Is this a sign of better news to come? Some insight on the latest inflation data and what it means to Canadians from Dr. Sherry Cooper, Chief Economist for Dominion Lending Centres.

The latest interest rate hike and how it has impacted the housing market from Dr. Sherry Cooper, Chief Economist for Doiminion Lending Centres. 

Bank of Canada June Rate Hike Spooks the Housing Market The Canadian Real Estate Association says the BoC’s surprise rate hike in early June cooled activity following a two-month solid start to the spring housing season. Home sales posted a 1.5% gain between May and June, tepid by recent standards. Sales were up in June in a little over half of all local markets, with increases in British Columbia and Alberta offsetting fewer sales in the Greater Toronto Area (GTA). On a year-over-year (y/y) basis, the number of transactions in June grew by 4.7%. According to Shaun Cathcart, CREA’s Senior Economist, “History suggests the price side of things will respond to this with only a slight lag. Add to that the recent Bank of Canada rate hikes, and we can probably expect price growth to be moderate in the months ahead, likely still with some degree of upward pressure, but less than in the last three months.” The CREA cut its forecast for home sales this year as tight inventory, and the rate hikes weigh on the housing market. The CREA now estimates that sales in 2023 will be down 6.8% from a year earlier, a more dramatic slowdown than the 1.1% decline forecast in April. “With the Bank of Canada unexpectedly ending its pause on rate hikes in June and hiking again in July, a major source of uncertainty has returned to the housing market,” the CREA said. New Listings The number of newly listed homes was up 5.9% month-over-month in June. Building on gains of 3.1% in April and 7.6% in May, new listings have gone from a 20-year low in March to closer to (but still below) average heading into the summer. With new listings outperforming sales in June, the sales-to-new listings ratio eased to 63.6% compared to 66.4% in May and a recent peak of 68.3% in April. The measure remains well above the long-term average of 55.2%. There were 3.1 months of inventory on a national basis at the end of June 2023, unchanged from the end of May and down more than an entire month from the most recent peak at the end of January. The long-term average for this measure is about five months. Home Prices The Aggregate Composite MLS® Home Price Index (HPI) climbed 2% month-over-month in June 2023—a significant increase for a single month on the heels of similar gains in April and May. It was again very broadly based, with a monthly price increase between May and June observed in most local markets. The Aggregate Composite MLS® HPI now sits 4.5% below year-ago levels, the smallest decline since November 2022. Bottom Line Home construction in Calgary, the home to the Canadian energy industry headquarters, is booming, driven by a rush of newcomers from abroad, as well as from more expensive housing markets in the rest of Canada. Home prices in Calgary have risen 4.2% in a year, the most significant rise among the more than 50 markets the CREA tracks. It’s the only major Canadian city to experience any increase at all. The benchmark price in the city has risen 34% in three years. Alberta’s population was 4.7 million as of April 1, up 4.5% in 12 months, trailing only tiny Prince Edward Island for the fastest growth among Canada’s provinces. In the first quarter, Alberta had the largest net interprovincial gain — almost 15,800 people — of the country’s provinces and territories. International migration contributed to nearly 36,000 new residents. Unlike previous surges in Alberta’s population driven by the oil industry’s demand for labour, this boom is happening during a relatively tame period for the province’s most important industry. Dr. Sherry Cooper Chief Economist, Dominion Lending Centres

A little more insight on the latest rate hikeby the BoC and what’s to come from our friends at First National.

Surprise rate hike. More to come?

Why Title Insurance is important? Some great information from our friends at CMI Financial Group.

Recently, there have been headlines about identity theft, fraud and stealing homes. Title fraud occurs when the fraudster assumes the identity of the homeowner and then uses it to assume the title on the home, sell the property or obtain a mortgage on that property or other properties in the homeowner’s name.

Protecting personal information

Borrowers can take steps to protect themselves by safeguarding their personal information:

• Keep personal information in a safe place.
• Don’t give out personal information on the phone, through the mail or online unless the borrower has initiated contact.
• Give your Social Insurance Number (SIN) only when absolutely necessary. Ask if other identification can be used.
• Check with the land registry office to ensure that the title of your home is in your name.
• Consider purchasing title insurance.

Title insurance coverage

While borrowers can take preventative measures to protect their personal information, they can also look at title insurance which protects the homeowner from a number of risks, including:

• Someone trying to acquire the home through forgery or fraud;
• Minor errors in the legal description of the property;
• Unpaid utilities, mortgages, taxes, or condo maintenance fees;
• Removal of existing structures if they violate zoning laws;
• Legal claims by someone else on the property, such as property liens or construction liens from unpaid contractor bills;
• Protection from another person having interests on the property;

Example:

If the previous owner did not pay their contractor and there are construction liens on the property, title insurance would cover this. If a structure needs to be removed because it encroaches on a neighbour’s property, title insurance will cover the removal costs.

