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PARTNERSTD: Dollars and Sense: Ready… Set... Cut! Cut! Cut!
8/30/2024
Report by TD Economics
Highlights
The Fed is finally ready to cut interest rates, but questions remain on the speed and magnitude.
We penciled in 25 basis points per meeting, with over 250 bps in cuts over this year and next.
However, now that the Fed is confident that inflation will return to target, it will prioritize a little more of the other side of its dual mandate developments in the job market to ultimately determine the speed and size of rate cuts.
The BoC has moved earlier, established a pace of 25 basis points per meeting, and already gapped 100 basis points to its U.S. counterpart. The economic bar will be higher to deliver on larger cuts than the current pace.
The Federal Reserve is just under three weeks away from delivering its first interest rate cut in four years. While at times it felt like the day would never come, inflation has finally stabilized close to the 2% target alongside a noticeable cooling in the labor market. The Feds focus has now pivoted away from just fighting inflation, to striking the right balance on its dual mandate to ensure the economic landing remains a soft one. This is the stage where markets typically get nervous on whether the Fed has got the timing right, evidenced by recent bouts of financial volatility. The emphasis will be on downside misses in the data given that the Feds policy rate is sitting at a lofty level of 5.50%. And with that, we can expect to see pricing jump around between a Fed that needs to act urgently to one that can move in a measured way. But in all circumstances, one prediction will hold firm: the Fed will cut interest rates in September, kicking off a prolonged cycle. This is not a one-and-done deal.
https://economics.td.com/ca-dollar-and-sense
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NBC Housing Market Monitor: Housing market lost its emerging momentum in July
8/28/2024
Home sales edged down 0.7% between June and July, a decline that follows a 3.4% pick up in the previous month which was due to the beginning of easing monetary policy by the Bank of Canada.
On the supply side, new listings edged up 0.9% from June to July, the sixth advance in seven months.
Active listings edged down 0.7% in July from their highest level since March 2020, the first decrease in five months. Meanwhile, the number of months of inventory (active listings-to-sales) remained stable at 4.2 during the month, a level back in line with its pre-pandemic level.
Market conditions were unchanged in July and remained tighter than their historical average in most provinces. They were balanced in Manitoba and B.C., and softer than average in Ontario.
After a slowdown in June, housing starts increased 37.9K in July to 279.5K (seasonally adjusted and annualized), a result well above the median economist forecast calling for a 245.0K print and its highest level since June 2023. Urban starts increased by 38.8K (to 261.1K) on an important gain in the multi-family segment (+38.1K to 217.3K) while the single-family segment was up marginally (+0.7K to 43.8). Starts practically doubled in Toronto (+30.7K to 65.1K), and also grew in Vancouver (+9.6K to 30.1K) and Calgary (+6.6K to 29.1K). On the other hand, they dropped significantly in Montreal (-26.0K to 9.0K) to their lowest level since February 2015 (excluding April 2020).
The TeranetNational Bank Composite National House Price Index remained virtually stable from June to July, with a marginal increase of 0.2% after adjustment for seasonal effects. Six of the 11 markets in the composite index were up over the month: Hamilton (+2.3%), Victoria (+1.0%), Halifax (+0.8%), Calgary (+0.7%), Toronto (+0.3%) and Quebec City (+0.2%). Conversely, prices fell in Ottawa-Gatineau (-0.4%), Winnipeg (-0.1%), Vancouver (-0.1%) and Montreal (-0.1%), while they remained stable in Edmonton.
https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf
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Scotiabank: Canada Housing Market: Still at the doorstep of a recovery, but hesitant to knock at the door
8/23/2024
National housing resale conditions softened from June to July as reflected by the modest decline in the sales-to-new listings ratio. Over this period, national sales declined by 0.7% (sa m/m) while new listings increased 0.9%. In July, sales were higher by 4.8% (nsa) compared to the same month in 2023.
After increasing from May to June, the sales-to-new listings ratiowhich reflects how tight resale conditions areedged down to 52.7% from June to July, essentially back to its May level, and still within the range for balanced national resale market conditions (of between 45% to 65%).
