27 Oct

Residential Market Commentary – Another rate cut seems likely

General

Posted by: Frank Fik

Canada’s latest inflation numbers have softened expectations for another rate cut by the Bank of Canada, but not by much.
The September inflation report from Statistics Canada showed the annual inflation rate rose by 2.4% in September, up from 1.9% in August and higher than the 2.2% expected by analysts.
The StatsCan report shows declining gasoline prices were outpaced by rising grocery costs.
Expectations for a rate reduction have diminished but remain strong.  Markets pulled back the chances of a cut to about 70%, down from 77% before the report.
Most economists are basing their forecasts on the central bank’s preferred measures of core inflation, which have largely stabilized.  They also point out that the Bank of Canada has expanded the data sets it is using to guide its rate decisions.  For example, Canada’s rising unemployment numbers have taken on more importance.
In a speech to mortgage professionals, just before the inflation numbers were released, well known economist Benjamin Tal raised the spectre of a recession.
“We are in a recession,” if it’s not a formal recession, it’s a per-capita recession for sure — especially if you live in Ontario and B.C.,” Tal said.
Tal says the BoC has “the green light to cut interest rates.” He is predicting a 25-basis-point reduction at the next policy meeting, with another move possible by early 2026.
Published by First National Financial LP
20 Oct

Residential Market Commentary – The latest analysis from CREA

General

Posted by: Frank Fik

Increasing home resales across Canada took a breather in September, but prices held fairly steady.
The Canadian Real Estate Association’s latest report shows sales dipped 1.7% last month compared to August, ending a run of gains that started back in April. Once again the Greater Toronto Area was the outlier, showing a year-over-year increase of 8.5% for September.  That was outweighed by declines in Greater Vancouver, Calgary, Edmonton, Ottawa, and Montreal.
There were decent gains on a year-over-year basis with September sales coming in 5.2% higher than in 2024.
Pricing, as measured by CREA’s National Composite Home Price Index, was virtually unchanged from August to September (-0.1%), but recorded a 3.4% decline on a y/y basis.  The national average home price was $676,000 in September, up 0.7% from September 2024.
Canada’s realtors continue to forecast ongoing increases in sales and prices but they are tempering their expectations.  Uncertainty triggered by U.S. tariffs and trade policy seems to have been enough to see interested home buyers step away from the market, especially in British Columbia and Ontario.
CREA’s latest Quarterly Forecast predicts a 1.1% decline in sales for 2025, with a 1.4% drop in the national average home price to $676,700.  In 2026, national home sales are forecast to rebound by 7.7%, with the national average home price rising by 3.2% to $698,600.
Published by First National Financial LP
6 Oct

Residential Market Commentary – Affordability Improves

General

Posted by: Frank Fik

A pair of new reports say housing affordability in Canada is getting better.  Ottawa’s fiscal watchdog, the Parliamentary Budget Officer (PBO), and well known housing economist Robert Hogue say falling interest rates and rising household incomes are the key factors in the improvement.
In his report economist Hogue calculates the national average share of household income needed to cover ownership costs has fallen to 53.6% (as of Q2 2025) from its all-time high of 63.5% at the end of 2023.  That percentage varies greatly across the country though.  In Vancouver it takes 89.2% of income to pay for housing costs while in Edmonton it is 32.2%.
Hogue also says the pace of affordability gains is expected to slow largely due to declining wage growth as more slack develops in the labour market.  Unemployment in Canada no stands at 7.1%.
The Parliamentary Budget Officer’s report tracks housing affordability based on the gap between average home prices and what the typical household can afford.  It shows cheaper borrowing costs and stronger wages narrowed the affordability gap from 80% in September 2023 to 34% in August 2025.
As with the Hogue report, the PBO says affordability gains varied widely across the country.  The biggest improvements were seen in Toronto and Hamilton, while Calgary, Montreal and Quebec City saw affordability deteriorate.
The Bank of Canada’s trendsetting Policy Rate has dropped to 2.25% and another quarter-point reduction is expected by the end of the year.
Published by First National Financial LP
22 Sep

Residential Market Commentary – BoC cuts rate amid mixed economic news

General

Posted by: Frank Fik

People hunting for homes and mortgages have had a lot of economic and market news coming their way lately. Probably the most significant is the Bank of Canada’s decision to lower its policy rate.

As expected, the central bank trimmed a quarter of a point off its trendsetting interest rate, bring it to 2.50%. It is the first rate move since March.

The cut came a day after Statistics Canada reported the inflation rate rose to 1.9% in August, up from 1.7% in July.

