Csilla Adkins

Summary Home sales edged up 3.7% between May and June, the first increase in five months following the beginning of the monetary easing cycle by the Bank of Canada in June. On the supply side, new listings increased 1.5% from May to June, the fifth advance in six months. Active listings rose by 1.2% in June, the third consecutive month of growth and the highest level since March 2020. Meanwhile, the number of months of inventory (active listings-to-sales) decreased from 4.3 in May to 4.2 in June, a level back in line with its pre-pandemic level. Market conditions tightened slightly during the month and remained tighter than their historical average in most provinces. They were balanced in Manitoba and B.C., and softer than average in Ontario. Housing starts decreased 23.5K in June to 241.7K (seasonally adjusted and annualized), a result below the median economist forecast calling for a 254.1K print. Urban starts decreased by 23.2K (to 223.2K) on a decline in the multi-family segment (+23.9K to 180.2K) while the single-family segment was up marginally (+0.7K to 43.0). Starts decreased in Vancouver (-3.0K to 20.6K), Toronto (-19.9K to 34.3K), and Calgary (-1.0K to 22.5K), while they increased in Montreal (+6.6K to 35.0K). At the provincial level, the most pronounced decreases in total starts were registered in Ontario (-19.1K to 67.6K), Alberta (-6.0K to 42.3K), and B.C. (-5.3K to 40.8K). Meanwhile, notable increases were seen in Manitoba (+6.3K to 10.3K), Nova Scotia (+3.2K to 12.1K), and Saskatchewan (+2.8K to 4.6K). The Teranet-National Bank Composite National House Price Index remained stable from May to June, after seasonal adjustments. Five of the 11 markets in the composite index were up during the month: Winnipeg (+3.9%), Edmonton (+2.3%), Quebec City (+1.1%), Calgary (+0.1%) and Toronto (+0.1%). Conversely, prices fell in Hamilton (-2.2%), Halifax (-0.8%), Ottawa-Gatineau (-0.8%), Vancouver (-0.3%) and Montreal (-0.3%), while they remained stable in Victoria. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

Key Takeaways for 2024 Overall, the Canadian mortgage landscape in 2024 was relatively similar to 2023. The rate of mortgages contracted in the last 18 months were stable. Renewing vs buying. Consumers renewing their mortgage increased (62% vs 58% in 2023) whereas repeat buyers and first-time buyers decreased. Significantly more mortgage consumers were impacted this year by rising interest rates (65% vs 50% in 2023). However, most consumers had strategies in place to avoid defaulting on their mortgage. It took an average of 4.2 years for consumers to save for a down payment, with 30% of buyers receiving a gift to help with the cost. While consumers continue to have concerns or uncertainty during the home buying process, the majority (79%) still believe it is a good long-term financial investment. Nearly three times as many buyers this year said high interest rates made them delay buying a home (13% vs 5% in 2023). First-time homebuyers and newcomers were the most likely to postpone. The vast majority of consumers did research before their most recent mortgage transaction, with 52% of consumers researching exclusively online, compared to just 34% in 2023. Going green. Among homeowners who did energy efficient renovations, 93% are satisfied with the results of their renovations and 68% saw savings in their energy/electricity bills. https://assets.cmhc-schl.gc.ca/sites/cmhc/professional/housing-markets-data-and-research/housing-research/surveys/mortgage-consumer-surveys/survey-results-2024/2024-cmhc-mortgage-consumer-survey-en.pdf

