Housing Market Dipped in July

According to Shaun Cathcart, the Canadian Real Estate Association’s Senior Economist, “Following a brief surge of activity in April, housing markets have settled down in recent months, with price growth now also moderating with its usual slight lag. Sales and price growth are already showing signs of tapering off further in August in response to the Bank of Canada’s mid-July rate hike and messaging regarding above-target inflation for longer than previously expected. We’re probably looking at another round of back to the sidelines for some buyers until there’s a higher level of certainty around interest rates going forward.”

Housing Market Dipped in July

The good news is that the July inflation data, released today, will likely keep the Bank of Canada on the sidelines as core inflation has finally begun to slow. A host of economic indicators also point to Q2 GDP growth–released September 1–slowing to around 1% following the stronger-than-expected 3.1% growth in the first quarter.

Labour market tightening eased in July with the decline in employment, rise in unemployment and continued downtrend in job vacancies. The central bank also welcomes the slowdown in the housing market.

Home sales recorded over Canadian MLS® Systems posted a small 0.7% decline between June and July 2023. Activity has been showing signs of stabilizing since May. While sales increased in July in more than half of all local markets, a decline in the Greater Toronto Area (GTA) tipped the national figure slightly negative. Sales were also down in the Fraser Valley, which, together with the GTA, offset gains in Montreal, Edmonton and Calgary.

New Listings
The number of newly listed homes was up 5.6% monthly in July. Building on gains of 2.8% in April, 7.9% in May, and 5.9% in June, new listings have gone from a 20-year low in March to closer to (but still below) average levels by mid-summer.

With new listings outperforming sales in July, the sales-to-new listings ratio eased to 59.2% compared to 63% in June and a recent peak of 68% in April. That said, the measure remains above the long-term average of 55.2%.

There were 3.2 months of inventory nationally at the end of July 2023, up slightly from 3.1 months in May and June.

While this was the first month-over-month increase since January, this measure is still a full month below where it was at the beginning of 2023 and almost two months below the long-term average for this measure (about five months).

Home Prices

The Aggregate Composite MLS® Home Price Index (HPI) climbed 1.1% month-over-month in July 2023—a larger-than-normal increase for a single month but only about half as large as the gains recorded in April, May, and June. This aligns with sales having leveled off as new listings have been recovering.

Despite the smaller gain at the national level, a monthly price increase between June and July was still observed in most local markets, as has been the case since April.

The Aggregate Composite MLS® HPI now sits just 1.5% below year-ago levels, the smallest decline since October 2022. Year-over-year comparisons will likely tip back into positive territory in the months ahead because prices continued to decline through the second half of 2022.

Bottom Line

With interest stabilizing, housing activity will gradually increase as more supply comes onto the market. The Bank of Canada will likely cut rates in 25 bps increments by June next year. Without a doubt, that will be good news for the housing market.

There remains huge excess demand for housing due to the rapid population growth. While the federal and provincial governments are working hard to increase the supply of affordable housing, the process is painfully slow and is unlikely to come close to the demand for homes for purchase or rent for the foreseeable future.

Housing Market Dipped in July

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Housing Market Dipped in July

July Inflation Rose But Core Inflation Improved

The Consumer Price Index (CPI) rose 3.3% y/y in July, up from a 2.8% rise in June. The acceleration in headline inflation was widely expected due to a base-year effect on gasoline prices, as a sizeable monthly decline in July 2022 (-9.2%) no longer impacts the 12-month movement. Excluding gasoline, the CPI rose 4.1% from 4.0% in June.

The mortgage interest cost index (+30.6%) posted another record year-over-year gain and remained the most significant contributor to headline inflation. The all-items excluding mortgage interest cost index rose 2.4% in July.

The CPI rose 0.6% in July, following a 0.1% gain in June, mainly due to higher monthly prices for travel tours, with July being a peak travel month. On a seasonally adjusted monthly basis, the CPI rose 0.5%.

July Inflation Rose But Core Inflation Improved

Food price inflation eased last month but remains sticky.

The core inflation measures will hearten the Bank of Canada. CPI-trim eased to 3.6% y/y in July, continuing the downtrend following the November 2022 peak. CPI-median held steady at 3.7%.

The sizable slowdown in other economic indicators suggests that Q2 GDP growth slowed to roughly 1.0% in the second quarter–markedly below the 3.1% pace posted in Q1. Labour markets are also easing with a meaningful drop in job vacancies and a rising unemployment rate.

July Inflation Rose But Core Inflation Improved

Bottom Line

It is now likely that when the Bank of Canada meets again on September 6, the Governing Council will announce a pause in rate hikes. They will promise to remain ever vigilant, but there is a good chance that the overnight policy rate has peaked at 5%–up 1900% since March 2022.

