ottawa-Gatineau, Montreal, Winnipeg, Quebec, Edmonton, Calgary. This was the first time in 9 quarters that a majority of markets improved. Countrywide, affordability improved 0.6 pp in the condo portion vs. a 2.9 pp improvement in the non-condo segment. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/housing-affordability.pdf
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Bank of Canada maintains policy rate, continues quantitative tightening

3/8/2023

The Bank of Canada today held its target for the overnight rate at 4%, with the Bank Rate at 4% and the deposit rate at 4%. The Bank is also continuing its policy of quantitative tightening. Global economic developments have evolved broadly in line with the outlook in the January Monetary Policy Report (MPR). Global growth continues to slow, and inflation, while still too high, is coming down due primarily to lower energy prices. In the United States and Europe, near-term outlooks for growth and inflation are both somewhat higher than expected in January. In particular, labour markets remain tight, and elevated core inflation is persisting. Growth in China is rebounding in the first quarter. Commodity prices have evolved roughly in line with the Banks expectations, but the strength of Chinas recovery and the impact of Russias war in Ukraine remain key sources of upside risk. Financial conditions have tightened since January, and the US dollar has strengthened. In Canada, economic growth came in flat in the fourth quarter of 2022, lower than the Bank projected. With consumption, government spending and net exports all increasing, the weaker-than-expected GDP was largely because of a sizeable slowdown in inventory investment. Restrictive monetary policy continues to weigh on household spending, and business investment has weakened alongside slowing domestic and foreign demand. The labour market remains very tight. Employment growth has been surprisingly strong, the unemployment rate remains near historic lows, and job vacancies are elevated. Wages continue to grow at 4% to 5%, while productivity has declined in recent quarters. Inflation eased to 5.9% in January, reflecting lower price increases for energy, durable goods and some services. Price increases for food and shelter remain high, causing continued hardship for Canadians. With weak economic growth for the next couple of quarters, pressures in product and labour markets are expected to ease. This should moderate wage growth and also increase competitive pressures, making it more difficult for businesses to pass on higher costs to consumers. https://www.bankofcanada.ca/2023/03/fad-press-release-2023-03-08/?fbclid=IwAR2176FL0YpgrqcA-0CAxpkw1SEwR7InkZY3Pb1NZxGjS9tc70Bw6ARkj-Q
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Home sales continue their downward trend in January

3/1/2023

On a seasonally adjusted basis, home sales decreased 3.0% from December to January, a second monthly decline in three months. As a result, sales slipped to their lowest level since August 2010 (excluding the pandemic). As the Bank of Canada raised its policy rate in January and is expected to keep monetary conditions restrictive for most of 2023, the resale market could experience further declines in the months ahead and remain at a level of activity well below its historical overage. Adding to the weakness of the report, the decrease in sales was widespread across provinces, with only Ontario (+0.4%) and PEI (+6.0%) registering increases. On the supply side, new listings were up 3.3% in the month, a first increase in three months and the fastest one since February 2022. Still, we continue to see that there is a high proportion of sellers who are changing their minds, as we estimate that about one in five listings are withdrawn during the month. Despite this, the increase in listings combined to the low level of sales is allowing supply to rise in Canada as testified by the number of months of inventory increasing from 4.1 to 4.3 in January. This is up from the trough of 1.7 reached in the pandemic but remains low on a historical basis. As a result, the active-listing to sales ratio is easing but is still tighter than its historical average in the majority of Canadian provinces, with only B.C. and Manitoba indicating a ratio above average. On a year-over-year basis, home sales were down 39.4% compared to the second-strongest month of January in history last year. Sales were down in every province on a year-over- year basis, with the largest decline observed in B.C. (-49.0%) and the smallest in Newfoundland (-13.5%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-canada.pdf
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Canadian home sales begin 2023 at 14-year low

2/24/2023

Statistics released by the Canadian Real Estate Association (CREA) show national home sales were down on a monthover-month basis in January 2023. Highlights: National home sales declined 3% month-over-month in January. Actual (not seasonally adjusted) monthly activity came in 37.1% below January 2022. The number of newly listed properties rose 3.3% month-over-month. The MLS Home Price Index (HPI) declined by 1.9% month-over-month and was down 12.6% year-over-year. The actual (not seasonally adjusted) national average sale price posted an 18.3% decline year-over-year in January. https://stats.crea.ca/en-CA/
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CMHC Rental Market Report

