This week’s top stories include how the Bank of Canada may pause interest rate hikes for an undisclosed period of time, how retail sales in Canada were up in the month of June, how the Canadian Real Estate Association has launched a new ad campaign, how condo trends are changing to suburban area’s, how there are more signs that the U.S. economic recovery is stalling and how Canadian home prices continue to rise regardless of the sales slump that is currently holding down the market.
Central Bank may pause rate hikes
A top economist with BMO capital markets thinks that the Bank of Canada (BoC) could temporarily put interest rate hikes on hold and I agree with him. When you mix slowing growth in Canada with a faltering U.S. economy and mild inflation trends, the BoC will have no choice but to hold interest rates where they are until better new emerges.
Douglas Porter of BMO commented by saying, “There is certainly more water to go under that bridge before the Bank of Canada makes it decision. Let’s just say it casts a little bit more doubt on whether the bank will indeed raise rates again in September.” He also stated that the strongest reason for the BoC to have second thoughts on raising interest rates would be the downturn that the U.S. is currently experiencing.
The U.S. economy is currently struggling for life and that has clearly caused Canada’s growth to slow to an almost standstill. The Canadian economy is stable but not enough to handle more interest rate hikes and rate shocks. What do you think? Please comment below.
Retail sales up
Statistics Canada released a report on Tuesday of this week showing that Canadian retail sales were up in the month of June but not as high as expected. Prices were down as gasoline prices took a nose dive that was partially offset by stronger numbers in auto sales.
After two consecutive months of declines, sales were up 0.1% from May’s numbers. The sales value did not reach the markets expectations, which was a 0.4% gain in overall retail sales. Canada is hoping to see better numbers next month but is not sure what to expect. What do you think? Please comment below.
CREA launches ad campaign
The Canadian Real Estate Association (CREA) has been under pressure from the Competition Bureau to change the layout of their realtor’s commission structure. The Competition Bureau feels that consumers are overpaying for commissions for selling their homes. CREA’s new campaign boasts of the merits of professional real estate agents.
The fall campaign will cost roughly $2 million and is geared to raise awareness of what your agent actually provides as a service. The Competition Bureau is taking CREA to the Competition Tribunal to determine whether or not organized real estate is being anti competitive with regards to their MLS system, which lists homes and properties that are currently for sale. This has been a long battle that is far from over. What do you think? Please comment below.
Condo trend changes
A new trend seems to be arising as 46% of new condominiums purchased in July were in the suburbs rather than downtown Toronto. Toronto usually holds 80% of all highrise sales but that is no longer the case.
Single detached homes have always been the way of the suburbs and account for more than 80% of new home sales. With greater acceptance towards condo living in the suburbs, many suburban buyers are now looking towards purchasing condos. Majority of this trend was started by builders who could not find sites inside Toronto and decided to setup shop outside the core.
U.S. recovery stalling
More evidence is mounting that the U.S. recovery is coming to a standstill as companies continue to cut back on investments and equipment. New homes numbers are also at the worst numbers seen in decades.
Big ticket manufactured goods were up 0.3% in July but were up on demand for commercial aircrafts. Without that demand, the sector would have dismal numbers. Orders for durable goods fell at the fastest pace since January of last year. New home sales were also down 12.4% from the previous month and is the slowest pace on record since 1963. The lack of sales caused for less jobs in the construction industry.
Two up and coming reports on the housing sector and on unemployment numbers will be the clincher. What do you think? Is this the double dip that I was speaking of last year and well into this year? Please comment below.
Canadian home prices rise
Demand for homes across Canada is down but home prices continue to rise despite the lack of sales in the market. This is part of the reason that sales are down as housing is becoming less and less affordable for consumers.
Home sales are down 25% from the peak of last year but the trend of housing prices moving upward is likely to continue. Conference Board of Canada associate director Michael Burt commented, “Most of the costs associated with home ownership, such as mortgage costs and insurance, are outstripping inflation and income growth. As a result, housing affordability in Canada, which has been deteriorating over the past decade, will continue to decline during the next two years.”
Home prices are up 13.6% for the month of June when compared to a year ago. Month over month, Junes prices were up 1.5% and was the largest increase since August and is also the 14th straight monthly home prices increase. What do you think? Should house prices correct in the near future? Please comment below.
Prime Rate: 3%
You Can Also Find Me Here:
Paul Sidhu: Vice President of National Sales
Useful Information: Mortgage 101
Learn More About Your Mortgage:
Now that you know what it takes to get a Canadian mortgage, check out our other handy reference articles filled with Useful Mortgage Tips.