We will unlikely see the first drop in the policy rate until June of next year. The Bank will proceed slowly, taking rates down by 25 bp increments. The low in the policy rate will probably be around 3%, well above the pre-pandemic level of 1.75%.

July Inflation Rose But Core Inflation Improved

Questions? Comments? Reach out:
—
📲 705-606-2727
📧 jmuir@dominionlending.ca
💻 https://jonmuirmortgages.ca
🌎 Google Business Page

Dominion Lending Centers – The Mortgage Source. Independently Owned and Operated.
License #: 10145
92 Caplan Ave #609, Barrie, ON L4N 9J2

July Inflation Rose But Core Inflation Improved

Why Use A Mortgage Broker?

Opting for a mortgage broker can prove advantageous due to their access to a variety of lenders and loan choices. This could save you the hassle of scouring for optimal mortgage deals. These professionals assist in navigating the intricacies of the mortgage market, providing tailored guidance and skillful negotiation for competitive rates and terms. Nonetheless, it’s vital to select a trustworthy broker who prioritizes your interests.

Verifying the trustworthiness of a mortgage broker involves a few steps:

Check Credentials: Ensure the broker is licensed and registered in your area. This can usually be confirmed through FRSA; the Canadian Government Regulatory body: http://mbsweblist.fsco.gov.on.ca/agents.aspx

Research Reputation: Look for online reviews and testimonials from previous clients. This can provide insights into the broker’s track record and customer satisfaction.
My Google Business Page: https://g.page/r/CXZmhubK7M5xEAE
My Webpage: https://jonmuirmortgages.ca/

Ask for Referrals: Seek recommendations from friends, family, or colleagues who have worked with mortgage brokers before.

Transparency: A trustworthy broker should be transparent about their fees, the lenders they work with, and any potential conflicts of interest.

Ask About Lender Relationships: Inquire about the broker’s relationships with lenders. A diverse network of lenders indicates their ability to find a suitable deal for your needs.

Clarify Communication: Ensure the broker communicates clearly and keeps you informed throughout the process.

Verify References: Request references from the broker and contact them to inquire about their experiences.

Check with Regulatory Bodies: Research if there have been any complaints or disciplinary actions against the broker through relevant regulatory bodies. http://mbsweblist.fsco.gov.on.ca/agents.aspx

Trust Your Instincts: If something feels off or if you feel pressured into making decisions, it’s wise to consider other options.

Remember, trust is built over time, so take your time to evaluate brokers thoroughly before deciding.

Questions? Comments? Reach out:
—
📲 705-606-2727
📧 jmuir@dominionlending.ca
💻 https://jonmuirmortgages.ca
🌎 Google Business Page

Dominion Lending Centers – The Mortgage Source. Independently Owned and Operated.
License #: 10145
92 Caplan Ave #609, Barrie, ON L4N 9J2

The Long-Awaited Labour Market Slowdown

The Canadian economy shed 6,400 jobs in July, far weaker than the 25,000 gain that was expected. The jobless rate was 5.5%, the third consecutive monthly rise. This likely improves the chances the Bank of Canada will remain on the sidelines in September.

Wage inflation, however, re-accelerated, moving back to 5.0%. This, combined with the continued stickiness in core inflation, will keep interest rates high for longer.

July’s data follows a surprise gain of 59,900 in June and a 17,300 loss in May, showing that employment is a notoriously volatile series. Nevertheless, it provides the fodder for Macklem to pause again after two consecutive rate hikes.

The Long-Awaited Labour Market Slowdown

A downturn in June’s manufacturing, wholesale, and retail data has buoyed the Bank’s hopes that the 475 basis point rate hikes have slowed the economy, especially as preliminary figures for June showed the economy contracting for the first time this year. Inflation rates for the same month moderated to 2.8%, fitting within the central bank’s target range for the first time since March 2021.

The Long-Awaited Labour Market Slowdown

Policymakers scrutinize indicators to determine if the current interest rates are sufficiently high to temper economic growth. They perceive substantial wage increases as inconsistent with their goal of reducing inflation to the 2% target. Even amidst recent significant strikes from workers demanding improved remuneration, the outlook hints at a potential slowdown in wage growth. This could be driven by increased immigration, which expands the workforce while the demand for labour diminishes.

Bottom Line

The chances of a rate hike on September 6 have diminished significantly. However, more data is yet to come with July inflation on August 15 and the Q2 GDP figure on September 1.

The Long-Awaited Labour Market Slowdown

Questions? Comments? Reach out:
—
📲 705-606-2727
📧 jmuir@dominionlending.ca
💻 https://jonmuirmortgages.ca
🌎 Google Business Page

Dominion Lending Centers – The Mortgage Source. Independently Owned and Operated.
License #: 10145
92 Caplan Ave #609, Barrie, ON L4N 9J2

The Long-Awaited Labour Market Slowdown