2/14/2023

Growth in demand outpaced strong growth in supply, pushing the vacancy rate for purpose-built rental apartments down from 3.1% to 1.9%. This was the vacancy rates lowest level since 2001. Rent growth, for its part, reached a new high. Rental demand surged across the country. This was a reflection of higher net migration and the return of students to on-campus learning. Another factor was higher mortgage rates, which drove up already-elevated costs of homeownership. Despite higher overall supply, the share of rental units that are affordable for the lowest-income renters is, in most markets, in the low single digits or too low to report. This is especially true in Ontario and British Columbia (B.C.). New data: Average rent growth for 2-bedroom units that turned over to a new tenant was well above average rent growth for units without turnover (18.2% vs. 2.8%). This increased affordability challenges. https://assets.cmhc-schl.gc.ca/sites/cmhc/professional/housing-markets-data-and-research/market-reports/rental-market-report/rental-market-report-2022-en.pdf?rev=2a0ed640-6c4c-435d-b13a-0faca94c0667
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Historic loss of value in the residential market

2/1/2023

From National Bank of Canada The Teranet-National Bank HPI continued to decline in December so that the cumulative drop in prices since their peak in May 2022 totaled 10.0%, the largest contraction in the index ever recorded. The current decline in prices has even surpassed the 9.2% loss in value that occurred during the 2008 financial crisis. However, there is some consolation in that the seasonally adjusted monthly decrease in prices in December was less significant than in November, going from -1.0% to -0.3%. With the Bank of Canada raising its key interest rate again in December and mortgage rates remaining high, we believe that the impact on property prices should continue to be felt in the coming months. All in all, we still expect the total correction to be limited to about 15% nationally by the end of 2023, but this assumes that policy rate hikes are coming to an end and that declines occur in the second half of 2023. Although corrections are occurring in all markets covered by the index (except Lethbridge), the CMAs that have experienced the largest price growth over the past two years are also the ones that have experienced the largest declines to date. Ontario, British Columbia and the Maritimes therefore appear to be more vulnerable, while the Prairie markets are less so, helped by a buoyant economic environment. HIGHLIGHTS: The Teranet-National Bank Composite National House Price Index decreased by 0.3% in December compared to the previous month and after adjusting for seasonal effects, the sixth consecutive monthly decrease. After adjusting for seasonal effects, 6 of the 11 markets in the composite index were down during the month: Winnipeg (-1.8%), Calgary (-1.1%), Ottawa-Gatineau (-1.1%), Edmonton (-0.9%), Montreal (-0.5%) and Toronto (-0.4%). Conversely, the Quebec City (+1.3%), Victoria (+1.1%), Hamilton (+0.8%), Halifax (+0.4%) and Vancouver (+0.1%) markets were up. From December 2021 to December 2022, the composite index remained stable, the first time since the financial crisis of 2008-09 that the index did not increase over one year. Price increases in Calgary (12.4%), Edmonton (6.3%), Halifax (4.7%), Quebec City (4.7%} and Montreal (2.5%) were entirely offset by decreases in Victoria (-0.1%), Ottawa-Gatineau (-1.0%), Vancouver (-1.5%), Toronto (-1.9%), Winnipeg (-2.0%) and Hamilton (-2.9%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-teranet.pdf
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Bank of Canada increases policy interest rate by 25 basis points, continues quantitative tightening