Months of inventory remained unchanged over this period at 4.2, still below its long-term (pre-pandemic) average of 5.3. And since the national market aggregates very different regional markets, there are wide variations in terms of how this indicator compares to its long-term average across provinces, ranging from less than 2 weeks above average in Ontario and British Colombia and Ontario to 5.7 months below in New Brunswick.
About 2/3 of the markets witnessed a decline in their sales-to-new listings ratio from June to July. Consequently, the number of sellers favouring markets declined from 10 in June to 5 in July while the number of balanced markets increased from 16 to 22.
https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.housing.housing-news-flash.august-15--2024.html
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NBC: Housing affordability continues to improve in Q2 2024
8/21/2024
From National Bank of Canada
Q2 2024 marked a second, albeit smaller, improvement in affordability. The amelioration was relatively widespread with 8 of the ten markets covered experiencing a decline in mortgage payment as a percentage of income (MPPI). The most significant improvement occurred in Hamilton, where a home price decline compounded on the broader trend of lower interest rates and rising incomes. On the flip side, Edmonton and Calgary saw rising home prices largely offset any relief. Overall, the composite improved with slightly higher prices not enough to offset the decline in mortgage interest rates and higher incomes. Still, the housing market remains unaffordable with the latest progress bringing the MPPI to 57.9%. Looking ahead, falling mortgage interest rates will likely be the main driver for improvements in affordability. So far, the decline in mortgage interest rates was precipitated by both expectations of rate cuts and the materialization of easing by the Bank of Canada. Given the deterioration in the growth outlook and the weakening in inflation and the labour market, we expect further central bank easing of 150bps over the next 12 months. Although the policy rate and mortgage interest rates do not always follow in lockstep, this development would provide a significant alleviation of the financing burden. At current income and home price levels, it would bring affordability halfway back to pre-pandemic levels. There is the risk, however, that lower interest rates could lift home prices, especially considering the current population boom. That said, between the payment shock from upcoming renewals and the rising unemployment rate, we do not expect much vigour in home prices for the next 12 months.
HIGHLIGHTS:
Canadian housing affordability posted a second consecutive improvement in Q224. The mortgage payment on a representative home as a percentage of income (MPPI) fell 1.1 percentage points. Seasonally adjusted home prices increased 0.4% in Q224 from Q124; the benchmark mortgage rate (5-year term) declined 11 basis points, while median household income rose 1.2%.
Affordability improved in 8 of the ten markets covered in Q2. On a sliding scale of markets from best progression to least: Hamilton, Toronto, Victoria, Ottawa-Gatineau, Vancouver, Quebec, Montreal, Winnipeg. On the flip side, Edmonton and Calgary deteriorated. Countrywide, affordability enhanced 1.1 pp in the condo portion and in the non-condo segment.
https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/housing-affordability.pdf
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Fledgling Canadian Housing Market Momentum Hits Pause in July
8/16/2024
While there were early signs of renewed momentum in June following the Bank of Canadas first interest rate cut since 2020, activity in Canadas housing market took a pause in July.
Home sales activity recorded over Canadian MLS Systems edged back by 0.7% on a month-over-month basis in July 2024, giving back a small portion of Junes post-first rate cut gain.
With another rate cut announced on July 24, weve now seen two rate cuts in a row, and the expected pace of future policy easing has steepened considerably, with markets now anticipating rate cuts at every remaining Bank of Canada decision this year, said Shaun Cathcart, CREAs Senior Economist. Combine that with a record amount of demand waiting in the wings, and the forecast for a rekindling of Canadian housing activity going into 2025 has just gone from a layup to a slam dunk.
Highlights:
National home sales edged back 0.7% month-over-month in July.
Actual (not seasonally adjusted) monthly activity came in 4.8% above July 2023.
The number of newly listed properties ticked up 0.9% month-over-month.
The MLS Home Price Index (HPI) edged up 0.2% month-over-month but was down 3.9% year-over-year.
