It’s time for your cheat sheet on this week’s top stories.
Canadian real estate
Canadian real estate market has entered bearish territory, expect it to get worse: BMO
Canada’s oldest bank warns the bear market is far from over – it’s just beginning. BMO Capital Markets explained that stocks are at a much healthier level. Months of supply doubled the low reached this year, with SNLR now showing a balanced market. The bank explains that the SNLR leads the prices by about 3 months, so the prices should continue to fall for now.
Canadian inflation revisions show something is seriously wrong: National Bank
Headline inflation in Canada is down, but that might not show what we think it is doing. Core inflation, preferred by the Bank of Canada (BoC), hit 5.3%, a 32-year high. Core inflation is preferred to headline inflation because it eliminates the most volatile components. However, the bank notes two major revisions in two months which show that it is not as reliable as previously thought.
They cite January’s annual growth as an example, which fell from a solid 2.3% to a sparkling 3.6% with the latest revision. It is quite common to revise the figures, but the National Bank explains that it is the second in 2 months. The revised figures would probably have supported the BoC’s rise in the fall. Instead, the central bank was still using inflation-creating tools like QE during this period.
Canada’s major real estate markets see stocks returning to ‘equilibrium’
Canada’s major real estate markets saw demand slump, restoring healthy inventories. The sales-to-new listings ratio (SNLR) reached 51.7% in July, a significant change from 89% earlier this year. It is now considered a “balanced” market, helping to eliminate the emotional premiums paid. This helps explain prices falling by tens of thousands per month in key markets.
Canadian HELOC debt accelerates as interest rates rise
Canadian Home Equity Line of Credit (HELOC) debt is growing at the fastest rate in nearly a decade. The outstanding balance reached $171.1 billion in June, up 2.9% (+$4.8 billion) from a year ago. It was the strongest growth since February 2013. That’s a huge number, but it may seem small contrary to your anecdotal experience. This is because HELOCs are only a fraction of home equity loans. A fixed rate home loan, for example, would not be considered a HELOC.
Canadian mortgage debt increases by half a billion dollars a day on average
Canadian mortgage debt hit a new record and grew at one of the fastest rates ever. The outstanding balance reached $2.03 trillion in June, up 9.7% ($178.7 billion) from the same month last year. The annual growth is the lowest rate since May 2021, but it’s still higher than in recent years before 2020. Aren’t large numbers supposed to be harder to grow?
Most Canadian real estate markets fell from their highs, as low as $355,000
Canadian house prices continue to erode from the top as the rate stimulus turns FOMO into NOMO. Markets saw prices fall as low as $355,000 from their all-time high. Other markets have lost up to a fifth of their value in a few months. However, the real estate bubble has inflated so quickly that no market is lower than last year, yet.