1/25/2023

The Bank of Canada today increased its target for the overnight rate to 4%, with the Bank Rate at 4% and the deposit rate at 4%. The Bank is also continuing its policy of quantitative tightening. Global inflation remains high and broad-based. Inflation is coming down in many countries, largely reflecting lower energy prices as well as improvements in global supply chains. In the United States and Europe, economies are slowing but proving more resilient than was expected at the time of the Banks October Monetary Policy Report (MPR). Chinas abrupt lifting of COVID-19 restrictions has prompted an upward revision to the growth forecast for China and poses an upside risk to commodity prices. Russias war on Ukraine remains a significant source of uncertainty. Financial conditions remain restrictive but have eased since October, and the Canadian dollar has been relatively stable against the US dollar. The Bank estimates the global economy grew by about 3% in 2022, and will slow to about 2% in 2023 and 2% in 2024. This projection is slightly higher than Octobers. In Canada, recent economic growth has been stronger than expected and the economy remains in excess demand. Labour markets are still tight: the unemployment rate is near historic lows and businesses are reporting ongoing difficulty finding workers. However, there is growing evidence that restrictive monetary policy is slowing activity, especially household spending. Consumption growth has moderated from the first half of 2022 and housing market activity has declined substantially. As the effects of interest rate increases continue to work through the economy, spending on consumer services and business investment are expected to slow. Meanwhile, weaker foreign demand will likely weigh on exports. This overall slowdown in activity will allow supply to catch up with demand. https://www.bankofcanada.ca/2023/01/fad-press-release-2023-01-25/
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Slight increase in home sales in December

1/20/2023

Summary On a seasonally adjusted basis, home sales increased 1.3% from November to December, a second monthly gain in ten months. Despite this relative stabilization of the market in December, sales were still down 37.8% from their February 2022 level. New listings were down 6.4% from November to December, a fifth contraction in six months which shows that both buyers and sellers remain on the sidelines in the current market environment. It should also be noted there is still a high proportion of sellers who are changing their minds, as we estimate that about one in five listings are withdrawn during the month. The low level of sales is still allowing supply to rebuild, with the number of months of inventory increasing from 4.1 to 4.2 in December. While easing, market conditions are still pointing in the direction of a favourable to sellers market with supply still very low on a historical basis. Housing starts fell 14.4K in December to a 9-month low of 248.6K (seasonally adjusted and annualized). Urban starts dropped 12.9K to 227.7K on declines in both the single-family (-5.5K to a post-pandemic low of 44.9K) and the multi-family segment (-7.4K to 182.9K). The Teranet-National Bank Composite National House Price Index decreased by 0.3% in December compared to the previous month and after adjusting for seasonal effects, the sixth consecutive monthly decrease. After adjusting for seasonal effects, 6 of the 11 markets in the composite index were down during the month: Winnipeg (-1.8%), Calgary (-1.1%), Ottawa-Gatineau (-1.1%), Edmonton (-0.9%). Montreal (-0.5%) and Toronto (-0.4%). Conversely, the Quebec City (+1.3%), Victoria (+1.1%). Hamilton (+0.8%), Halifax (+0.4%) and Vancouver (+0.1%) markets were up. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf
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What’s Happening in Canadian Housing Markets as We Head into 2023?

1/11/2023

Sales in November were down 3.3% on a month-over-month basis, rejoining the trend of moderating sales that began back in February. The Aggregate Composite MLS Home Price Index (HPI) edged down 1.4% on a month-over-month basis in November, which, as with sales activity, continues the trend that began in the spring. The national MLS HPI now sits about 11.5% below its peak level but there are considerable regional differences. While prices are down more in Ontario and parts of British Columbia, they have softened to some degree almost everywhere. Calgary, Regina and Saskatoon stand out as markets where home prices are barely off their peaks. https://www.creacafe.ca/whats-happening-in-canadian-housing-markets-as-we-head-into-2023/
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Canada: Prices down from their peak across the country