From TD Economics As we had anticipated, its been a quiet spring selling season. Elevated borrowing costs and Bank of Canada uncertainty have kept buyers on the sidelines through May, leaving Canadian home sales at the lower end of their pre-Covid levels. Canadian average home prices have managed to grind higher so far this spring, but largely due to a shift to more expensive homes being sold. In contrast, benchmark prices (which are a more like for like measure) have declined. The resale market is still projected to gain traction in the second half of 2024, although weve dialed back the expected pace of gains in sales and prices relative to our March forecast. This is because borrowing costs are unlikely to fall as much as previously thought, with one fewer cut expected by the Bank of Canada this year. Whats more, the U.S. central bank is now likely to begin cutting its policy rate late in 2024, instead of the summer, which has spilled over to more limited declines in Canadian bond yields over the remainder of this year. 2025 growth forecasts for Canadian home sales and average home prices have been lifted, however, as downgraded activity in 2024 yields additional pent-up demand waiting to be unleashed, and more meaningful rate relief is delivered. Were retaining our view that price growth will outperform in the Prairies going forward, lifted by tight markets, historically strong population growth, solid affordability conditions, and economic outperformance. Elsewhere, relatively tight supply/demand balances should keep prices on the rise in Quebec and the Atlantic, although notable affordability deteriorations will prevent even stronger gains. Interprovincial migration has also begun to slow in the Atlantic, weighing on what is likely a key source of ownership demand in the region. In Ontario and B.C., average home price growth should benefit from the strongest sales gains in the country moving forward, with pent-up demand driving a recovery in activity from low levels in these two markets. In the near-term, price growth will be restrained by loose supply/demand conditions, although compositional forces could offer some offset in Ontario, as theyve done in recent months. Thereafter, historically challenging affordability backdrops should cap the pace of gains taking place in the two regions. https://economics.td.com/ca-provincial-housing-outlook

Nearly half (48%) admit to spending more than they know they should. 15% believe impulse shopping is preventing them from making real financial progress. A special report from the BMO Real Financial Progress Index reveals Canadians plan to spend more on vacations and/or travel (20%), home renovations (15%), weddings for family and/or friends (10%) and special events such as graduations and showers (9%) this summer compared to 2023. Household spending continues to be a primary driver of economic growth. According to BMO Economics, consumer confidence will likely improve following the Bank of Canadas first rate cut in four years, with expectations for another two rate cuts for the rest of 2024 and several more in 2025. Inflation is showing continued signs of calming, opening the door for further rate cuts by the Bank of Canada, said Sal Guatieri, Senior Economist, BMO. Lower borrowing costs and slower-rising living costs should provide sufficient relief to support moderate two per cent growth in consumer spending this year and next. The BMO Real Financial Progress Index explores Canadians summer spending plans and forecasts: Sizzling Summer Travels: One-in-five Canadians (20%) plan to spend more on summer travel, while 38% plan on spending the same as in 2023. 15% plan on spending less than last year. Overcast Conditions for Celebrating Milestones: Nearly a tenth of Canadians plan to spend more on weddings (9%) and special events such as graduations and showers (9%) for family and friends. More than a fifth (22%) plan to spend the same on weddings for family and/or friends and more than a quarter intend to spend the same as last year on special events (27%). Ramping Up Home Renovations: 15% plan to spend more on home renovations, while nearly a quarter (24%) will spend the same as last year. 13% intend to spend less on home renovations in 2024. Summer Splurges: For those planning on making a large purchase, including buying a car, 18% plan to spend the same and 10% plan to spend more than they did in 2023. Climbing Summer Camp Costs: 15% of parents with children under the age of 18 plan to spend more on summer camps and/or childcare and 36% intend to spend the same as last year. https://newsroom.bmo.com/2024-06-18-BMO-Survey-Canadian-Summer-Spending-Heats-Up