The actual (not seasonally adjusted) national average sale price was almost unchanged (-0.2%) on a year-over-year basis in July.
https://stats.crea.ca/en-CA/
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Study: The evolving landscape of Canadian lending: Key trends in mortgage and non-mortgage loans
8/14/2024
Non-mortgage loans are above the levels seen before the pandemic
Non-mortgage loans have increased from the first quarter of 2019 and edged up in the first quarter of 2020. Over the next two quarters, non-mortgage debt levels declined as lockdowns came into full effect. Canadians were able to build up savings, reduce debt and reduce spending to bolster their finances against uncertainty as non-essential businesses closed and travel restrictions were imposed. Despite this reduction, since 2022, debt levels have risen, ultimately wiping out the previous effects. This increase in debt levels can be attributed to several factors, including inflation that peaked at 8.1% year over year in June 2022, making everyday goods and services more costly.
Uninsured mortgage loans grow faster than insured ones as house prices increase
Since 2017, uninsured mortgages have predominated in Canada, overtaking insured ones for the first time that year. From 2012 to 2019, the outstanding value of uninsured mortgages grew quarterly by 3.0% on average, while insured mortgages declined by 0.4%. This disparity widened during the pandemic as house prices soared due to lower borrowing costs and increased demand, with the quarterly growth of outstanding value of uninsured mortgages reaching 3.4% from 2020 to 2022, while insured mortgages declined by 0.5%. Rising interest rates from early 2022 through the third quarter of 2023 cooled housing market activity, decelerating the quarterly growth of uninsured mortgages to 2.0%, compared with a decline of 1.0% for insured mortgages during the same period.
Arrears for non-mortgage loans are trending upward
Households with loans in arrears, defined as those late on debt payments by 90 days or more, saw a slight increase during the first two quarters of 2020 owing to economic closures. Government support during the pandemic helped reduce arrears by increasing household disposable income. However, as interest rates rose and pandemic-related support diminished, non-mortgage loan arrears climbed again in 2022. Passenger vehicle loans (+0.18%) and credit card loans (+0.07%) saw the largest arrears increases by the third quarter of 2023 compared with the first quarter of 2019.
Mortgage loan arrears have not seen a similar rise despite increasing interest rates. By the third quarter of 2023, mortgage arrears were still below pre-pandemic levels, down 0.08% from the first quarter of 2019. Most households have yet to feel the full impact of higher interest rates, as many mortgage renewals are due in the coming years. According to the Canada Mortgage and Housing Corporation, around 2.2 million mortgages, or 45% of all outstanding mortgages in Canada (over $675 billion), will face an interest rate shock in 2024 and 2025.
https://www150.statcan.gc.ca/n1/daily-quotidien/240814/dq240814d-eng.htm
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Canadian labour force: What will happen once baby boomers retire?
8/9/2024
This study uses several demographic scenarios to illustrate how Canadas labour force could evolve from 2023 to 2041. This projection exercise produced a number of findings.
Despite the baby boomer cohorts retiring, the size of Canadas labour force is likely to increase over the next few years because of migratory increase. The scenarios show that the size of the labour force is sensitive to both immigration levels and above all, the participation rate of the Canadian population. If labour force participation in Canada in 2041 reached the same intensity as in Japan, the size of the Canadian labour force would increase in a similar way to the scenario in which 750,000 permanent immigrants are admitted annually. The increase in the overall participation rate would be five times higher in the scenario where participation rates in Canada converge toward those currently observed in Japan, compared with the increase observed in the scenario in which Canada admits 750,000 immigrants annually. The scenario in which participation rates converge toward those observed in Japan, while unlikely given the significant differences between the two societies, nevertheless illustrates the potential impact of an increase in Canadians participation rate on the growth and demographic weight of the labour force.
Canadas strong population growth, driven by large-scale immigration, brings both opportunities and challenges. While it increases the size of the labour force, it has a limited impact on the overall labour force participation rate and on the aging and renewal of the labour force. Beyond its purely demographic impact, immigration also exerts pressure on housing supply, infrastructure construction and the provision of services to the population, while also addressing unfilled job demands in certain employment sectors.