1/5/2023

From National Bank of Canada For the first time since the financial crisis of 2008, all of the cities covered by the Teranet-National Bank HPI have seen prices decline from their peak reached over the past 12 months, marking the end of a prosperous period for the Canadian real estate market. Indeed, price declines were observed in all markets covered, with the last cities on the list to experience contractions being Calgary, Edmonton, Lethbridge and Trois-Rivieres. Since its peak in May 2022, the national composite index has already fallen by 9.0%, almost as much as during the last financial crisis (-9.2%). With the Bank of Canada raising its key interest rate again in December and mortgage rates remaining high, we believe that the impact on property prices should continue to be felt in the coming months. All in all, we still anticipate a total correction of about 15% in house prices nationally by the end of 2023, assuming that the policy rate does not increase further and begins to decline in the second half of 2023. Although corrections are being observed in the vast majority of markets covered by the index, the CMAs that have experienced the most significant price growth over the past two years are also those that have recorded the sharpest declines to date. Ontario, British Columbia, and the Maritimes therefore appear to be more vulnerable, while the Prairie markets are less so, helped by a buoyant economic context. HIGHLIGHTS: The Teranet-National Bank Composite National House Price Index decreased by 1.1% in November compared to the previous month and after adjusting for seasonal effects, a fifth consecutive monthly decrease. After adjusting for seasonal effects, 8 of the 11 markets in the composite index were down during the month: Montreal (-2.2%), Hamilton (-1.9%), Vancouver (-1.5%), Ottawa-Gatineau (-1.3%), Winnipeg (-1.1%), Quebec City (-1.1%), Toronto (-0.9%) and Calgary (-0.8%). Conversely, the Halifax (+1.6%), Victoria (+0.9%) and Edmonton (+0.3%) markets were up. From November 2021 to November 2022, the composite index increased by 2.0%, the lowest annual growth since November 2019. This growth was driven by Calgary (14.6%), Edmonton (7.6%), Halifax (6.2%), Quebec City (5.7%), Montreal (4.7%) and Victoria (3.0%). Growth was lower than average in Winnipeg (1.2%), Vancouver (0.7%) and Ottawa-Gatineau (0.4%), while it remained stable in Toronto and was down in Hamilton (-0.9%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-teranet.pdf
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The housing market resumed its downward trend in November

12/28/2022

Summary On a seasonally adjusted basis, home sales decreased 3.3% from October to November, an eighth monthly decline in nine months. After recording a gain in October, the real estate market has resumed its downward trend of recent months, accumulating a decline in sales of 38.8% since their February level. New listing were down 1.3% from October to November, a fourth contraction in five months which shows that both buyers and sellers remain on the sidelines in the current market environment. It should also be noted that a very high proportion of sellers are changing their minds, while we estimate that about one in five listings are withdrawn during the month. The level of sales is still allowing supply to rebuild, with the number of months of inventory increasing from 3.9 to 4.2 in November. While easing, market conditions are still pointing in the direction of a favourable to sellers market with supply still very low on a historical basis. Housing starts were essentially steady in November at a level way above historical trends (-0.4K to 264.2K, seasonally adjusted and annualized). This was better than consensus expectations calling for a decline. That said, the prior months result was revised downwards from 267.1 to 264.6K. The Teranet-National Bank Composite National House Price lndexTM decreased by 1.1% in November compared to the previous month and after adjusting for seasonal effects, a fifth consecutive monthly decrease. After adjusting for seasonal effects, 8 of the 11 markets in the composite index were down during the month: Montreal (-2.2%), Hamilton (-1.9%), Vancouver (-1.5%), Ottawa-Gatineau (-1.3%), Winnipeg (-1.1%), Quebec City (-1.1%), Toronto (-0.9%) and Calgary (-0.8%). Conversely, the Halifax (+l.6%), Victoria (+0.9%) and Edmonton (+0.3%) markets were up. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf
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Residential Mortgage Industry Report - Fall 2022 Edition

12/15/2022

From CMHC In this Fall 2022 edition, we find the following: Recent mortgage market trends Mortgage growth slowed down as interest rates hiked in the second quarter of 2022. Mortgage consumers are increasingly turning back to fixed rates as interest rates rapidly increase and the discount on variable interest rates vanishes. Declining ratios of mortgage loan approvals to applications show it is increasingly difficult for potential borrowers to get qualified for loans subject to the stress test. The share of mortgages in arrears (i.e. delinquent for 90 days or more) have continued to trend downwards across all types of lenders. Housing Finance Research at-a-glance In the third quarter of 2022, consumers without a mortgage registered notable delinquency rate increases in auto loans and credit cards. Mortgage lending growth by alternative lenders outpaces conventional lenders. Their portfolio metrics indicate a decreasing risk profile. Mortgage borrowers in the alternative lending space are more likely to renew their loans as it becomes harder to qualify with traditional lenders. https://assets.cmhc-schl.gc.ca/sites/cmhc/professional/housing-markets-data-and-research/housing-research/research-reports/housing-finance/residential-mortgage-industry-report/2022/residential-mortgage-industry-report-fall-2022-en.pdf?rev=239fc8ea-a885-430f-97fe-dd700161d872
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Bank of Canada increases policy interest rate by 50 basis points, continues quantitative tightening