Canadas population surpassed 41 million for the first time on April 1, marking an increase of nearly a quarter-million people from the previous quarter. The yearly rise of 1.27 million set a new record, while the 3.2 per cent growth rate was the highest since 1958 and more than twice the historical average, says Sal Guatieri, BMO Senior Economist and Director of Economics in a recent report. Net international migration of 1.24 million drove almost all the rise, with two-thirds (828,000) propelled by temporary immigration. If, as planned, the federal government slashes the number of temporary immigrants from 6.8% of the population to 5% within three years, then overall growth will slow to around 1%. A growing population propelled by permanent immigration targets of half a million per year will still support the housing market, but in a much more sustainable manner. Builders will have a decent chance of keeping up with household formation, reducing the risk of markets overheating and prices overshooting income growth. Poor affordability, namely in B.C. and Ontario, is not (yet) having a serious effect on international migration. Ontarios population grew 3.5% in the past year and B.C.s rose 3.3%, both much faster than usual and still leading all provinces except for Alberta, whose population exploded 4.4%, the most since 1981. Ontario and Albertas population growth is about double the long-run norm. All provinces are attracting more international migrants than usual, even pricey Ontario (net 93,000) and B.C. (40,000), with Alberta (33,000) punching above its weight. But regional affordability differences are influencing where migrants, including longtime residents, eventually end up.The biggest increases in population relative to historical norms are in Saskatchewan, Manitoba, Quebec, and three Atlantic Provinces. What do all six regions have in common? Still-decent affordability. The sole exception is Newfoundland Labrador with still subdued population growth of 1.0%, though thats twice the norm. A total 356,000 people moved between provinces in the past year, also more than usual. This is where differences in housing costs come to the fore. Ontario had a net outflow of 32,000 people, trending at the worst levels on record, while B.C. lost 10,000 folks to other provinces. The hands-down winner of the interprovincial migration sweepstakes is Alberta with a net gain of 53,000, tracking the most on record. And its no coincidence that the biggest contributor to this gain is people leaving B.C. and Ontario. More Canadians are also moving to Atlantic Canada. While NL did see a small net outflow, this followed a rare inflow in the prior two years. Quebec, Saskatchewan and Manitoba also lost residents to other provinces, but Quebecs net outflow was much smaller than usual. Source: https://economics.bmo.com/en/publications/detail/0aa3f8dd-43d3-4167-ac05-682ddb7765be/

TD Provincial Economic Forecast Provincial economies are performing broadly as expected. Activity is likely to remain subpar across most of Canada, as regional economies continue to absorb the impact of elevated rates. We still see scope for growth outperformances in the Atlantic Region and Prairies, with somewhat weaker expansions likely in Ontario, B.C and Quebec. The Bank of Canada has begun to normalize its policy rate. However, the process will be gradual, with more significant progress in 2025. By late this year, the U.S. central bank should also be trimming its policy rate, downwardly pressuring Canadian yields and setting the stage for meaningful rate relief. All provinces will benefit, particularly those with the most highly indebted households such as Ontario, B.C., and Alberta. Falling borrowing costs will also deliver a shot in the arm to Canadian housing markets later in the year, changing the momentum from a spring market that has been subdued. Home sales growth should be particularly sturdy in B.C. and Ontario given pent-up demand, although affordability pressures will limit price gains. In contrast, markets in the Prairies should continue to outperform. Population growth across the nation continued to balloon over the first quarter of 2024, notably in Alberta, Ontario, and PEI. This may be the last surge before we see population growth rates slowly taper as a result of recently announced policies by the federal government. For now, decent employment gains have not been able to keep pace with the quickly growing labour force, leading to higher unemployment rates across most jurisdictions. We see jobless rates generally peaking by the end of this year before gently pulling back in 2025. https://economics.td.com/provincial-economic-forecast

Summary Home sales edged down 0.6% between April and May, a fourth consecutive monthly decline. On the supply side, new listings increased 0.5% from April to May, the fourth advance in five months. Active listings rose by 4.2% in May, the second consecutive month of growth and the highest level since March 2020. Meanwhile, the number of months of inventory (active listings-to-sales) increased from 4.2 in April to 4.4 in May, a level now back in line with its pre-pandemic level. Market conditions loosened during the month but remained tighter than their historical average in most provinces. They were balanced in Manitoba and B.C., and softer than average in Ontario. Housing starts jumped 23.4K in May to 264.5K (seasonally adjusted and annualized), a result well above the median economist forecast calling for a 245.1K print. Urban starts increased by 24.7K (to 246.1K) withs gains in both the multi-family segment (+24.0K to 203.1K) and the single-family segment (+0.8K to 43.0K). Starts increased in Montreal (+14.4K to 28.3K), Toronto (+17.3K to 54.3K), and Calgary (+1.4K to 23.4K), while they decreased in Vancouver (-11.1K to 23.5K). At the provincial level, the most pronounced increases in total starts were registered in Qubec (+19.4K to 59.6K), Ontario (+12.4K to 86.3K), and New Brunswick (+3.5K to 7.0K). Meanwhile, notable decreases were seen in British Columbia (-8.4K to 46.5K) and Manitoba (-4.8K to 3.5K). The Teranet-National Bank Composite National House Price Index rose by 0.5% from April to May, after seasonal adjustments. Seven of the 11 markets in the composite index were up during the month: Halifax (+1.5%), Hamilton (+1.1%), Calgary (+1.0%), Vancouver (+1.0%), Victoria (+0.8%), Toronto (+0.5%) and Quebec City (+0.5%). Conversely, prices fell in Edmonton (0.7%), Winnipeg (-0.6%) and Ottawa-Gatineau (-0.2%), while they remained stable in Montreal. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

