23 Oct

Residential Market Update


Posted by: Adriaan Driessen



Industry & Market Highlights 

CMHC releases Sept. housing starts data

The annual pace of Canadian housing starts fell to their lowest level in nearly two years in September.

Canada Mortgage and Housing Corp. says the seasonally adjusted annual rate came in at 188,683 units last month, down from 198,843 in August.

Thomson Reuters Eikon says economists had expected an annual rate of 210,000 for September.

September marks the third straight monthly decline.

The slowdown in the pace of housing starts comes amid rising interest rates from the Bank of Canada, and more restrictive mortgage rules.

“The September housing starts report fits with the relative calm and return to normality in sales, market balance and price growth that we are seeing across most of the country this year, in particular Toronto, following speculative excesses in Southern Ontario earlier last year and a moderate correction in response to policy measures earlier this year,” wrote Sal Guatieri, a senior economist with BMO Capital Markets, in a note.

“Demand continues to be supported by the fastest population growth in 27 years and new millennial-led households. A calmer housing market is just what the doctor ordered, and won’t discourage the Bank of Canada from raising rates on Oct. 24.”

CMHC says the pace of urban starts fell by 5.9 per cent to 175,653 units. The slowdown was dragged down by an 8.9 per cent drop to 122,656 units in urban multiple-unit projects such as condos, apartments and townhouses. Single-detached urban starts increased by two per cent to 52,997.

Rural starts were estimated at a seasonally adjusted annual rate of 13,030 units, while the six-month moving average of the monthly seasonally adjusted annual rates was 207,768 for September, down from 213,966 in August.

British Columbia led the declines with a drop of 43.3 per cent due to stiffer mortgage rules and growing lack of affordability, particularly in the Greater Vancouver area. Alberta also saw a drop of 34.8 per cent, amid a weakening in the oil-producing economies.

Meanwhile, Ontario housing starts increased 21.3 per cent, led by Toronto condos and Quebec was up 15.4 per cent.  By The Canadian Press.

First-time homebuyers are maxed out, but confident

Canadians are not holding back when it comes to buying their first home.  The annual mortgage consumer study by Canada Mortgage and Housing Corporation finds that 85% of first-time buyers are maxing-out their home-buying budgets.

The CMHC study indicates that affordability is the most important factor for both first-timers and repeat buyers, ahead of things like the condition of the home, the neighbourhood and distance to work.

More than half of recent homebuyers say other key concerns include unforeseen costs, paying too much for their property and rising interest rates.  Still, 76% of first-time buyers are confident they will be able to meet their mortgage payments.  Sixty percent of first-time buyers and 69% of repeat buyers claim to have sufficient assets, such as investments or other properties, which they could use to fund their mortgage if they needed to.

There is some support for this consumer confidence.  Recent reports by the credit monitoring firms Equifax and TransUnion indicate the growth of consumer debt (non-mortgage) is slowing and delinquency rates are declining.  At the same time the Office of the Superintendent of Financial Institutions reports the quality of mortgage loans is improving.

Rising interest rates, foreign buyer taxes and tougher mortgage qualification rules appear to be cooling real estate sales and prices across the country but the Canadian Real Estate Association is maintaining a positive forecast.

The Bank of Canada is expected to bump-up its benchmark interest rate by a quarter-point – to 1.75% – on Wednesday.  By First National Financial.

The temperature may be dropping, but Montreal is heating up

Never mind Vancouver.  Do not bother with Toronto.  Canada’s hot housing market du jour is Montreal.

While Toronto and Vancouver have been getting all the attention as the busiest, most expensive and most volatile markets in the country, Montreal has been on a sales and price appreciation roll for 43 consecutive months.

In September, Montreal home sales hit a nine year high; 3,220 units (led by 1,206 condominium transactions), up 8% compared to a year ago.  Year-over-year prices climbed 7% for single-family homes ($336,000), 6% for plexes ($504,000) and 4% for condos ($263,000).

In Vancouver, year-over-year sales declined from February through August.  In Toronto, gains have been modest.  September sales were up just 1.9% compared to 2017.  Prices were up about 2%.

High prices, rising interest rates and foreign buyer taxes appear to be weighing down the two top markets.  Montreal, meanwhile, is enjoying the benefits of good immigration, economic growth, consumer confidence and public infrastructure projects, according to the local real estate board.  By First National Financial. 



Economic Highlights


Interest rate rise “a done deal” but impact is showing says TD

There is little dispute among economists that the Bank of Canada will increase interest rates again this week.

Wednesday’s hike will be accompanied by explanation as to why this is necessary in the context of better-than-expected economic growth in the third quarter and core inflation is on target.