12/7/2022

The Bank of Canada today increased its target for the overnight rate to 4%, with the Bank Rate at 4% and the deposit rate at 4%. The Bank is also continuing its policy of quantitative tightening. Inflation around the world remains high and broadly based. Global economic growth is slowing, although it is proving more resilient than was expected at the time of the October Monetary Policy Report (MPR). In the United States, the economy is weakening but consumption continues to be solid and the labour market remains overheated. The gradual easing of global supply bottlenecks continues, although further progress could be disrupted by geopolitical events. In Canada, GDP growth in the third quarter was stronger than expected, and the economy continued to operate in excess demand. Canadas labour market remains tight, with unemployment near historic lows. While commodity exports have been strong, there is growing evidence that tighter monetary policy is restraining domestic demand: consumption moderated in the third quarter, and housing market activity continues to decline. Overall, the data since the October MPR support the Banks outlook that growth will essentially stall through the end of this year and the first half of next year. CPI inflation remained at 6.9% in October, with many of the goods and services Canadians regularly buy showing large price increases. Measures of core inflation remain around 5%. Three-month rates of change in core inflation have come down, an early indicator that price pressures may be losing momentum. However, inflation is still too high and short-term inflation expectations remain elevated. The longer that consumers and businesses expect inflation to be above the target, the greater the risk that elevated inflation becomes entrenched. https://www.bankofcanada.ca/2022/12/fad-press-release-2022-12-07/
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Housing affordability: Back to the 1980s!

12/2/2022

From National Bank of Canada We remain in the midst of the longest sequence of declining home affordability since the 1986-1989 episode (11 quarters). The magnitude of the deterioration, however, is much more pronounced this time (25.5 p.p. vs. 20.2 p.p. in the 1980s). As a result, the mortgage ona representative home in Canada now takes 67.3% of income to service, the most since 1981. A first since the second quarter of 2019 is the downturn in housing prices that has mitigated slightly the impact on affordability of still rising mortgage rates. Our 5-year benchmark mortgage rate used to calculate our affordability metrics rose 75 bps in the third quarter of the year. While this surge was less significant than the one observed in the previous quarter, it propelled the benchmark mortgage rate to its highest level since 2010. To give an idea of scale, all else being equal, a 75-bps increase represents an extra 300$ (or an 8.1% increase) on the monthly mortgage payment for a representative home in Canada. With our affordability indexes at extreme levels in most markets, we see further declines in housing prices. The slowdown in real estate activity in several markets is expected to result in a cumulative 15% decline in home prices in 2023 from the peak (-7.7% to date). This, combined with a stabilization of the benchmark 5-year mortgage rate, should improve affordability in the coming quarters. HIGHLIGHTS: Canadian housing affordability deteriorated for a seventh consecutive quarter in Q322. The mortgage payment on a representative home as a percentage of income (MPPI) rose 3.8 points, a deceleration from the 10.2-point increase in Q222. Seasonally adjusted home prices decreased 1.1% in Q322 from Q222; the benchmark mortgage rate (5-year term) rose 75 bps, while median household income rose 0.9%. Affordability deteriorated in all the ten markets covered in Q3. On a sliding scale of markets from worst deterioration to least: Vancouver, Victoria, Calgary, Montreal, Toronto, Quebec, Edmonton, Ottawa-Gatineau, Hamilton, Winnipeg. This was the seventh consecutive quarter with a worsening in all markets. Countrywide, affordability deteriorated 2.7 pp in the condo portion vs. a 4.8 pp deterioration in the non-condo segment. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/housing-affordability.pdf
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The housing market has stabilized in October