Normally rising inflation would be a reason for the Bank not to lower its rate, due to concerns about over stimulating the economy and encouraging even more inflation. However, the Bank noted that other factors – such as stable (although higher than desired) core inflation, a decline in the gross domestic product and an increase in unemployment – indicate inflation is not a high risk.

The interest rate cut could make variable-rate mortgages look more attractive for those who are comfortable with potential rate movement.

The Canadian Real Estate Association reports August home sales increased 1.1% compared to July and were almost 2.0% better than a year earlier. The MLS Home Price Index showed flat pricing month-over-month, but registered a 3.4% decline year-over-year. CREA’s national average price was $664,000 in August 2025, up 1.8% from August 2024.

August new listings were up 2.6% over July and up 8.8% over a year earlier.

Published by First National Financial LP

9 Sep

Residential Market Commentary – Odds favour a rate cut

General

Posted by: Frank Fik

Canada’s latest employment report has significantly increased the likelihood of an interest rate cut by the Bank of Canada on September 17.

Statistics Canada’s Labour Force Survey (LFS) for August shows a loss of nearly 66,000 jobs for the month. That follows a drop of 41,000 positions in July. The August unemployment rate stands at 7.1%, up from 6.9% a month earlier.

Looking back to June, the Survey of Employment, Hours and Payroll (SEPH) – which is considered more reliable than the Labour Force Survey (LFS) – shows more than 32,000 jobs were lost; a significant reversal from initial reports of 83,000 jobs added for the month.

Most of the August loses came in part-time positions but had an inordinate impact on workers aged 25 to 54, which is an important demographic in the first-time homebuyer market. On-going trade trouble with the United States is getting the blame.

Employment plays an important role in the Bank of Canada’s interest rate decisions. Market watchers now say there is a better than 80% chance the Bank will cut its policy rate later this month. However, inflation is still the key factor.

“All told, this weak report fully reinforces any bias for the BoC to ease somewhat further here, but inflation hasn’t quite given them the all-clear,” wrote bank economist Douglas Porter in a newsletter.

The next inflation report is due September 16, one day before the Bank of Canada’s next interest rate setting.

Published by First National Financial LP

25 Aug

Residential Market Commentary -Inflation eases slightly

General

Posted by: Frank Fik

The Canadian economy has recorded a small victory in the ongoing fight against the rising cost of living.

Statistics Canada reports headline inflation, also known as the Consumer Price Index (CPI), dipped slightly in July to 1.7%.  That is down from 1.9% in June.  Much of that decline is attributed to lower gasoline prices, resulting from the removal of the consumer carbon tax.

The growth of mortgage interest costs also continued to ease in July, rising by 4.8% year-over-year.  That is down from a 5.6% year-over-year increase in June.  However, natural gas prices and rent drove up overall shelter costs by 3.0%.
Core inflation, which is the Bank of Canada’s preferred measure of price increases, remains elevated.  It is hovering around 3.0%, which is the upper limit of the Bank’s desired range for inflation.  However, many economists note that the measures of core inflation did drop slightly in July.  They point out that the longer-term trend for core inflation has it running comfortably within the BoC’s 1.0% to 3.0% target range.
Those economists also say it is unlikely the July inflation report will have a serious influence on the Bank of Canada’s next interest rate setting on September 15.  Several other economic reports will arrive before then and the ongoing tariff turmoil coming out of the United States continues to spread uncertainty in Canada and around the world.
Published by First National Financial LP
12 Aug

Residential Market Commentary – Waiting for more data

General

Posted by: Frank Fik

The Bank of Canada’s next interest rate announcement is set for September 17.  Between now and then there will be plenty of economic data to digest.

The latest significant report was Statistics Canada’s July employment reading, which surprised most analysts with a drop of nearly 41,000 jobs.  Most of those positions were full-time.  The unemployment rate was unchanged at 6.9%.

Expectations had been for an increase of 13,500 jobs.

Well known Canadian economist Douglas Porter referred to the report as “unambiguously weak”, especially in light of the June employment report that showed 83,000 new jobs were created.

Some analysts feel this increases the likelihood of a Bank of Canada Policy Rate cut in September.  They put the chances at 40%.  However, Porter and many other economists do not expect July’s sudden jobs decline to change the central bank’s current stance on interest rates.

“[The Bank] will still need to see inflation slow notably over the next two prints for a September cut to be a high likelihood. We expect that the job market slack will put downward pressure on inflation, eventually, supporting the case for a return to modest rate cuts. And it appears that the trade uncertainty will be with us for some time yet,” Porter wrote in a client note.

The central bank has held its trend-setting Policy Rate at 2.75% since March.