TD Economics senior economist Fotios Raptis says the hike is “a done deal” but notes in a report that the impact of rising interest rates is starting to bite.

He highlights weaker retail and consumer spending data with nominal spending declining in Saskatchewan, Quebec, Alberta, and British Columbia.

National home sales were also weaker in September and growth in home prices was weaker. TD is forecasting a slower pace of home activity in the months ahead as mortgage costs and affordability weigh.

Headline inflation, Raptis points out, was also down sharply in September with the CPI rising 2.2% year-over-year, well below the expected 2.7%.

However, with a strong business outlook, tight labour market, and rising wages, he believes that the BoC has reason to believe the economy can withstand another rate rise.

Rate rises will remain gradual

Meanwhile, CIBC Economics’ Avery Shenfeld says the BoC will remain cautious on rate rises following this week’s near-certain hike.

Apart from the NAFTA-replacement USMCA trade deal, not much has changed since the central bank last spoke of gradual rate rises.

Although Shenfeld expects Governor Poloz to avoid too much forward guidance although there should be positive talk regarding growth in 2018 and 2019.  By Steve Randall.

Did the new USMCA effect rates?

It’s been rough week for bonds. Since we closed the books last Friday, 2 year yields are up 10 basis points to 2.31%, 5 year yields are up 15 basis points to 2.48%, and 10 year yields are up 16 basis points to 2.58%.

Of course the question isn’t where rates are, but rather WHY are rates here?  The most obvious answer was Canada’s agreement to join the US-Mexico trade agreement (now the “USMCA”) last weekend.  Canada made some key concessions on dairy but the US agreed to protect Canada from potential tariffs on autos.  The reduction of uncertainty and de-escalation of a possible trade war was bullish for Canadian economic growth expectations and rates move higher.  The initial down trade (prices) was highlighted by momentum/negative gamma type selling (or put another way, more sellers than buyers).  Easy peasy.

The selling is presently being punctuated by a stronger than expected jobs report this morning.  Canadian employment popped by 63,300 jobs in September, more than reversing the drop reported last month.  The unemployment rate dropped a tick to 5.9%.  We also can’t underestimate the impact of the new NHL season kicking off with a potentially historic run in the cards for the Leafs.  With the removal of trade overhang (and two goals by Auston Matthews in the season opener) the market has now priced in two 25 basis point hikes by the BoC by January.

Commercial Break

We’ll pause here to highlight First National’s excellent early rate lock program for all your commercial mortgage borrowing needs.  If you’ve already hedged your fixed rate borrowing, congratulations.  If you haven’t, it’s not too late.  Help me help you.  Call your favourite First National underwriter, lock-in, and sleep better!  Two sure things in life are the benefits of sunscreen and hedging your fixed rate mortgages.  By Jason Ellis, Senior Vice President and Managing Director, Capital Markets, First National Financial.


Mortgage Interest Rates

Prime lending rate is 3.7%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.34%.  Fixed rate increased across the board on average 25 basis points.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages very attractive.

Terms Posted



  Per $100k

Our Rates Payment

  Per $100k

6 Months 3.14% $480.46 3.10% $478.39 $2.07
1 Year 3.34% $490.86 3.29% $488.25 $2.61
2 Years 3.74% $512.02 3.44% $496.11 $15.91
3 Years 3.89% $520.07 3.54% $501.38 $18.69
4 Years 3.94% $522.77 3.64% $506.69 $16.08
5 Years 5.59% $615.64 3.54% $493.48 $122.16
7 Years 5.80% $627.97 4.04% $528.19 $99.78
10 Years 6.10% $645.76 4.14% $533.64 $112.13
Variable 2.70% $457.99 2.70% $457.99 $0.00
Prime Rate 3.70%
Please Note: Payment per $100K and possible savings shown above are based on a 25-year ammortization. Rates are subject to change without notice and the rate you receive may vary depending on your personal financial situation. *OAC E&OE. Please reply to this email and I will be happy to provide you with greater detail and determine the best rate available for you.
This edition of the Weekly Rate Minder shows the latest rates available for Canadian mortgages. At Dominion Lending Centres, we work on your behalf to find the best possible mortgage to suit your needs.

Explore mortgage scenarios using helpful calculators on my website: http://www.iMortgageBroker.ca



5 Oct

Residential Market Update


Posted by: Adriaan Driessen



Industry & Market Highlights 

The short break in interest rate increases may be over

Over the past few months rates have held steady and gave home owners a reprieve in the increasing mortgage interest rate market.  After the official announcement of a trilateral trade agreement with Canada, the U.S. and Mexico, and the US Federal Reserve Bank raising interest Rates – most Economists agree that the Bank of Canada is next to make a rate announcement, and we may start to see some slow, but steady interest rate increases again. Of course no one can say for sure, but the signs seem to point in that direction. If you’re feeling nervous about rates increasing contact your broker to review your options to look out for your best interest.