11/24/2022

Summary On a seasonally adjusted basis, home sales increased 1.3% from September to October, the first monthly gains in eight months. Despite this growth in sales, this should not be seen as the beginning of an upward trend, but more like a stabilization of the market, with sales now 35.6% below their February level. This is the first time in four months that new listings are up with an increase of 2.2% from September to October. Despite the increase in soles, the increase in new listings allowed supply to accumulate, resulting in the number of months of inventory increasing from 3.7 to 3.8 in October. We are not yet seeing a large influx of sellers at this time, so supply is still very low on a historical basis and market conditions are still pointing in the direction of a favourable to sellers market. This situation is also present in the majority of Canadian provinces, while only B.C. and Manitoba close to indicating a favourable to buyers market. Housing starts declined by 31.8K in October to 267.1K (seasonally adjusted and annualized) after having reached their highest level for 2022 in the prior month while the consensus was calling for a decline to 275K. Storts continued to be well above their long-term average, despite still increasing interest rates. The Teranet-National Bank Composite National House Price Index decreased by 0.8% in October compared to the previous month and after seasonal adjustments. Nine of the 11 markets in the composite index were down during the month: Halifax (-4.7%), Hamilton (-2.8%), Winnipeg (-2.4%), Victoria (-2.0%), Quebec City (-1.7%), Toronto (-1.1%), Ottawo-Gotineau (-1.1%), Montreal (-1.0%) and Vancouver (-0.3%). Conversely, the Calgary (+1.8%) and Edmonton (+2.0%) markets were still up. https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/economic-news-resale-market.pdf
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Canadian home sales edge up from September to October

11/18/2022

Statistics released by the Canadian Real Estate Association (CREA) show national home sales edged a little higher in October 2022. HIGHLIGHTS National home sales were up 1.3% on a month-over-month basis in October. Actual (not seasonally adjusted) monthly activity came in 36% below October 2021. The number of newly listed properties edged up 2.2% month-over-month. The MLS Home Price Index (HPI) declined by 1.2% month-over-month and was down 0.8% year-over-year. The actual (not seasonally adjusted) national average sale price posted a 9.9% year-over-year decline in October. https://stats.crea.ca/en-CA/
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Teranet-National Bank House Price Index - Canada: A second consecutive record decline in September

11/10/2022

From National Bank of Canada In September, the seasonally adjusted composite index fell by 2.0%, matching the previous months record decline and representing a fifth consecutive monthly contraction. Since its peak in May, the composite index (not seasonally adjusted) has already declined by 7.0%, whereas during the 2008 financial crisis, prices fell by only 6.2% over the same period and by 9.2% in total over eight months. In a context where monetary policy will continue to be tightened in the coming months, house prices should continue their contraction and exceed that experienced during the financial crisis of 2008. Indeed, we anticipate a record cumulative decline of about 15% nationally by the end of 2023, assuming a policy rate that tops out around 4.0% and a Bank of Canada that throws some weight behind lowering rates in the second half of 2023. Although corrections are observed in the vast majority of markets covered by the index, the CMAs that have experienced the most significant price growth over the past two years are also those that have experienced the most significant declines to date. As a result, the price correction is expected to be more significant in Ontario, British Columbia and the Maritimes, while it is expected to be less significant in the Prairies, which are favoured by a buoyant economic environment. HIGHLIGHTS: The Teranet-National Bank Composite National House Price Index decreased by 2.0% in September compared to the previous month and after seasonal adjustments. After adjusting for seasonal effects, 8 of the 11 markets in the composite index were down during the month: Victoria (-5.9%), Vancouver (-3.5%), Hamilton (-2.1%), Montreal (-1.9%), Toronto (-1.8%), Winnipeg (-1.7%), Ottawa-Gatineau (-1.0%), and Quebec City (-0.1%). Conversely, the Calgary (+1.2%), Halifax (+1.1%) and Edmonton (+0.2%) markets were still up. From September 2021 to September 2022, the composite index increased by 6.0%. This growth was driven by Halifax (16.4%), Calgary (14 .7%) and Montreal (10.5%). Growth was lower than average in Winnipeg (5.9%). Hamilton (5.6%), Edmonton (5.6%), Ottawa-Gatineau (5.0%), Victoria (4.7%), Toronto (4.5%) and Vancouver (3.9%). https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/economic-news-teranet.pdf
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Canada: Home sales and new listings continued to slide in September

