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Happy Monday Morning! Those holding their breath for an easing in mortgage rates were delivered some tough news last week. The Canadian labour market added 150,000 jobs in January, more than TEN times economist estimates. Let’s not forget that December jobs numbers were TWENTY times estimates. Just what the hell is going on here? Either our economists are really, really bad at forecasting or the Stats Canada random number generator is in need of repairs. My good friend Ben Rabidoux at North Cove Advisors might have the answer. Immigration. Per Rabidoux and Stats Canada, “On a year-over-year basis, employment for those who were not born in Canada and have never been a landed immigrant was up 13.3% in Jan, compared with growth in total employment of 2.8%.” This makes sense. Job vacancies were sky-high in H2 2022. The Government responded by ramping non-permanent resident growth, which hit record highs over the past 2 quarters. “The increase of NPRs in the third quarter of 2022 was larger than any full-year increase since 1971 (when data on NPRs became available). This increase was driven by work permit holders…” Rabidoux concludes, that what we’re seeing now in the jobs data are work permit holders filling

Happy Monday Morning! Lots of chatter these days about increased activity in the housing market. It’s true open houses are busier, stale inventory that’s been sitting for months is suddenly under contract, and some new listings are fetching multiple offers. Quite a difference four weeks can make. Is this the end of the housing bear market? While sentiment has certainly shifted, the data suggests we’re not out of this just yet. For the month of January, Greater Vancouver home sales ticked in at their lowest levels since January 2009. Yes sales were in the dumps, but housing bulls will scream, “But there’s nothing to buy!” and this is also true. New listings trickled in at their lowest levels since 2004! Very hard to get lower prices when new listings are basically running at 20 year lows. This doesn’t account for the increase in housing stock over the past two decades either. There’s been a narrative building over the past year that a bunch of distressed sellers would flood the market as higher interest rates bite. That has not happened. So we’re stuck with very low inventory levels as we approach the busier spring selling season. Current inventory levels today would

Happy Monday Morning! As expected, one and done from the BoC this past week. Here’s Tiff Macklem, “With today’s modest increase, we expect to pause rate hikes while we assess the impacts. To be clear, this is a conditional pause. Its conditional on economic developments evolving broadly inline with our outlook.” For those playing along at home, their outlook involves a soft landing. Those hopes, of course, largely depend on the trajectory of the housing market. We’ve noticed a lot more optimism in the housing market these days. Buyers are finally coming off the sidelines after being nearly non-existent over the past six months. Stale inventory is suddenly finding a bid, sometimes going back into multiple offers. Is this the bottom? The CEO of Redfin seems to think so. At least for the US housing market. Up North i’m a bit more skeptical. While interest rates may have peaked, they remain elevated. Affordability still sucks. Variable rate mortgages are sitting at 6%, up nearly 500bps from last year. Let’s not forget about trigger rates. According to National Bank, between 73% to 80% of variable-rate fixed payment mortgages originated between 2020 and 2022 have been triggered during this tightening campaign. Variable

Happy Monday Morning! We got more encouraging news on the inflation front. Consumer prices in Canada fell on a seasonally adjusted basis, dropping -0.1% month over month, the first drop since July 2020. Yes, annual inflation still looks very high at 6.3%, but that only tells us what happened a year ago. We discussed these big fat, laggy indexes last week so no need to beat a dead horse. Let’s try to filter through the noise here. As my good friend Ben Rabidoux points out, Consumer prices have been nearly flat over the past 6 months. Remember, prices don’t have to drop, they just have to stop going up a lot. Shelter inflation remains stubbornly high, despite house prices cratering. Ironically, the largest contributor to annual inflation in Canada right now is now mortgage interest costs. A whopping 400bps of tightening on a highly levered household sector will do that. And we might not be done yet. The Bank of Canada will provide an important update this Wednesday. Markets are still expecting the BoC to squeeze in another 25bps before pausing. Twitter seems to agree. The Bank of Canada has been pretty unpredictable over the past year. My bet is on 25bps

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Happy Monday Morning! Canadian inflation data drops this week on Wednesday, January 17th. This will be an important headline given that the Bank of Canada is set to meet the following week on January 25th. As of right now the market is still expecting a 25bps rate hike, but that could change if CPI comes in a lot weaker than expected. As of right now, RBC is calling for headline CPI to fall to 6.4% for December, down from 6.8% in November. That seems about right given the drop we saw last week in the US. Inflation has now fallen for six consecutive months in the US. In fact, if you remove shelter costs (huge lag), you have deflation on a monthly basis. Of course people will say you can’t remove shelter, it makes up nearly 30% of the CPI basket and people need a place to live! Of course this is true, but we all know the housing market is in the dumps, prices are falling and rents have peaked. Here’s the Zillow rent index against the shelter component of the CPI index. Shelter inflation is going to drop like a stone, give it time. The Fed knows this

Happy Monday Morning! Back to our regularly scheduled programming after a few weeks off during the holidays. Last year was an eventful year across the Canadian Real Estate spectrum to say the least. I figured i’d start off the New Year with a quick sentiment check. And the survey says… things are going to get worse. My poll on Twitter garnered nearly 5000 votes, with almost 80% of respondents calling for a further correction in prices by the end of 2023. Yes, it’s true Twitter tends to skew bearish, however it’s hard to deny that further downside is likely given the rapid surge in home prices suddenly colliding with the fastest rate hiking cycle most people have ever seen. In fact, on a debt adjusted basis, this rate cycle is more than twice as severe as the 1980’s. Prices have already dropped quite a bit. The national home price index is down 16% since it peaked in March 2022, that’s the steepest decline on record, dating back to 2005. While we are nearing the end of this rate hiking cycle, markets are still expecting more pain ahead from Tiff Macklem thanks to another strong labour report. The Canadian economy added

Toronto and Vancouver home sales fell nearly 50% in the month of December. The comps are going to look awful from now until March. Is the Fed looking in the rearview mirror? Why the jobs data is lagging and why it’s possible inflation can come down quicker than we might expect. Another recession signal just flashed red. Sign up for Shakepay with the promo code: LOONIEHOUR, and you’ll receive $10 after you buy your first $100 worth of bitcoin. https://shakepay.me/r/LOONIEHOUR Listen to The Loonie Hour on your favourite podcast platform: The Loonie Hour on Spotify: https://open.spotify.com/show/4vA4m1d9RVo9KitszSHzN0 The Loonie Hour on Apple Podcasts: https://podcasts.apple.com/ca/podcast/the-loonie-hour/id1591470469 #TheLoonieHour #Macroeconomics #PersonalFinanceCanada

Sales activity remains subdued across Greater Vancouver as we close out the year. Buyers are tepid, not eager to write offers and are looking to negotiate, can you blame them? Sales activity remains historically weak. In the month of November, sales across Greater Vancouver totalled 1624, down 54% from November 2021 and marking the third slowest November in two decades.