DATE

Steve Saretsky -

Another month, another record inflation print. Canada’s CPI inflation printed 8.1%, the highest level since January 1983. The silver lining is this was actually lower than market expectations of 8.4%, sending bond yields lower on the premise that inflation is likely peaking and a recession is becoming nearly inevitable if we aren’t in one already. The Canada 5 year bond which prices fixed rate mortgages continues to fall, dipping below 2.9% and now down nearly 50bps from the recent peak in June. Some lenders are slashing five year fixed rate mortgages, albeit somewhat marginally. The reality is that fixed rate mortgages are still too high to prevent a further correction in the nations housing market. It’s also worth noting that another increase in prime rates is due in September when the Bank of Canada hikes rates again. If the Bank moves rates up another 50bps as expected, it will trigger quite a few fixed payment variable mortgages, a product which accounts for 80% of all variable mortgages in circulation. I can assure you very few homeowners are prepared for a call from their bank in September asking them to increase their monthly payment or provide a lump sum of cash

Steve Saretsky -

Another month, another jumbo sized rate hike from the Bank of Canada. Tiff Macklem and crew surprised markets with a 100bps rate hike, the largest move since 1998 when the central bank was trying to support a weak Loonie. It was just two years ago when the Bank of Canada was rather irresponsible in encouraging the private sector to take on more borrowing, ensuring interest rates would remain at zero until the end of 2023. In the past four months, the bank has taken interest rates from zero to their target neutral rate of 2.5%, an incredible pace of change. While the bank is adamant they are “front loading” interest rates, there’s still another 100bps of tightening priced in for this year. This will have serious ramifications for the housing market so let’s discuss. One of the pillars supporting the housing market has been variable rate mortgages. They’ve been dirt cheap, averaging more than 150bps cheaper than the fixed rate mortgages this year. For this reason, we’ve seen an increasing number of new purchasers opting to go with variable rate mortgages. So far this year, over 50% of new mortgage originations have been variable, a historically high figure. If you were

Steve Saretsky -

As per Stats Canada, activity at the offices of real estate agents and brokers dropped 15.0% in April, the largest contraction since April 2020. That was in April, so you can only imagine how the data will look in the coming months. Recent sales figures in Canada’s two largest major metros suggest this bear market is just getting started. Greater Toronto Area home sales just recorded a 20 year low in home sales in June, the second consecutive month now. The decline in sales activity is rather widespread. Here’s how it looks from a year-over-year perspective in June: York -52% Peel -52% Toronto -43% Durham -34% Prices in the suburbs are off in some cases by 15-20% from peak valuations in February. It’s been a sharp move alongside the quickest pace of increase in bond yields in recent history. While things are certainly less dire here in Vancouver, the market has entered a rather significant cooling. Greater Vancouver home sales were off 34% from last June, the fourth slowest June over the past twenty years. In the Fraser Valley it was the slowest June in over twenty years, pretty remarkable when you consider how much the valley has grown from

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The Canadian Economy

Steve Saretsky -

Another month, another record inflation print. Canada’s CPI inflation printed 8.1%, the highest level since January 1983. The silver lining is this was actually lower than market expectations of 8.4%, sending bond yields lower on the premise that inflation is likely peaking and a recession is becoming nearly inevitable if...

Steve Saretsky -

Another month, another jumbo sized rate hike from the Bank of Canada. Tiff Macklem and crew surprised markets with a 100bps rate hike, the largest move since 1998 when the central bank was trying to support a weak Loonie. It was just two years ago when the Bank of Canada...

Steve Saretsky -

As per Stats Canada, activity at the offices of real estate agents and brokers dropped 15.0% in April, the largest contraction since April 2020. That was in April, so you can only imagine how the data will look in the coming months. Recent sales figures in Canada’s two largest major...

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The Saretsky Report. December 2022