11/4/2022

From National Bank of Canada On a seasonally adjusted basis, home sales fell 3.9% from August to September, bringing the level of sales 18.9% below its 10-year average. This was the seventh consecutive decline for this indicator, with sales down a cumulative 36.2% between February and September. Declines were observed in every province and in 60% of all local markets. We expect the current moderation in sales to continue going forward as the Bank of Canada continues to increase its overnight rate in restrictive territory. The rapid rise in interest rates by the central bank is certainly limiting the purchasing capacity of households while also having a psychological effect on some buyers who are waiting to see how high rates will stabilize before taking action. Rising interest rates and the slowdown in the market did not provoke an influx of sellers for the moment. On the contrary, new listings declined 0.8% between August and September, a third monthly drawback in a row. Overall, the number of months of inventory rose from 3.5 to 3.7 months in September, the highest level since May 2020. Based on the active-listings-to-sales ratio, market conditions loosened in the country and are still indicating a balanced market. Six provinces out of 10 are now in balanced territory: B.C., Alberto, Saskatchewan, Manitoba, Ontario and P.E.. The others continued to indicate market conditions favourable to sellers mainly due to lack of supply. On a year-over-year basis, home sales were down 32.2% compared to the second-strongest month of September in history last year. Sales were down in every province on a year-over-year basis, with the largest decline observed in B.C. (-45.2%) and the smallest in Saskatchewan (-7.3%). For the first three quarters of 2022, cumulative sales were down 21.9% compared to the same period in 2021. https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/economic-news-resale-market.pdf
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Bank of Canada increases policy interest rate by 50 basis points, continues quantitative tightening

10/27/2022

The Bank of Canada today increased its target for the overnight rate to 3%, with the Bank Rate at 4% and the deposit rate at 3%. The Bank is also continuing its policy of quantitative tightening. Inflation around the world remains high and broadly based. This reflects the strength of the global recovery from the pandemic, a series of global supply disruptions, and elevated commodity prices, particularly for energy, which have been pushed up by Russias attack on Ukraine. The strength of the US dollar is adding to inflationary pressures in many countries. Tighter monetary policies aimed at controlling inflation are weighing on economic activity around the world. As economies slow and supply disruptions ease, global inflation is expected to come down. In the United States, labour markets remain very tight even as restrictive financial conditions are slowing economic activity. The Bank projects no growth in the US economy through most of next year. In the euro area, the economy is forecast to contract in the quarters ahead, largely due to acute energy shortages. Chinas economy appears to have picked up after the recent round of pandemic lockdowns, although ongoing challenges related to its property market will continue to weigh on growth. Overall, the Bank projects that global growth will slow from 3% in 2022 to about 1% in 2023, and then pick back up to roughly 2% in 2024. This is a slower pace of growth than was projected in the Banks July Monetary Policy Report (MPR). In Canada, the economy continues to operate in excess demand and labour markets remain tight. The demand for goods and services is still running ahead of the economys ability to supply them, putting upward pressure on domestic inflation. Businesses continue to report widespread labour shortages and, with the full reopening of the economy, strong demand has led to a sharp rise in the price of services. https://www.bankofcanada.ca/2022/10/fad-press-release-2022-10-26/
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CMHL Housing Supply Report - Canadian Metropolitan Areas