ON TRACK IN SOME AREAS, A BUMPY ROAD AHEAD IN OTHERS Population growth continues to surge. Mays Labour Force Survey data reported a 3.6% (S.A.A.R.) increase in the 15 year old+ population compared to April. This 97,600 increase since the release of last months report maintained the trend of robust population growth through 2024 so far, with the last three months averaging growth of 3.7% (S.A.A.R.). Compared to May of last year, Canadas 15+ population is up by almost 1.1 million. The increase in the labour force population is down by roughly half when compared to Aprils explosive growth numbers, although m/m growth of 3% (S.A.A.R.) is still significantly high, especially when compared to pre-pandemic levels. A quarter of the year recorded, a quarter of the goal reached. Canada admitted another 34,785 permanent residents among its major categories in March, totalling 121,620 admissions for the year so far, approximately 25% of the annual goal of 485,000 the federal government set for 2024. https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.canada-and-us-economics-.economic-commentary.population-growth.-june-10--2024-.html

From Scotiabank We expect the Bank of Canada to cut by 25bps at each of the next three meetings. Inflation is on a good downward path though growth in the interest rate-sensitive parts of the economy remains surprisingly strong. Positive risks to the outlook for growth and inflation remain as interest rates come down. We are particularly mindful of the response in real estate markets and household spending. Any materialization of upside risks would imperil future rate cuts. Rate cuts have finally begun in Canada. With inflation hopefully on a sustained downward path despite the interest rate-sensitive parts of our economy performing surprisingly well, it is now clear that the Bank of Canada has decided rate relief is necessary. That is great news for borrowers if the Bank of Canada follows through with additional cuts. We think they will, though we remain concerned about upside risks to inflation given rising wages and falling productivity, the surprising strength in consumption, the serial over-stimulation by the federal and provincial governments, and the potential for a housing market rebound. As a result of the latest decision and the communications around that we are changing our Bank of Canada view and now expect that Governor Macklem will cut the policy rate at each of the next three meetings, for a total of 100bps of cuts this year. https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.global-outlook-and-forecast-tables.scotiabank%27s-forecast-tables.2024.june-6--2024.html

From National Bank of Canada In the first rate decision with material uncertainty in a year, the BoC opted lower the target for the overnight rate by 25 basis points, a decision in line with market expectations and the consensus forecast. This makes the BoC the first G7 central bank to ease policy this year, though the ECB is widely expected to follow suit tomorrow. Citing clear progress in core inflation, in addition to ongoing sub-potential growth and a rebalancing labour market, the press release noted monetary policy no longer needs to be as restrictive. The focus now turns to the pacing of cuts in this nascent easing cycle. In the opening statement to the presser, Macklem said its reasonable to expect further easing as long as inflation continues to ease. That puts a July cut squarely in focus and wed be inclined to bet they will ease again at the next meeting. At the same time, wed note that earlier BoC communications indicated that monetary policy easing this year would be gradual. Macklem confirmed this view in the press conference. So although back-to-back cuts may be instituted to start, were skeptical theyll continue at the same pace thereafter. We agree with market expectations that 50 basis points of additional rate relief is appropriate in 2024. In contrast, the consensus sees this marking the start of a more aggressive easing campaign. The median expectation is for a 4% policy rate by year-end. Three more cuts over the last four decisions of the year, isnt a pace of cuts we would characterize as gradual and isnt as likely to materialize barring a more material slowdown in the economy. The Banks next decision will take place on July 24th. The Summary of Deliberations for todays decision will be released on June 19th. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/boc-policy-monitor.pdf