If you are currently in a variable rate mortgage with a lower risk tolerance, this may be the time to consider locking in.  If you have a high risk tolerance and are used to the ebb and flow of markets, it’s business as usual. 

Increases in the U.S. and the potential ripple effect

Market watchers who are forecasting another Bank of Canada rate increase next month have been handed more backing for their prediction.

Last week the U.S. Federal Reserve pushed up its policy rate for the eighth time since December of 2015.  The Fed increased its benchmark rate by 25 basis points (a quarter of a percent) to a range of 2% to 2.25%, the same level it was at in April 2008, before the height of the global financial crisis.  The U.S. central bank also made it clear it intends to continue along that path.

The Fed says it expects one more increase this year and is projecting at least three hikes in 2019.  It has also changed some of the language in the accompanying statement, eliminating the phrase “the stance of monetary policy remains accommodative.”

The effects of U.S. rate increases routinely ripple across the border influencing bond rates and the value of the Canadian dollar.  A declining loonie could trigger further inflation, as the cost of imported goods increase.

The Bank of Canada is already facing an inflation rate that is running on the high side of its 1% to 3% target range.  Unemployment is at generationally low levels in Canada, and working people exercising their spending power can also fuel inflation.

Given these pressures and the BoC’s stated desire to normalize interest rates another quarter-point increase seems very likely on October 24th.  By First National Financial.

SOLD Date Coming to Realtor.ca

CREA’s Board of Directors has voted to add sold and historical data to the property listings on Realtor.ca without the need for a login.

In a message to real estate boards across the country, CREA says the move comes “in order to meet consumer demand and at the request of Realtors and boards.”

It says, “In addition to responding to requests from members, this will ensure we continue to offer leading edge services on the best real estate website in Canada.”

A Competition Tribunal decision in July 2016 found that by not including sold and other data in its VOW feed to members, TREB had engaged in anti-competitive acts. An appeal court upheld the decision and on Aug. 23 of this year, the Supreme Court of Canada announced that it would not hear TREB’s appeal. CREA supported TREB at the tribunal and had intervenor status in the proceedings.

TREB is now supplying the disputed data to its member VOWs.

CREA media relations officer Pierre Leduc says that before the sold data can be displayed on Realtor.ca, each real estate board must request that the information be added. CREA will then work with the boards, the provincial associations and the regulators to ensure that it complies with all laws and regulations.

“We’ll have to check with the boards to see what historic sold data they have access to, and how far back that data will go,” says Leduc.

Only historic sold prices will be posted and not pending solds, he says. Pending solds were part of the Competition Tribunal order for VOWs, but consumers and Realtors are concerned about privacy issues on deals that have yet to close.

Leduc says CREA hopes to have the sold data rolled out on Realtor.ca as soon as possible.  By REMonline.com

CREA: National home sales post modest sales gain

Growth in Canada’s housing market in August was modest as the effects of the mortgage stress test continues, although is beginning to fade.

The latest sales data and forecast from the Canadian Real Estate Association released Monday shows a small rise for sales in August, a 0.9% increase month-over-month.

Actual (not seasonally-adjusted) activity was down 3.8% year-over-year while prices nationally increased 1% from a year earlier. Sales activity is weaker than most months over the last 4 years.

“The new stress-test on mortgage applicants implemented earlier this year continues to weigh on national home sales,” said CREA President Barb Sukkau. “The degree to which the stress-test continues to sideline home buyers varies depending on location, housing type and price range.”

There were 5.2 months of inventory on a national basis at the end of August 2018, right in line with the long-term average for the measure.

The Aggregate Composite MLS® Home Price Index (MLS® HPI) was up 2.5% y-o-y in August 2018.

The largest y-o-y price gains in August were for apartments (+9.5%), followed by townhouse/row units (+4.3%). But prices for one-storey and two-storey single family homes were little changed on a y-o-y basis in August (+0.4% and -0.4% respectively).

Where the gains were

Around half of all local markets recorded an increase in sales from July to August, led again by the GTA.

TD Economics’ analysis of the data shows the largest gains were in Toronto (+2.2%), Montreal (+2.8%) and Edmonton (+5.4%) while sales were lower in Halifax (-8.2%), London (-1.2%) and Winnipeg (-1.0%).