Title insurance exclusions

The following issues are not covered by title insurance:

• Zoning bylaw violations from home renovations or additions that the title insurance policy holder is responsible for;
• Environmental hazards;
• Known title defects that we revealed before the homeowner bought the property;
• Wear and tear on the home and property, and;
• Risks and damages that would be covered by homeowner’s insurance.

While title insurance can’t protect a borrower from becoming a victim of fraud or title defect, it can protect them from many of the consequences and the resulting stress.

The latest on today’s Bank of Canada annoucement and what it means for Canadians from Dr. Sherry Cooper, Chief Economist for Dominion Lending Centres.

Some great info from our friends at Zoocasa.

When house hunting, many buyers prefer the history and character of an older home versus the cookie-cutter design that often comes with new developments.  However, if you’re looking into buying an older home, it’s important to arm yourself with knowledge so you can assess the house objectively and protect yourself from costly surprises down the road.

Leave it to the professionals – but ask around

One of the most important things to remember with older homes is the worst problems are often the least apparent. There may be clues to the naked eye, but only professional home inspectors can accurately verify the state of a home. Therefore, it’s recommended you get a few different opinions, and if there’s something specific you’re still unsure about, find an inspector with a background in that area or obtain a repair bid from an expert in the trade.

Additionally, you should consult with the real estate agent and ask when major components were installed, updated or replaced (if ever). The goal is get as full a picture of the home’s history as you possibly can. Most sellers will disclose any plumbing, electrical or roofing issues. Don’t hesitate to talk to neighbours as well – they’re a great source of information and chances are they’ll be honest if their basements have flooded recently or they have mice scampering around.

Be aware of the following risks associated with old homes:

Foundation

Head down to the basement and check the foundation for signs of cracks, crumbling or shifting. Mold could also be a sign of a weak foundation. Check the grade at the perimeter of the house – settling near the foundation may indicate water in the basement. Quite often, older homes have porous stone foundations and lack effective waterproofing systems, which can lead to water damage.

Water damage

Water damage is one of the most common dilemmas in old homes and can lead to a range of problems, from damp walls to fungal decay and woodworm. Damaged plaster and stained walls and ceilings are a telltale sign, and you may even feel a temperature difference in the walls. Look for missing or broken roof shingles, rotted or loose trim boards, and disconnected or plugged-up gutters and downspouts.

Electrical

Read the electrical panel’s amperage rating – modern homes require at least 100 amps, and preferably 200 since we have so many devices plugged in.  Look around to see where the switches and outlets are. Three-pronged sockets with reset buttons are good; two-pronged ones with scorch marks are bad. Original knob-and-tube wiring and aluminum wiring pose a fire hazard, and watch out for fuses.

Plumbing

Test the water pressure in faucets and showerheads, keeping an eye (or ear) out for dripping taps. Duck under the sink and take a look at pipework, tanks and cylinders if you can. The plumbing system should be copper pipes with copper soldering, or PVC piping. Lead or cast-iron pipes will need to be replaced. If you’re thinking of installing an extra bathroom, establish where the water supply and waste pipes run.

Sewage and drains

Many older properties still have clay pipes, which are susceptible to tree roots that grow through the pipe walls and cause blockages. Be alert for overflowing manhole covers or drain covers, and unpleasant smells. A qualified inspector will be able to tell you if the sewer system and drains work properly. If possible, figure out when the sewage service from the street was last upgraded.

Insulation

If the house has older plaster walls, it probably has little or no insulation. Even if there is insulation, it may well be deficient or contain asbestos. You’ll also want to look for double glazed rather than single pane windows. These things will make your home more energy efficient.

Heating

Find out how old the furnace is and what type of energy is used to heat the home: oil, electricity, natural gas or boiler system? Radiators may add charm, but they’re an expensive option and complicate air conditioning in the summer.

Roof

What condition is the roof in? Definitely poke around in the attic. Some clues that you may need to replace or repair it include leaks or water stains near the chimney and on the inside of the top floor ceiling. Be sure that the ridges aren’t bowing or the eaves sagging. Don’t forget to examine the chimney’s brickwork too – any chipping or crumbling is a red flag.

Remember, safety first and trust your instincts!

More information on today’s Bank of Canada increase for Canadians…and the glimmer of hope that we may have reached the peak. From our friends at First National.