The Bank of Canada today reduced its target for the overnight rate to 4%, with the Bank Rate at 5% and the deposit rate at 4%. The Bank is continuing its policy of balance sheet normalization. The global economy grew by about 3% in the first quarter of 2024, broadly in line with the Banks April Monetary Policy Report (MPR) projection. In the United States, the economy expanded more slowly than was expected, as weakness in exports and inventories weighed on activity. Growth in private domestic demand remained strong but eased. In the euro area, activity picked up in the first quarter of 2024. Chinas economy was also stronger in the first quarter, buoyed by exports and industrial production, although domestic demand remained weak. Inflation in most advanced economies continues to ease, although progress towards price stability is bumpy and is proceeding at different speeds across regions. Oil prices have averaged close to the MPR assumptions, and financial conditions are little changed since April. In Canada, economic growth resumed in the first quarter of 2024 after stalling in the second half of last year. At 1.7%, first-quarter GDP growth was slower than forecast in the MPR. Weaker inventory investment dampened activity. Consumption growth was solid at about 3%, and business investment and housing activity also increased. Labour market data show businesses continue to hire, although employment has been growing at a slower pace than the working-age population. Wage pressures remain but look to be moderating gradually. Overall, recent data suggest the economy is still operating in excess supply. CPI inflation eased further in April, to 2.7%. The Banks preferred measures of core inflation also slowed and three-month measures suggest continued downward momentum. Indicators of the breadth of price increases across components of the CPI have moved down further and are near their historical average. However, shelter price inflation remains high. With continued evidence that underlying inflation is easing, Governing Council agreed that monetary policy no longer needs to be as restrictive and reduced the policy interest rate by 25 basis points. Recent data has increased our confidence that inflation will continue to move towards the 2% target. Nonetheless, risks to the inflation outlook remain. Governing Council is closely watching the evolution of core inflation and remains particularly 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. https://www.bankofcanada.ca/2024/06/fad-press-release-2024-06-05/

Canadian new home prices increase slightly in April The national index rose by 0.2% monthly in April on the strength of increases in large urban centres such as Edmonton, Calgary, and Vancouver. Overall, prices increased in 5 of the 27 census metropolitan areas (CMAs) surveyed, were unchanged in 15 CMAs and declined in 7. The largest price gains are reported by cities in Alberta The largest month-over-month increases in April were reported in Edmonton (+1.1%) and Calgary (+ 0.9%). Builders attributed the price gains to construction costs along with favourable market conditions. In Alberta, the rapidly growing population is fuelling demand for new housing. According to the latest population estimates of Canada, Alberta (+4.4%) recorded the fastest year-over-year rise in population in Canada in the first quarter of 2024. The largest monthly declines in April were seen in KitchenerCambridgeWaterloo (-0.4%) and Winnipeg (-0.4%), where builders linked the decreases to weak market conditions. National new home prices edge down year over year in April Nationally, the prices of new homes edged down (-0.1%) in April compared with the same month last year. This was less than the year-over-year decline seen in March 2024 (-0.4%). The largest year-over-year declines in April were registered in Ottawa (-4.4%) and Saskatoon (-2.5%), while the largest increases were in Calgary (+3.9%), Vancouver (+1.3%) and Qubec (+1.2%). https://www150.statcan.gc.ca/n1/daily-quotidien/240523/dq240523c-eng.htm

HIGHLIGHTS: Canadian housing affordability posted a first improvement in three quarters in Q124. The mortgage payment on a representative home as a percentage of income (MPPI) fell 3.1 percentage points, the largest one quarter improvement since the second quarter of 2019. Seasonally adjusted home prices decreased 0.6% in Q124 from Q423; the benchmark mortgage rate (5-year term) slumped 32 basis points, while median household income rose 1.2%. Affordability improved in all ten markets covered in Q1. On a sliding scale of markets from best progression to least: Vancouver, Victoria, Toronto, Hamilton, Montreal, Winnipeg, Ottawa-Gatineau, Edmonton, Quebec, Calgary. Countrywide, affordability enhanced 2.2 pp in the condo portion vs. a 3.4 pp betterment in the non-condo segment. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/housing-affordability.pdf

