Posted on
June 29, 2024
by
Steve Flynn
Canadian real GDP grew 0.3 per cent in April, following close to zero change in March. The growth was driven equally by goods (+0.3 per cent) and services (+0.3 per cent), as well as a rebound in wholesale trade (+2 per cent), manufacturing (+0.4 per cent), and mining, quarrying, and oil and gas extraction (+1.8 per cent). Residential construction activity fell by 2.3 per cent as higher interest rates eroded profitability for new projects. The sector is now nearly 24 per cent below its peak in April 2021. Cooler home sales caused GDP from offices of real estate agents and brokers to fall 2.5 per cent from the prior month. Preliminary estimates suggest that output in the Canadian economy grew by 0.1 per cent in May. Canada's economy expanded at a reasonable rate that matched analyst expectations in April, following an unexpected jump in inflation last Tuesday. The GDP release caused little change in market expectations of a rate cut in July, which markets are currently pricing at close to 50-50 odds. The Bank of Canada will be watching next Friday's jobs report as the last major piece of information before it decides whether to cut or hold rates at its next meeting on July 24th. Regardless of whether the Bank cuts in July, markets are anticipating a gradual decline in the overnight rate throughout the rest of the year and into 2025. Copyright British Columbia Real Estate Association. Reprinted with permission.
Posted on
June 28, 2024
by
Steve Flynn
Canadian prices, as measured by the Consumer Price Index (CPI), rose 2.9 per cent on a year-over-year basis in May, up from a 2.7 per cent increase in April. Month-over-month, on a seasonally adjusted basis, CPI rose by 0.3 per cent in May. The acceleration in headline CPI was driven by rising prices for services, especially cellular, travel, rents, and air transport. The shelter cost index remains the major driver of inflation with the rate of increases higher now (6.4 per cent) than they were this time last year (4.7 per cent). Mortgage interest costs were up 23.3 per cent and rent was up 8.6 per cent from the same time last year in May. Excluding shelter, consumer prices rose just 1.5 per cent, year over year. In BC, consumer prices rose 2.9 per cent year-over-year, unchanged from April. The Bank of Canada's preferred measures of core inflation, which strip out volatile components, fell to between 2.4 and 2.9 per cent per cent year-over-year in May. Canada's inflation rate came in higher than expected in May, halting a string of good reports since the start of the year. The Bank of Canada's preferred measures of core inflation, CPI median and CPI trim, jumped back above the 2 per cent target when measured on a 3-month annualized basis. Food prices ticked up sharply last month after remaining flat or declining in every prior month since the start of the year. Rents remain the most troubling component of the CPI bundle, and still show no signs of slowing down. Rents rose 9.3 percent over the last 4 months on an annualized basis. While one month does not make a trend, the probability of an additional rate cut by the Bank of Canada in July declined following the report. The Bank will be watching the forthcoming employment and GDP reports closely to guide its decision prior to the next announcement on Wednesday, July 24th. Copyright British Columbia Real Estate Association. Reprinted with permission.
Posted on
June 26, 2024
by
Steve Flynn
Canadian retail sales rose 0.7 per cent to $66.8 billion in April. Excluding volatile items, sales were up 1.4 per cent on a month-over-month basis. In volume terms, adjusted for rising prices, retail sales rose 0.5 per cent in April. Retail sales in BC were up by 1.3 per cent in April and up by 2.2 per cent from the same time last year. In the CMA of Vancouver, retail sales were up 0.4 per cent from the prior month and were up 2.5 from April 2023. Copyright British Columbia Real Estate Association. Reprinted with permission.
Posted on
June 18, 2024
by
Steve Flynn
Canadian housing starts rose 10 per cent to 264,506 units in May at a seasonally adjusted annual rate (SAAR). Starts were up 35 per cent from the same month last year. Single-detached housing starts were largely unchanged from last month at 54,410 units, while multi-family and others rose 13 per cent to 210,093 units (SAAR). In British Columbia, starts fell 15 per cent from last month to 46,507 units SAAR in all areas of the province. In areas in the province with 10,000 or more residents, single-detached starts rose 7 per cent to 4,360 units while multi-family starts dropped 18 per cent to 39,959 units. Starts in the province were 14 per cent above the levels from May 2023. Compared with last year, year-to-date starts were up by 20 per cent in Victoria, 52 per cent in Kelowna, and 41 per cent in Abbotsford. Year-to-date starts were down by 8 per cent in Vancouver and by 14 per cent in Nanaimo. Copyright British Columbia Real Estate Association. Reprinted with permission.