Activity picked up in several markets in B.C. including 2.9% in Vancouver – the first gain this year – along with the Fraser Valley (+0.6%), Okanagan-Mainline (+1.7%), and Victoria (+2.7%).

“Our view is that sales and prices will continue to grow, but that rising borrowing costs will restrain the pace of expansion. This is particularly true for more expensive markets in Ontario and B.C. where affordability pressures are acute,” TD economist Rishi Sondhi says.

Activity had fallen too far

In his assessment of the CREA data, RBC Economics’ senior economist Robert Hogue says that the figures show that the recent drop in activity was part of the market finding its normal level following B-20.

“The fact that home resales snapped back by 8.1% in the four months since reaching a seven-year low in April tells us that activity had fallen too far. This is typical following a major policy change that pulled some activity forward,” he said.

He added that the latest figures reflect a new, slower phase of recovery.  By Steve Randall.

Decreasing certainty for an increase in rates

Market watchers have now fixed their gaze on October 24th as the most likely date for the next rate move by the Bank of Canada.  As of the setting last week, that saw no change, the betting was about 75% in favour of a hike in October, but that certainty seems to be slipping.

The latest employment numbers from Statistics Canada will likely have the Bank carefully considering any move toward an increase.  The August unemployment rate popped-up 0.2 of a percentage point to 6.0%, on a net loss of 51,600 jobs in August.

The August jobs report is sending mixed messages though.  Most of the losses came in part-time positions, which fell by 92,000.  Full-time jobs actually increased by 40,400.  Year-over-year employment in Canada is up 0.9%.  While 155,000 part-time positions have disappeared, there has been a gain of 326,000 full-time jobs for a net gain of 171,000 positions.

Another factor that could hold back an October rate increase is a softening of wage growth.  The rate of increase in hourly pay slowed to 2.9% in August, down from 3.2% – year-over-year – in July and a 3.6% in June.

The bigger issue, though, remains the NAFTA re-negotiations.  Uncertainty about the outcome of the talks is a drag on the Canadian economy.  It is hampering the Bank of Canada’s efforts to move economic growth away from debt-fueled consumer spending to business investment and export growth.

The Bank continues to use words like cautious and gradual to describe its approach and with inflation remaining well inside the Bank’s target range there is no urgency for a rate increase.  By First National Financial. 

Canadian Mortgage Credit Growth Grinds To A Halt, Worst Growth In 18 Years

The Canadian real estate market is slowing down, and it’s hitting mortgages. Bank of Canada (BoC) numbers show mortgage credit grinded to a halt in July. The annual rate of mortgage growth fell to the lowest level in nearly 18 years, and is set up to go lower.

Canadians Owe Over $1.52 Trillion In Mortgage Debt

Canadians set a new dollar record for outstanding mortgage credit at institutional lenders. The outstanding balance stood at $1.52 trillion in July, up $4.95 billion from the month before. Households sent the total $54.22 billion higher than the same time last year. On the upside, lenders are primed to receive a whole lot of interest payments. On the other  hand, if we look closely – we see the rate of growth is actually shrinking very quickly.

Canadian Mortgage Credit Falls To Lowest Growth Since July 2001

The growth of mortgage credit fell to its lowest levels in almost two decades. The $54.22 billion increase from last year comes in at just 3.7% growth. That still sounds pretty decent, until you realize it’s only 0.68% in real terms. The annual pace of growth is now the lowest it’s been since July 2001. For historical context, a then new artist named Shaggy topped the charts with It Wasn’t Me when mortgage growth was last this low. Of course most of you have no idea who he is, so ask your mom for the best explanation. Then tell her mortgage levels fell to Shaggy-era levels of growth, and email us her take.

Mortgage Growth Likely To Head Lower

Looking at the short-term trend, these numbers will likely come in lower for at least a few more months. Annualizing growth over the past 3 months, we get just 1.7% – lower than inflation. This means if the annual growth rate came in at the same pace as the past 3 months, the rate would fall to 1.7%. Until this number rises above the annual pace for a while, expect the rate to continue to fall.

Canada is coming off of record sales years, and interest rates are quickly climbing. That’s dropping demand for new loans, and tightening credit requirements. It shouldn’t be a huge surprise that mortgage growth is on the decline, and likely to slide further.  By betterdwelling.com

Reviewing the Stress Test and B-20 Lending rules hindering the Canadian Housing Market

Back in 2013, the B-20 rules as underwriting guidelines for residential mortgages came into effect. The rules were put in place as a direct response to the financial issues in the United States caused by “poor mortgage lending practices” (mortgagebrokernews.ca).