Published by First National Financial LP

6 Aug

Residential Market Commentary – Bank of Canada policy rate unchanged

General

Posted by: Frank Fik

The Canadian economy continues to keep policymakers at the Bank of Canada guessing.  The key contributor to the quandary continues to be U.S. tariffs, and that puzzle has just become even more complicated.
As of August first, the U.S. increased its tariff rate on imported Canadian goods to 35%, up from 25%, except for products covered by the CUSMA trade deal.  What that means remains to be seen, but any economic slowdown, inflation or unemployment triggered by the increase will figure into the BoC’s decision-making on its policy rate.
In the meantime, the Bank is monitoring a Canadian economy that has been remarkably resilient in the face of the tariff upheaval, so far.
The Bank of Canada once again held its benchmark, overnight policy rate steady at 2.75%, where it has been since the March setting.  The latest decision follows an increase in the June inflation reading from 1.7% to 1.9%, while core inflation remains stuck at about 3.0%. There was also a surprisingly strong employment report in June, with the economy creating 83,000 new jobs.  As well, expectations for Canada’s gross domestic product remain optimistic.
The latest report from Statistics Canada – which came out after the rate setting – shows GDP dropped 0.1% in May, as it did in April.  But, StatsCan’s early forecast for June suggests an increase and, as a result, GDP growth of 0.1% for the second quarter of 2025.
Market watchers say new data, coming this month, will give the BoC a clearer and truer view of the Canadian economy.  For those who are waiting for further interest rate relief, many of the experts say it will be September, or even October, before the Bank makes another move.
Published by First National Financial LP
22 Jul

Residential Market Commentary – Real estate rebound

General

Posted by: Frank Fik

Market watchers across the country are talking about a real estate recovery.  Much of the optimism is based on sales and pricing results over the past two months.

The June figures from the Canadian Real Estate Association show a 2.8% increase in sales compared to May, which recorded a 3.5% increase over April. On a year-over-year basis sales are up 3.5% compared to June of 2024. The improvements have been driven by transactions in the Greater Toronto Area which have jumped more than 17% since April, but still remain at historical lows.

The market domination of the GTA may help to explain why prices continue to ease. The national average price for June came in at $692,000, a 1.3% decrease from a year earlier. CREA’s proprietary ‘Home Price Index’ showed a 3.7% decline from June of 2024.
New listings fell 2.9% between May and June, but are still 11.4% higher than they were a year earlier. The sales-to-new listings ratio has tightened-up a little but is, slightly, tilted in favour of buyers.  The June ratio stands at 50.1% compared to 47.3% in May.  CREA considers anything between 45% and 65% to be a balanced market.
Many market watchers are hopeful the rebound will continue through autumn, but analysts say that will likely depend on interest rates.  Expectations for further cuts by the Bank of Canada have diminished in recent weeks. The experts are now looking to October before there is another rate cut. They cite June’s good employment report and persistently “stickie” core inflation. Interest costs on fixed-rate mortgages have been creeping up, based on economic news that is bolstering the yields on Canada and U.S. government bonds.
Published by First National Financial LP
30 Jun

Residential Market Commentary – Bank of Canada balancing act

General

Posted by: Frank Fik

Expert opinions on Bank of Canada interest rate cuts are shifting. A growing number of market watchers are backing away from their predictions of two more reductions this year. Several are now saying the Bank has likely reached the end of the current trimming cycle.

The central bank held its trend-setting Policy Rate at 2.75% for a second time in its decision on June 4. Since then, inflation numbers and Gross Domestic Product readings have given the BoC reasonable grounds to stand pat.

Statistics Canada’s latest figures for GDP show it declined by 0.1% in April compared to March. Much of that decline was led by the manufacturing sector, which is falling victim to U.S. tariffs and trade uncertainty. A similar reduction is forecast for May. While many economists admit the slowdown shows the economy is softening, they say it is not on the verge of collapse. GDP is 1.3% higher that it was a year earlier.

The other key factor in the Bank’s rate decisions, inflation, held steady at 1.7% in May. That headline number is actually below the Bank’s target of 2.0% and would normally suggest there is room for a further rate cut. However, that is a little deceiving.

Headline inflation (aka the Consumer Price Index) continued to be skewed by the elimination of the consumer carbon tax. As well, core inflation, which is the BoC’s preferred measure, remains stuck at 3.0%, which is the high end of the Bank’s desired inflation range.

The Bank finds itself trying to balance economic growth against the risk of rising inflation. The Bank’s next interest rate announcement is set for July 30.

Published by First National Financial LP