Posted on
June 8, 2024
by
Steve Flynn
Canadian employment edged up by 27,000, or 0.1 per cent, to 20.518 million in May. The unemployment rate ticked up to 6.2 per cent. Average hourly wages rose 5.1 per cent year-over-year to $34.94 last month, while total hours worked were up 1.6 per cent from May of last year. Employment in BC fell 0.3 per cent to 2.863 million, while employment in Metro Vancouver fell 1.1 per cent to 1.610 million in April. The unemployment rate rose 0.6 points in BC to 5.6 per cent while rising in Metro Vancouver by 0.8 points to 6.1 per cent last month. Copyright British Columbia Real Estate Association. Reprinted with permission.
Posted on
June 7, 2024
by
Steve Flynn
The Bank of Canada lowered its overnight lending rate this morning by 25 basis points from 5 per cent to 4.75 per cent. In the statement accompanying the decision, the Bank noted that first quarter real GDP growth was below forecast, and recent data suggests the economy in operating in excess supply. On inflation, the Bank sees downward momentum in core inflation, while noting that shelter inflation remains high. Overall, the Bank is confident that inflation will continue to move toward its 2 per cent target and that monetary policy no longer needs to be as restrictive. This Bank of Canada rate-lowering cycle will be one of the few times this century that rates are being cut for reasons other than in response to a global crisis. As such, we should expect a gradual pace of rate cuts measuring 25 basis points per meeting over the next 18 months until the Bank’s policy rate hits the mid-point of the Bank’s estimated neutral range of 2.25-3.25 per cent. Where the policy rate ultimately ends up will be dictated by economic conditions. A good baseline is 2.75 per cent, but a worse than expected economy could mean the Bank’s policy rate needs to fall under 2.25 per cent for a period, and conversely, more stubborn than anticipated inflation could mean that this lowering cycle stalls out north of 3.25 per cent. Now that the Bank of Canada is at long last lowering its policy rate, the impact on fixed mortgage rates may not be that significant. The bond market, and by association the mortgage market, is a machine that digests all available information about current and future economic conditions and, since late 2023, markets have strongly anticipated falling policy rates. As a result, 5-year fixed mortgage rates have likely already priced in the entirety of expected rate cuts. As for variable rates, current market pricing has settled around prime minus 60 basis points. If that discount holds, it will take seven rate cuts or 175 basis points, before the average variable rate falls back under the average 5-year fixed rate. Copyright British Columbia Real Estate Association. Reprinted with permission.
