25 Jun

Residential Market Commentary – Sleepy and uneventful

General

Posted by: Frank Fik

The spring home buying season never really blossomed this year.

May figures from the Canadian Real Estate Association suggest buyers and sellers have been taking a “wait and see” stance.

Sales in May dipped 0.6% from April and are down 5.9% from a year earlier. Prices dropped 4.0% year-over-year leaving the national average home price at $699,000.

CREA’s preferred measure, the National Composite MLS Home Price Index, came in 2.4% below May 2023.

The number of new listings was also flat with an increase of just 0.5%. However, inventories are at a five-year high.

CREA used the words “sleepy” and “uneventful” to describe the month and speculated that buyers and sellers were waiting for the Bank of Canada to implement interest rate cuts. That cut did come on June 5th and the realtors are hopeful it will stimulate renewed activity.

A recent survey of home buying intentions by the real estate website Wahi suggests that while high rates may be keeping buyers out of the market they are not driving sales. Just 11% of respondents who said they will be selling within the next five years are doing so because of financial strain.

The key reason people plan to put their homes on the market is size.

Thirty-seven percent said they want to downsize and 25% said they are looking for a bigger place. Of those looking for a smaller home nearly 70% are more than 54 years old. On the other side, 94% of those looking to upsize are between 18 and 54 years old.

Published by First National Financial LP

5 Jun

Bank of Canada Cuts Overnight Rate by 25 Basis Points

General

Posted by: Frank Fik

We are pleased to inform you that today the Bank of Canada reduced its target for the overnight rate by 25 basis points to 4.75 per cent. This is the first interest rate cut since the tightening cycle began in March 2022.

Although there will likely be no significant changes to fixed mortgage rates in the short term, the CMBA-BC is strongly encouraged by this rate reduction, viewing it as a positive step towards alleviating the financial pressure on mortgage holders, borrowers, and homebuyers across British Columbia. Variable Rate Mortgages and Home Equity Lines of Credit will benefit from this rate drop as the prime lending rate decreases, which is welcome news to those borrowers.

“A rate cut is crucial to provide the first steps of relief to mortgage holders and borrowers across the province,” said Rebecca Casey, President of the CMBA-BC. “We are pleased that the Bank of Canada has begun to ease the financial burden on homeowners and homebuyers.”

CMBA-BC advocates for action to bring relief to mortgage holders and homebuyers in British Columbia, including in the form of lower interest rates.

The Canadian economy has shown meaningful signs of slowing, with the first-quarter growth rate of 1.7 per cent falling short of the Bank of Canada’s forecast of 2.8 per cent and economists’ estimates of 2.2 per cent, according to Statistics Canada. Inflation has also seen a significant decline. The annual CPI inflation rate peaked at 8.1 per cent in June 2022 but has since fallen to 2.7 per cent in April, comfortably within the Bank’s target range of 1 per cent to 3 per cent.

Due to elevated interest rates, on a year-over-year basis, the cost of shelter in British Columbia was up again in April according to BC Stats, with the cost of homeownership up 7.2 per cent and the cost of renting increasing 7.1 per cent. Many British Columbians are already at a tipping point.

CMBA-BC will continue to advocate for policies that support mortgage holders and facilitate a stable, prosperous housing market in British Columbia.

The next scheduled date for announcing the overnight rate target is July 24, 2024. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR at the same time.

 

Published by the CMBA -Canadian Mortgage Brokers Association

3 Jun

Residential Mortgage Commentary – Interest rate decision time

General

Posted by: Frank Fik

The last significant economic report before this week’s Bank of Canada interest rate announcement is in.  It effectively knocks down the last barrier to a, much hoped for, rate cut.

Gross domestic product – the value of all goods and services produced by the economy – for the 1st quarter of this year grew by 1.7%.  That is significantly lower than the central bank’s forecast of 2.8% growth, and analyst projections for a 2.2% increase.

GDP growth for the 4th quarter of last year saw a major downgrade to 0.1% from 1.0%.

Statistics Canada’s GDP report builds on several months of data showing inflation has fallen inside the Bank of Canada’s target range of 1.0% to 3.0% for both the Consumer Price Index (headline inflation) and core inflation, which is the Bank’s preferred measure.

It is widely accepted that the central bank’s high interest rate policy has done what was needed to slow the economy, allowing supply to catch up with demand.

There are reasons the Bank could hold off on a rate cut until July:

  • There has been no clear message from the Bank that a cut is actually coming.
  • The Bank is still wary about mistakes it made in implementing rate hikes, that saw it lose control of inflation 2-and-a-half years ago.
  • A fear that housing prices will spike as rates drop could see the Bank delay cuts until after the spring buying season.
  • Currency concerns will likely keep the Bank from cutting more aggressively than the U.S. Federal Reserve.

Published by First National Financial LP