Key Highlights Even with a record-high 650,000 construction workers in 2023, Canadas housing production of 240,267 units was below the potential of over 400,000 homes per year. While more human and financial resources have been committed to residential construction over the past several years, housing starts have not kept the pace. Meeting the Governments Housing Plan of achieving the goal of 3.87 million new homes by 2031 demands both regulatory reforms and industry consolidation to increase efficiency and productivity. The Housing Accelerator Fund is a huge step in achieving this outcome. https://www.cmhc-schl.gc.ca/blog/2024/what-canada-potential-capacity-housing-construction

Summary Home sales edged down 1.7% between March and April, a second monthly decrease in five months. On the supply side, new listings increased 2.8% from March to April, the third advance in four months. Active listings jumped 5.8% in April, following stabilization the previous month. Overall, the number of months of inventory (active listings-to-sales) increased from 3.9 in March to 4.2 in April. Market conditions loosened during the month but remained tighter than their historical average in most provinces. They were balanced in Manitoba and B.C., and softer than average in Ontario. Housing starts remained relatively stable in April as they edged down 2.0K to 240.2K (seasonally adjusted and annualized), a result in line with the median economist forecast calling for a 240.0K print. Urban starts decreased by 0.2K (to 220.1K) as a decline for the multi-family segment (-1.2K to 178.5K) was almost fully offset by an increase in the single-family segment (+0.9K to 41.7K). Starts increased in Montreal (+4.0K to 13.9K) and Calgary (+0.1K to 21.9K), while they decreased in Vancouver (-7.1K to 34.6K) and Toronto (-5.0K to 37.0K). At the provincial level, the most pronounced increases in total starts were registered in Alberta (+5.8K to 45.9K), Manitoba (+2.7K to 8.2K) and New Brunswick (+1.4K to 3.6K). Meanwhile, notable decreases were seen in Qubec (-6.7K to 39.9K) and British Columbia (-6.0K to 54.8K). The Teranet-National Bank Composite National House Price Indexremained stable from March to April, after seasonal adjustments. Seven of the 11 markets in the composite index were up during the month: Edmonton (+2.3%), Montreal (+1.9%), Calgary (+1.9%), Ottawa-Gatineau (+0.5%), Vancouver (+0.4%), Hamilton (+0.4%) and Winnipeg (+0.3%). Conversely, declines occurred in Halifax (-0.7%), Toronto (-1.2%), Victoria (-1.9%) and Quebec City (-2.1%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

Employment increased by 90,000 (+0.4%) in April, and the unemployment rate was unchanged at 6.1%. The employment rate held steady at 61.4%, following six consecutive monthly declines. In April, employment rose among core-aged men (25 to 54 years old) (+41,000; +0.6%) and women (+27,000; +0.4%) as well as for male youth aged 15 to 24 (+39,000; +2.8%). There were fewer women aged 55 and older employed (-16,000; -0.8%), while employment was little changed among men aged 55 and older and female youth (aged 15 to 24). Employment gains in April were driven by part-time employment (+50,000; +1.4%). Employment increased in April in professional, scientific and technical services (+26,000; +1.3%), accommodation and food services (+24,000; +2.2%), health care and social assistance (+17,000; +0.6%) and natural resources (+7,700; +2.3%), while it fell in utilities (-5,000; -3.1%). Employment increased in Ontario (+25,000; +0.3%), British Columbia (+23,000; +0.8%), Quebec (+19,000 +0.4%) and New Brunswick (+7,800; +2.0%) in April. It was little changed in the other provinces. Total hours worked rose 0.8% in April and were up 1.2% compared with 12 months earlier. Average hourly wages among employees increased 4.7% (+$1.57 to $34.95) on a year-over-year basis in April, following growth of 5.1% in March (not seasonally adjusted). In the spotlight: Over one in four workers (28.4%) have to come into work or connect to a work device at short notice at least several times a month. https://www150.statcan.gc.ca/n1/daily-quotidien/240510/dq240510a-eng.htm