The results of this population projection exercise show that immigration is not the only lever for influencing the evolution of the Canadian labour force. According to the projections, various processes will stabilize at the start of the 2030s, when the last baby boomers turn 65. Furthermore, the projections show that immigration levels would not significantly influence the aging or rejuvenation of the future labour force if they remained relatively constant over time.
https://www150.statcan.gc.ca/n1/pub/75-006-x/2024001/article/00005-eng.htm
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Short-term rentals in the Canadian housing market
8/7/2024
The role of short-term rentals (STRs) in Canadas housing challenges remains a subject of ongoing policy debate in many Canadian cities. While there is a widespread notion that such rentals limit the availability of long-term housing, empirical analysis of their impacts has produced mixed results. This paper provides an overview of STR activity across Canada.
The paper focuses on the subset of STRs that could potentially serve as long-term housing. This subset of STRs, referred to as potential long-term dwellings (PLTDs), is intended to capture STR units that are not serving as anyones primary residence, but could potentially function as long-term housing (either as owner-occupied or rental units). The PLTD subset comprises entire units listed for more than 180 days a year, excluding vacation-type properties.
Previous research indicates that STR activity plays an increasingly significant role in the Canadian accommodation services subsector, with its share of revenues rising from an estimated 7.0% in 2017 to 15.2% in 2021. However, in the housing market, STRs still account for a small proportion of total housing units. In 2023, the estimated number of PLTDs in Canada was 107,266, a figure that represents less than 1% of total housing units in Canada. PLTDs also accounted for a small share of total housing units in Canadas largest census metropolitan areas (CMAs). However, the share of PLTDs was higher in tourist areas, particularly around ski hills. In Whistler, they constituted 35.0% of all housing units, while in Mont-Tremblant, their share was 16.4%.
https://www150.statcan.gc.ca/n1/pub/11-621-m/11-621-m2024010-eng.htm
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Summertime and the easing is easy
8/2/2024
For the second time in as many meetings, the Bank of Canada lowered the target for the overnight rate by 25 basis points, a decision in line with the consensus and market expectations. The rate reduction brings the policy rate to 4.50%, fully unwinding the two rate hikes delivered in June and July 2023. This move also pushes the BoCs policy rate 100 bps below the Federal Reserves (based on the upper bound target), marking the largest negative gap since the late 1990s. Despite the consecutive cuts and upward pressure on CORRA, balance sheet normalization will continue (as expected). Here are additional highlights from the communique and the opening statement to the press conference:
Driving the decision to cut was broad price pressures continuing to ease and ongoing excess supply lowering inflationary pressures.
Once again, there wasnt really any forward rate guidance in the press release but the opening statement to the presser reiterated that it is reasonable to expect further cuts if inflation eases in line with their forecast. He added that downside risks are taking on increased weight in our monetary policy deliberations. Note that the statement dropped the focus items that theyd previously been referring to (i.e., the balance between demand and supply, inflation expectations, wage growth, and corporate pricing behaviour). Instead, incoming information will guide future decisions.
The statement notes that excess supply is growing: With robust population growth of about 3%, the economys potential output is still growing faster than GDP, which means excess supply has increased.
On the labour market, they highlight that there are signs of slack with labour force growth outpacing employment and job seekers having more trouble finding work. Wage growth is showing some signs of moderating but remains elevated.
As for inflation, the statement notes that broad inflationary pressures are easing although shelter and some services inflation remains elevated. Governing Council is carefully assessing these opposing forces on inflation.
https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/boc-policy-monitor.pdf
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Artificial Intelligence has taken the world by storm. Here’s how Canadians are using it to help with their finances
7/31/2024
Artificial Intelligence (AI) has had many breakthroughs in the past few years, and more and more households are beginning to incorporate it in their daily routines. The BMO Real Financial Progress Index reveals a growing number of Canadians, notably Gen Z, are using artificial intelligence (AI) to help manage their finances and investments.
Among the 33% of Canadians using AI to help manage their finances, the most common uses include:
Learning more about personal finance topics (45%),
Creating and/or updating household budgets (43%),
Identifying new investment strategies (42%),
Building savings (40%), and
Creating and/or updating their financial plans (40%).
