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The Bank of Canada made its fifth interest rate decision of 2021 and updated its outlook for inflation and economic growth. The Bank held its overnight rate at 0.25% and suggested that Canada’s economic recovery, while slightly slower than expected so far, should be stronger than anticipated in 2022. The next scheduled date for announcing the overnight rate target is September 8, 2021. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on October 27, 2021.

As COVID-19 continues to be pushed down in Canada, consumer spending is expected to go up.  The latest survey by the Bank of Canada suggests that will lead to an even greater demand for homes. The Bank’s Survey of Consumer Expectations, for the second quarter of 2021, indicates there is a general, overall optimism about the end of the pandemic and that consumers are prepared to do some spending as the virus fades and health restrictions are lifted. The survey indicates 40% of respondents managed to save more money than usual during the pandemic.  That group expects to spend about 35% of those savings over the next 2 years.  They indicate that much of that spending will be on activities that have been restricted during [...]

Much of the economic talk so far this year has centered on interest rates.  The main questions have been when they will start to rise and by how much.  In an attempt to provide answers economists and analysts monitor a key factor that guides interest rate policy: inflation. Inflation has been a non-issue in North America for the better part of 40 years.  That’s largely because after the last significant bout of inflation, in the late ‘70s through the mid ‘80s, central banks in Canada and the U.S. were given the job of keeping it under control.  At that time the Bank of Canada rate topped 21%, and mortgage rates looked more like credit card interest. Interest rates are the traditional tool used to control [...]

Inspecting your home on a regular basis and following good maintenance practices are the best ways to protect your investment in your home. There is always something to do around the house, especially when the season changes. Spring is the time to assess winter damage, start repairs and prepare for warmer months. Here are 5 tips for you and your clients to properly maintain your homes this spring. Exterior inspection and repairs Take advantage of the spring weather to do an outdoor inspection of you home. Examine the foundation wall to see if it sustained any damage over the winter. Watch for cracks or leaks and repair as required. Look for low spots that may have formed next to the foundation that could trap water. [...]

The Bank of Canada hold its target for the overnight rate at the effective lower bound of 0.25%. Canada’s economy was strong through to late 2020, but the lockdown measures did have an impact on the economy. The rate will have to stay low to help recuperate from the economic impact of COVID-19. This is good news for homeowners and buyers looking to get into the market. The next scheduled date for interest rate announcement is June 9, 2021. Read the full report by Bank of Canada here.

The “B” word has started floating back into discussions about Canada’s housing market.  The latest numbers from the Canadian Real Estate Association help to explain why worries about a bubble are on the rise. Sales activity in February jumped nearly 40% compared to a year earlier, setting a new record.  Sales rose nearly 7% compared to January.  The national average price surged by 25% year-over-year.  New listings rebounded month-over-month in February but inventories remain at record lows.  Nationally there is just 1.8 months of supply. The Bank of Canada has expressed concerns about overheating.  Governor Tiff Macklem has noted that there are signs that real estate speculation is on the rise. "What we get worried about is when we start to see extrapolative expectations, when [...]

Home sales and home prices are breaking records. Housing starts are beating expectations. The Toronto and Vancouver housing markets occupy prominent places on a new, global list of least affordable cities.* Now, Bank of Canada Governor Tiff Macklem says there are early signs Canada’s housing market is overheating.  During a session with an Alberta business audience Macklem said there are signs of “excess exuberance” in the housing market. So far, he said, the move toward bigger houses further away from city centres has not been speculation.  The BoC sees it as a response to a need for more working and family space for people who no longer need to go in to the office.  The Bank supports its argument by pointing to the fact that [...]

Current conventional wisdom has it that the latest wave of home sales is being powered by “move over” and “move up” buyers. These are people who are motivated by a desire for more space, largely prompted by the shift to remote work/work-from-home that has been triggered by the pandemic. If it is sustained, it could be seen as a societal shift: urbanization evolving to suburban/ex-urbanization.  But that sustainability is being called into question by at least one prominent Canadian economist. Benjamin Tal, who has a propensity for bold statements, points out that the trend has been around for a while, and it has been accelerated by current circumstances.  But he recently told BNN/Bloomberg he does not think it will last. “I believe that this trend [...]

The desire for home ownership remains strong in Canada.  The latest home buying sentiment poll by one of the country’s big banks suggests nearly 60% of Canadians aspire to own a home.  Just over half of those people are looking for a detached home. Affordability continues to be a key concern with roughly 60% of respondents saying homes in their area are unaffordable.  According to the survey the average home buying budget in Canada stands at $445,000.  The Canadian Association of Realtors (CREA) puts the average price of a home (all types) at $607,000. Not surprisingly a significant portion of those polled – 45% – expect they’ll have to leave their current city to buy a bigger house.  Changing housing needs and the desire for [...]

In a year where pretty much all things economic and financial have been stood on their heads, here is another anomaly brought on by the coronavirus pandemic.  Household debt is on the rise again and a lot of it is mortgages. The latest tally by Statistics Canada shows that the Canadian Household Debt-to-Income ratio crept back up to 170.7% in the third quarter.  That is, on average, Canadian households owe $1.71 for every dollar of disposable (after tax) income.  That is a significant bump from $1.63 in the second quarter, but significantly less than the $1.81 at the start of the year. The drop in Q2 is largely attributed to government support payments, mortgage deferrals and other debt relief that saw Canadians spending much less, [...]