Following sharp declines during the COVID‑19 pandemic, many indicators of financial stress have now returned to more normal levels. Signs of stress are concentrated primarily among households without a mortgage and survey data suggest that, of these households, renters are most affected. In contrast, indicators of stress among mortgage holders are largely unchanged, remaining at levels lower than their historical averages. Factors such as income growth, accumulated savings and reduced discretionary spending are supporting households ability to deal with higher debt payments. Over the coming years, more mortgage holders will be renewing at higher interest rates. Based on market expectations for interest rates, payment increases will generally be larger for these mortgage holders than for borrowers who renewed over the past two years. Higher debt-servicing costs reduce financial flexibility for households and businesses and make them more vulnerable in the event of an economic downturn. Signs of financial stress have risen primarily among households without a mortgage The combination of higher inflation and higher interest rates continues to put pressure on household finances. Many indicators of financial stress, which had declined during the pandemic, are now close to pre-pandemic levels. Signs of increased financial stress appear mainly concentrated among renters. The rates of arrears on credit cards and auto loans for households without a mortgagewhich includes renters and outright homeownersare back to pre-pandemic levels and continue to grow. In contrast, arrears on these products for households with a mortgage have remained low and stable. https://www.bankofcanada.ca/2024/05/financial-stability-report-2024/

Key takeaways Canadas financial system remains resilient. Over the past year, financial system participantsincluding households, businesses, banks and non-bank financial institutionshave continued to proactively adjust to higher interest rates. However, risks to financial stability remain. The Bank sees two key risks to stability, related to: Debt serviceabilityBusinesses and households continue to adjust to higher interest rates. Indicators of financial stress in both sectors were below historical averages through the COVID-19 pandemic but have been normalizing. Some indicators look to be increasing more sharply and warrant monitoring. Higher debt-servicing costs reduce financial flexibility for households and businesses and make them more vulnerable in the event of an economic downturn. Asset valuationsThe valuations of some financial assets appear to have become stretched, which increases the risk of a sharp correction that can generate system-wide stress. The recent rise in leverage in the non-bank financial intermediation sector could amplify the effects of such a correction. The financial system is highly interconnected. Stress in one sector can spread to others. Participants should continue to be proactive, including planning for more adverse conditions or outcomes. https://www.bankofcanada.ca/2024/05/financial-stability-report-2024/

13% of aspiring homeowners plan on purchasing a home in 2024. 26% plan on doing so in 2025 or later. 62% believe owning a home is still one of lifes biggest aspirations, but 56% of aspiring homeowners feel owning a home is unattainable. The BMO Real Financial Progress Index reveals the majority (72%) of aspiring homeowners are waiting until interest rates drop before purchasing a home a 4% increase from 2023 amid rising concerns about the cost of living (58%), inflation (56%) and their overall financial situation (38%), over the past three months. According to BMO Economics, homebuyers may need to wait longer for affordability relief. The Bank of Canada left interest rates unchanged in April, but left the possibility open for a rate cut by June or July 2024. Demographic forces have allowed some pent-up demand to build, and market psychology is such that many are expecting rate cuts in the second half of the year, said Robert Kavcic, Senior Economist, BMO Capital Markets. This should pull some demand off the sideline and firm up housing activity, but rates have a long way to fall still before affordability is restored to recent norms. The BMO Real Financial Progress Index found 85% of Canadians believe they are making real financial progress and over two thirds (67%) feel confident in their financial situation, but fear of unknown expenses (84%) and concerns about their overall financial situation (81%) and housing costs (74%) are among the leading sources of financial anxiety. https://newsroom.bmo.com/2024-04-29-BMO-Survey-72-of-Aspiring-Homeowners-are-Waiting-for-Rate-Cuts-Before-Buying

Eligible employees who worked from home in 2023 will be required to use the Detailed Method to claim home office expenses. The temporary flat rate method does not apply to the 2023 tax year. As an employee, you may be able to claim certain home office expenses (work-space-in-the-home expenses, office supplies, and certain phone expenses). This deduction is claimed on your personal income tax return. Deductions reduce the amount of income you pay tax on, so they reduce your overall income tax liability. Salaried employees can claim: Electricity, Heat, Water, some utilities, monthly Internet access or part of your rent. Commission employees can also claim: home insurance, property taxes and lease of a cell phone, computer and more. Review the CRA website for more. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-22900-other-employment-expenses/work-space-home-expenses.html

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

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

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

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

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

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

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

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

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

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

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

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