Posted on
June 5, 2024
by
Steve Flynn
Metro Vancouver* home sales down in May while inventory continues to increase: The number of transactions on the Multiple Listing Service® (MLS®) declined in May compared to what is typical for this time of year in Metro Vancouver. This shift has allowed the inventory of homes available for sale to continue to accumulate with over 13,000 homes now actively listed on the MLS® in the region. The Greater Vancouver REALTORS® (GVR) reports that residential sales in the region totalled 2,733 in May 2024, a 19.9 per cent decrease from the 3,411 sales recorded in May 2023. Last month’s sales total was also down 19.6 per cent from the 10-year seasonal average for May (3,398). “The surprise in the May data is that sales have come in softer than what we’d typically expect to see at this point in the year, while the number of newly listed homes for sale is carrying some of the momentum seen in the April data,” Andrew Lis, GVR’s director of economics and data analytics said. “It’s a natural inclination to chalk these trends up to one factor or another, but what we’re seeing is a culmination of factors influencing buyer and seller decisions in the market right now. It’s everything from higher borrowing costs, to worries about the economy, to policy interventions imposed by various levels of government.” There were 6,374 detached, attached and apartment properties newly listed for sale on the MLS® in Metro Vancouver in May 2024. This represents a 12.6 per cent increase compared to the 5,661 properties listed in May 2023 and a seven per cent increase compared to the 10-year seasonal average (5,958). The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 13,600, a 46.3 per cent increase compared to May 2023 (9,293). This total is also up 19.9 per cent above the 10-year seasonal average (11,344). Across all detached, attached and apartment property types, the sales-to-active listings ratio for May 2024 is 20.8 per cent. By property type, the ratio is 16.8 per cent for detached homes, 25.1 per cent for attached, and 22.5 per cent for apartment properties. Analysis of the historical data suggests downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months. “With market trends now tilting back toward more balanced conditions, as the number of new listings outpaces the number of sales, we should expect to see slower price growth over the coming months,” Lis said. “Up until recently, prices were climbing modestly across all market segments. But with rising inventory levels and softening demand, buyers who’ve been waiting for an opportunity might have more luck this summer, even if borrowing costs remain elevated.” The MLS® Home Price Index (HPI) composite benchmark price for all residential properties in Metro Vancouver is currently $1,212,000. This represents a 2.3 per cent increase over May 2023 and a 0.5 per cent increase compared to April 2024. Sales of detached homes in May 2024 reached 846, an 18.9 per cent decrease from the 1,043 detached sales recorded in May 2023. The benchmark price for a detached home is $2,062,600. This represents a 5.9 per cent increase from May 2023 and a 1.3 per cent increase compared to April 2024. Sales of apartment homes reached 1,338 in May 2024, a 22.7 per cent decrease compared to the 1,730 sales in May 2023. The benchmark price of an apartment home is $776,200. This represents a 2.2 per cent increase from May 2023 and a 0.3 per cent decrease compared to April 2024. Attached home sales in May 2024 totalled 523, a 14 per cent decrease compared to the 608 sales in May 2023. The benchmark price of a townhouse is $1,145,600. This represents a 5.2 per cent increase from May 2023 and a 0.9 per cent increase compared to April 2024. *Areas covered by the Real Estate Board of Greater Vancouver include: Burnaby, Coquitlam, Maple Ridge, New Westminster, North Vancouver, Pitt Meadows, Port Coquitlam, Port Moody, Richmond, South Delta, Squamish, Sunshine Coast, Vancouver, West Vancouver, and Whistler.
Posted on
June 3, 2024
by
Steve Flynn
Canadian real GDP was essentially unchanged in March, following a 0.2 per cent increase in February. Both goods and services sectors were unchanged from February. Residential construction activity rose by 1.4 per cent driven by increased construction of single-detached homes, while the broader construction sector also rose (+1.1 per cent). GDP from offices of real estate agents and brokers fell 0.9 per cent last month as home sales cooled somewhat. Preliminary estimates suggest that output in the Canadian economy rose by 0.3 per cent in April. Real GDP rose 1.7 per cent in the first quarter on an annualized basis, following no growth in the fourth quarter of 2023 (revised down from 0.2 per cent). Household spending on services, such as telecom, rents, and air travel, rose by 1.1 per cent from the prior quarter and drove much of the increase. Employee compensation rose 1.5 per cent in the first quarter, following a 0.9 per cent increase in the previous quarter. This helped contribute to a rising household savings rate, which hit 7 per cent, the highest rate since the first quarter of 2022. Meanwhile, housing market resale activity rose, with ownership transfer costs up 7.1 per cent. New home construction was essentially flat. Zero real economic growth in March, and below-forecast first quarter growth, is yet another piece of evidence supporting a rate cut next week. Soft real GDP growth in Canada looks worse when one considers the very rapid rate of population growth; real GDP per capita continues to sharply decline. This comes in the context of excellent progress on inflation, which hit 2.7 per cent last month, and looks even better when one digs deeper into the CPI report. Price appreciation now boils down almost entirely to rents and mortgage costs. Employment, for its part, also continues to soften, with the unemployment rate hitting 6.1 per cent last month. Taken together, markets anticipate that the bank will begin rate cuts at its announcement next week on June 5th. Copyright British Columbia Real Estate Association. Reprinted with permission.
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