Back to the Offer Table

Steve Saretsky -

It was back to the offer table for Canadian house shoppers. After a brief pause in shopping activity, home buyers returned in September. Sales activity increased 0.9% from August, as new listings declined. Low inventory levels continue to decimate the nations housing market as buyers pick over the scraps. There is just 2.1 months of inventory on a national basis. Just for context, a balanced market requires 4 months of inventory. In other words, new listings have to surge or sales have to plummet just to hopefully get to a balanced market where price growth can moderate.

Unfortunately we are nearing the last of the fall market, with new listings expected to take their usual seasonal decline along with home sales. I don’t expect much to change between now and the birth of the spring market in early 2022. Therefor, it’s no surprise that home prices continue to rip, up 1.7% nationally over the past month. Assuming this pace continues (seems unlikely), home price inflation would be running at over 20% annualized, that’s on top of the 21.5% they already increased during the past twelve months.

Year-over-year price growth is as follows:

Canada +21.5%
Toronto +19.1%
Montreal +20.8%
Vancouver +13.8%
Calgary +9.2%
Ottawa +16.3%

It should come as no surprise, but rampant housing inflation further complicates things for the Bank of Canada which is already desperately trying to temper consumer inflation expectations. CPI inflation data for September will be released this Wednesday, and it’s expected to drift higher, closer to 4.5%.

I don’t envy Tiff Macklem’s position. Inflation is proving to linger longer than anticipated, and raising interest rates on a mountain of debt is easier said than done. The Bank will be releasing a monetary policy update and interest rate decision on October 27th. God speed.

Three Things I’m Watching:

1. National home prices have tripled since 2005. (Source: The Habistat)

2. US inflation is annualizing 7.2%, the highest since early 1980s. (Source: Bank of America)

3. Canada home price inflation hit 21.5% year-over-year in September. (Source: RBC)

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The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

Steve Saretsky -

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

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The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession...

Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

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The Saretsky Report. December 2022