While AI is helping Canadians manage some aspects of finances, over two thirds (68%) say AI cannot understand how emotions influence financial planning.
AI is a transformative technology that can instantly analyze information and generate ideas, but peoples relationship with money is complex, personal and emotional. By making it easier to help manage finances, AI is proving a powerful tool to build financial literacy and make informed financial decisions, and together with guidance from a professional advisor, more Canadians can be empowered to conveniently manage their money, achieve their goals and make real financial progress.
https://about.bmo.com/artificial-intelligence-has-taken-the-world-by-storm-heres-how-canadians-are-using-it-to-help-with-their-finances/
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More Clarity, for the Time Being… : Scotiabank’s Forecast Tables
7/26/2024
From Scotiabank
Further rate cuts in Canada this year a certainty while we continue to believe that the Federal Reserve will cut in September.
Economic data have come in largely as expected so our forecasts remain largely unchanged. Lower interest rates will provide a mild boost to economic growth later this year, but the full impact of rate cuts will take time to materialize given the lags of monetary policy.
Clarity on interest rates and the outlook over the next few months may be fleeting. The results of the US election risk muddying the outlook substantially.
The long-awaited rate cuts are finally underway in Canada and are likely to start in the United States in September. These will eventually provide relief to the interest rate sensitive parts of the economy and may also lift business and household sentiment. These rate cuts are occurring in the context of slow, but still-positive growth, and solid progress on inflation management even though there remain substantial risks of higher inflation (linked to the sharp rise in global shipping costs and rapid wage growth and low productivity in Canada). We remain comfortable with our view that policy rates will fall by another 75 basis points in Canada this year and that the Federal Reserve will cut its policy rate by at least 50 basis points starting in September. Moreover, economic data have come in roughly as expected over the last several months, leading to only minor tweaks to the outlook for growth. All told, this forecast update is largely similar to our previous forecast. In this sense, the stability in our forecast combined with more certainty on the interest rate path suggest greater clarity in the outlook for the next several months.
https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.global-outlook-and-forecast-tables.scotiabank%27s-forecast-tables.2024.july-18--2024.html
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Bank of Canada reduces policy rate by 25 basis points to 4½%
7/24/2024
The Bank of Canada today reduced its target for the overnight rate to 4%, with the Bank Rate at 4% and the deposit rate at 4%. The Bank is continuing its policy of balance sheet normalization.
The global economy is expected to continue expanding at an annual rate of about 3% through 2026. While inflation is still above central bank targets in most advanced economies, it is forecast to ease gradually. In the United States, the anticipated economic slowdown is materializing, with consumption growth moderating. US inflation looks to have resumed its downward path. In the euro area, growth is picking up following a weak 2023. Chinas economy is growing modestly, with weak domestic demand partially offset by strong exports. Global financial conditions have eased, with lower bond yields, buoyant equity prices, and robust corporate debt issuance. The Canadian dollar has been relatively stable and oil prices are around the levels assumed in Aprils Monetary Policy Report (MPR).
In Canada, economic growth likely picked up to about 1% through the first half of this year. However, with robust population growth of about 3%, the economys potential output is still growing faster than GDP, which means excess supply has increased. Household spending, including both consumer purchases and housing, has been weak. There are signs of slack in the labour market. The unemployment rate has risen to 6.4%, with employment continuing to grow more slowly than the labour force and job seekers taking longer to find work. Wage growth is showing some signs of moderating, but remains elevated.
GDP growth is forecast to increase in the second half of 2024 and through 2025. This reflects stronger exports and a recovery in household spending and business investment as borrowing costs ease. Residential investment is expected to grow robustly. With new government limits on admissions of non-permanent residents, population growth should slow in 2025.
https://www.bankofcanada.ca/2024/07/fad-press-release-2024-07-24/
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NBC Housing Market Monitor: Home sales picked up in June following rate cut
7/19/2024
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
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2024 CMHC Mortgage Consumer Survey
7/17/2024
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
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TD Provincial Housing Market Outlook: Mediocre Second Half Sales Recovery on Deck
7/12/2024
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
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BMO Survey: Canadian Summer Spending Heats Up
7/10/2024
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
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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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