Bank of Canada increases its benchmark interest rate to 4.50%

Valuable intel from our friends at First National

What’s ahead for Canada? Here is what the country’s leading economists think.
Jan 24, 2023
First National Financial LP
The Economic Club of Canada is our country’s most respected platform for non-partisan dialogue among the world’s most notable thought leaders. Its annual outlook breakfast is its signature event. This year, the breakfast featured four of the country’s top chief economists responding to a series of questions designed to encourage predictions about 2023. First National attended and shares these highlights.

Is the Canadian economy headed for a soft landing or a full-on recession in 2023? It looks like we are in for a monetary-policy induced slowdown and possibly a soft landing where inflation is tamed without devasting impacts on the economy. While economists and policymakers have fairly consistently underestimated the resilience of the Canadian economy in the past three years, the expression ‘never bet against the Fed’ still applies. In the post Second World War era, every time the US Federal Reserve and the Bank of Canada raised rates as much as they have this past year the following year saw an economic slowdown.

Is the Bank of Canada nearing the point of pausing its policy of increasing interest rates? Notwithstanding the possibility of another 0.25 basis point increase on January 25, it looks like the Bank is signalling that it is comfortable with what it has done so far and is aware that recent rate hikes are creating challenges for Canadians. It may pause after January for a few months and reassess if further moves are necessary based on inflation reports.

Is there a risk the Bank of Canada has gone too far, too fast to tame inflation? Yes and there may be more pain to come because of recent policy rate increases. There are also secular headwinds that used to be tailwinds for the economy to sort out. Free trade has been replaced by re-shoring and protectionism which hurts Canada because we are an export nation. Carbon used to be free and it isn’t now. The housing market has rolled over because it is an interest-rate sensitive part of the economy. The are too many headwinds to completely avoid some form of recession.

When will inflation moderate? By year end 2023, inflation in Canada will be at the one to three percent range and core inflation will be right at 3%. Recent three-month rolling averages of inflation look to be trending in the right direction in both Canada and the U.S. Food and energy price inflation in particular have declined. However, there is a risk that inflation settles in at 5% which would require additional action by the Bank of Canada.

Will there be job losses in the Canadian economy this year after such a strong month of job creation in December 2022? Employment is a lagging indicator of economic health, but the creation of 100,00 jobs in December was a positive sign. Going forward, it is likely that there will be job losses and possibly as many as 100,000 across Canada. But in context, job losses in many past recessions numbered 300,000. Some industries did have significant employment gains in the past two years including technology, financial services and public administration but other industries do not have slack capacity which means they may be cushioned from future job cuts. For example, manufacturing typically employs 2 million Canadians and sheds 300,000 jobs in a recession. However, the industry now only employs 1.7 million so it is unlikely that job losses, if they occur, will reach that traditional 300,000 level.

Are or were we in a housing bubble? It depends on where you are in Canada because there are extreme differences between the Prairie provinces (no bubble) and southwestern Ontario (a bubble). In the first two years of the pandemic, Canada’s house prices increased by 50% and now depending on location, they are off by 20 to 25% from the peak. The net result is home prices are still higher than they were pre-pandemic.

Will housing become affordable in the next two years? Very unlikely. The housing market is more likely to become less affordable at least in the near term even as a record level of new supply comes on stream. That supply will not keep up with new demand driven by immigration and as many of Canada’s 10 million millennials begin buying their first homes.

Will OSFI change/tighten mortgage qualification rules this year? The regulator has opened public consultations on its Guideline B-20 (Residential Mortgage Underwriting Practices and Procedures) with the intention of completing those consultations by April 14, 2023. It is unlikely to make any changes until it observes spring housing market activity. Since OSFI exists to manage risk, not to make housing more affordable, changes – if any – would tend to respond to their view of the relative risk in the system. So far, Canadians have handled interest rate shocks very well and as a result, mortgage lenders have seen remarkable stability in credit performance.

How does Canada’s economic outlook compare to America’s. America has the potential to be more resilient because U.S. consumers went through a deleveraging cycle after the financial crisis whereas Canadians levered up. This difference shows up in share of income that is devoted to debt service in Canada versus the U.S. In the U.S., consumer debt service is at historically low levels and in Canada it’s about to become historically high. American firms did not hire as aggressively as Canadian firms either, meaning fewer areas of the job may be at risk. However, Canada has a higher personal savings rate, and our provincial and federal fiscal positions are better than those in the U.S.

Is the Canadian dollar poised for a rebound? Most of the recent weakness in the Canadian dollar is due to the relative strength of the U.S. dollar but our currency has also been held back because of commodity prices. It is possible that the U.S. dollar will weaken later this year with a benefit to our currency, but as is, the Canadian dollar is currently trading close to its fair value.

Could there be some positive signs as we move toward the end of 2022…details from the experts at First National.

The latest facts and insight from Dr. Sherry Cooper, Chief Economist at Dominion Lending Centres.