Now, 5 years after these rules have come into effect, Canada’s housing market is said to be facing affordability issues. It is widely believed that it is become increasingly more difficult for first time home buyers to purchase a property. To deal with the affordability issues and the stress test, some young people are borrowing from parents to help with a down payment.

Recently, it has been reported that there is a decrease in mortgage originations from the Millennial and Generation Z cohort and a rise amongst the Pre-War Generation (those between the ages of 73-93). Findings have shown an increase of mortgage originations of 63% in the last quarter from the Pre-War Generation (theglobeandmail.com).

This begs the questions: are those who are trying to get into the housing market seeking help from their grandparents and asking them to take out mortgages for their grandchildren? Is the current generation asking and receiving help from their aging grandparents? If so, what else are they willing to do to achieve their goal of home ownership

The Conservative party as made a motion to the House of Commons to institute a subcommittee to review the stress test and B-20 rules to determine if it is helping or hindering the Canadian housing market.  By CMBA, Canadian Mortgage Brokers Association.



Economic Highlights


Canadian Jobs Plunge in August As Unemployment Rises

In a real shocker, Statistics Canada announced this morning that employment dropped by 51,600, retracing most of the 54,100 gain in July. Economists had been expecting a much stronger number, but the Labour Force Survey is notoriously volatile, and job gains continue to average 14,000 per month over the past year. Full-time employment growth has run at about twice the pace at an average monthly increase of 27,000. Labour markets remain very tight across the country.

The unemployment rate returned to its June level of 6.0%, ticking up from 5.8% in July. July’s jobless figure matched a more than four-decade klow. At 6.0%, the unemployment rate is 0.2 percentage points below the level one year ago.

All of the job loss last month was in part-time work, down 92,000, while full-time employment rose by 40,400. The strength in full-time jobs is a sign that the labour market is stronger than the headline numbers for August suggest.

On a year-over-year basis, employment grew by 172,000 or 0.9%. Full-time employment increased (+326,000 or +2.2%), while the number of people working part-time declined (-154,000 or -4.3%). Over the same period, total hours worked were up 1.6%.

Statistics Canada commented that monthly shifts in part-time employment could result from movements between part-time and full-time work, the flux of younger and older workers in and out of the labour force, changes in employment in industries where part-time work is relatively common, or deviations from typical seasonal patterns.

By industry, the decline was broadly based and included a loss of 16,400 jobs in construction and 22,100 in the professional services sector. The number of people working in wholesale and retail trade declined by 20,000, driven by Quebec and Ontario.

Job losses were huge in Ontario as employment increased in Alberta and Manitoba. Employment was little changed in the other provinces.

After two consecutive monthly increases, employment in Ontario fell by 80,000 in August, which was the province’s most significant job loss since 2009. All of the decline was in part-time work. On a year-over-year basis, Ontario employment increased by 79,000 (+1.1%). The Ontario unemployment rate rose 0.3 percentage points in August, to 5.7% (see table below).

In Ontario, full-time employment held steady compared with the previous month, with year-over-year gains totalling 172,000 (+3.0%). Part-time jobs fell by 80,000 in August, following a roughly equivalent rise in July. In the 12 months to August, part-time work decreased by 93,000 (-6.7%).

Employment in Alberta rose by 16,000, and the unemployment rate remained at 6.7% as more people participated in the labour market. Compared with August 2017, employment grew by 53,000 (+2.3%), mostly in full-time work.

In Manitoba, employment rose by 2,600, driven by gains in part-time work, and the unemployment rate was 5.8%. On a year-over-year basis, employment in the province was unchanged, while the unemployment rate increased 0.8 percentage points as more people looked for work.

In British Columbia, employment edged up and the unemployment rate increased 0.3 percentage points to 5.3% as more people searched for work. Compared with a year earlier, employment was virtually unchanged.

Wage gains decelerated to their lowest level this year as average hourly earnings were up 2.9% y/y, the slowest pace since December.

There is no real urgency for the Bank of Canada to hike interest rates as the economy shows little risk of overheating. So far in 2018, the economy has shed 14,600 jobs, but the number masks a 97,300 gain in full-time work. Part-time employment is down by 111,900 this year.

The economy is running at or near full-employment as job vacancies continue to mount. If a NAFTA agreement comes to fruition, it is still likely the Bank of Canada will raise interest rates once again at the policy meeting in October. The Bank of Canada guided in that direction yesterday when Senior Deputy Governor Carolyn Wilkins said the central bank’s top officials debated this week whether to accelerate the pace of potential interest rate hikes, before finally choosing to stick to their current “gradual” path.