10/20/2022

Highlights After a boom recorded last year, housing starts in the countrys six largest census metropolitan areas (CMAs) fell 5% in the first half of 2022. The decrease observed for apartments (-9%) is the main cause of this drop. On an annualized basis, however, housing starts in the first half of 2022 remained high compared to the level of construction over the past five years. Additionally, there was a lot of contrast between the six urban centres studied. Indeed, in the first half of the year, housing starts were up in Edmonton, Calgary and Toronto, while declines were observed in Vancouver, Ottawa and Montral. The effects of rising interest rates and construction costs could have an even greater impact on housing starts in the coming months. New data on physical construction time for housing reveal important differences across centres and dwelling types, which has an impact on the affordability of the end product. Cities that build a lot of large, tall apartment structures will risk having housing construction sectors that are less responsive to a rapid need for new housing units. This is consistent with what is observed in Vancouver and Toronto. Low-rise apartment structures, such as those built in abundance in Montral, take much less time to build than taller apartment structures with a similar number of units. https://assets.cmhc-schl.gc.ca/sites/cmhc/professional/housing-markets-data-and-research/market-reports/housing-supply-report/housing-supply-report-2022-11-en.pdf?rev=74c50e35-d0a7-4131-b6a5-5829967ed5d1
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The road ahead for the economy and housing — fall 2022 update

10/14/2022

Highlights Inflationary pressures have been stronger and more persistent than expected since we published our Housing Market Outlook in April 2022. This has led to significantly sharper than predicted interest rate hikes in Canada and other economies. Interest rates are expected to rise further given the need to reduce inflation. The Canadian economy will enter a modest recession by the end of 2022 and start recovering in the second half of 2023. The national house price is expected to decline by close to 15% by Q2 2023 from its historical peak in Q1 2022 as housing demand slows with rising interest rates and deteriorating economic and income conditions. Despite this house price decline, ownership affordability will not improve as the benefit from lower prices will be offset by rising interest rates. Rental affordability pressures will increase with rental demand as fewer renter households can access ownership. https://www.cmhc-schl.gc.ca/en/blog/2022/road-ahead-economy-housing-fall-2022-update
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To buy or to rent: The housing market continues to be reshaped by several factors as Canadians search for an affordable place to call home

10/13/2022

The homeownership rate falls The proportion of Canadian households who own their homeor the homeownership rate (66.5% in 2021)is on the decline in Canada after peaking in 2011 (69.0%). The growth in renter households (+21.5%) is more than double the growth in owner households (+8.4%). Adults under the age of 75 were less likely to own their home in 2021 than adults in that age range a decade earlierespecially young millennials aged 25 to 29 years (36.5% in 2021 vs. 44.1% in 2011). A large share of newer builds are rentals Recently built dwellings are increasingly likely to be occupied by renters40.4% of the housing built in the five years ending in 2021 was tenant-occupied, the highest tenant rate next to that of dwellings built in the 1960s post-war apartment boom, at 44.5%. Over one-third of recently built dwellings, those constructed from 2011 to 2021, were occupied and primarily maintained by millennial (36.6%) renters or owners in 2021, the largest share of any generation. Millennials also represented the largest share of condominium occupants (30.2%) compared with the other generations. The share of condominiums continues to rise The rising trend of condominium construction continuesthe share of occupied dwellings that are condominiums edged up from 13.3% in 2016 to 15.0% in 2021. Most condominiums (90.0%) are located in Canadas large cities, known as census metropolitan areas (CMAs). In Canadas CMAs, condominiums made up 39.9% of the occupied stock in the primary downtowns in 2021, and half of these downtown condos were being rented out by investors. Home values continue to surge through 2021 Expected home values rose in large and small municipalities (census subdivisions [CSDs]) in Ontario and British Columbia from 2016 to 2021. Among CSDs, 77.8% in Ontario and 46.1% in British Columbia saw the average expected value of homes rise by over 50%. Differences in the impact of temporary COVID-19 benefits on household incomesfor renters and for homeownerswere a key contributor to the different degrees of improvement in housing affordability seen for each group, from 2016 to 2021. Canadians find their housing more affordable in 2021 because of higher incomes The rate of unaffordable housing, or the proportion of households that spent 30% or more of their income on shelter costs, fell from 24.1% in 2016 to 20.9% in 2021. The rate of unaffordable housing in Canada for renters fell from 40.0% in 2016 to 33.2% in 2021, with most of the decline occurring among renters earning below the median household income of all renters (68.4% in 2016, compared with 56.0% in 2021). https://www150.statcan.gc.ca/n1/daily-quotidien/220921/dq220921b-eng.htm
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