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In a surprise move, the Bank of Canada announced on January 21^st, 2015 that it was lowering its trend-setting overnight lending rate from 1 per cent to 0.75 per cent. This marks the first change to the Bank’s key interest rate in more than four years.

The decision to cut rates was the result of the recent sharp drop in the price for oil, which the Bank said “will be negative for [economic] growth and underlying inflation in Canada.”The Bank’s new Canadian economic forecast assumes that oil prices will average around US$60 per barrel, which means the Bank believes oil prices will rise from the mid-to-high $40 range where they stood at the time of the announcement.

The Bank said that total CPI inflation was already starting to reflect lower oil prices and that inflation was expected to drop below the lower bound of its target range for inflation of between one and three per cent before returning to the target range in the fourth quarter of this year. “This points to interest rates staying lower over the rest of the year,” said Gregory Klump, CREA’s Chief Economist.

The Bank said “the oil price shock is occurring against a backdrop of solid and more broadly-based growth in Canada in recent quarters. Outside the energy sector, we are beginning to see the anticipated sequence of increased foreign demand, stronger exports, improved business confidence and investment, and employment growth.”

The cut to the Bank’s key interest rate will act as another shoulder against the wheel pushing Canada’s economy in this direction while helping put a floor under falling inflation.

Even before the surprise rate cut, a rising spread between bond and mortgage rates was already putting downward pressure on five year fixed interest rate mortgages.

As of January 21st, 2015, the advertised five-year lending rate stood at 4.79 per cent, unchanged from the previous Bank rate announcement on December 3rd, 2014 and down 0.45 percentage points from the same time one year ago. The Bank of Canada’s next policy interest rate announcement is March 4^th, 2015 and the next update to Canadian economic forecast will be published in its Monetary Policy Report on April 15^th, 2015.

(CREA 01/21/2015)

Ottawa, ON, December 15, 2014 - According to statistics released today by The Canadian Real Estate Association (CREA), national home sales activity was unchanged on a month-over-month basis in November 2014.

Highlights:

• National home sales were unchanged from October to November.
• Actual (not seasonally adjusted) activity stood 2.7% above November 2013 levels.
• The number of newly listed homes edged down 0.4% from October to November.
• The Canadian housing market remains balanced.
• The MLS® Home Price Index (HPI) rose 5.2% year-over-year in November.
• The national average sale price rose 5.7% on a year-over-year basis in November.

The number of home sales processed through the MLS® Systems of Canadian real estate

Boards and Associations was unchanged in November 2014 compared to October. As a result, activity remains much improved compared to the quiet start to the year.

November sales strengthened in half of all local housing markets, with monthly increases in Montreal, Edmonton, Winnipeg, Hamilton-Burlington, Barrie, and Windsor-Essex tempered by a monthly decline in the Greater Toronto Area.

“The Canadian housing market remains a story about how sales and prices are still running strong in some areas while others are seeing subdued levels of activity with slower price gains or modest price declines,” said CREA President Beth Crosbie. “All real estate is local and your REALTOR® remains your best source for information about how the housing market is shaping up where you currently live or might like to in the future.”

“The effect of lower oil prices on Canada’s housing markets is something of a wildcard at the moment,” said Gregory Klump, CREA’s Chief Economist. “It’s not clear how far oil prices may drop or for how long they’ll stay down. How that plays out may affect the outlook for interest rates, job growth, consumer confidence, and sentiment about making major purchases.”

Actual (not seasonally adjusted) activity in November stood 2.7 per cent above levels reported in the same month last year. November sales were up from year-ago levels in about half all local markets, led by Greater Vancouver and the Fraser Valley, Calgary, and Greater Toronto.

Actual (not seasonally adjusted) sales activity for the year-to-date in November was five per cent above levels in the first 11 months of 2013. It was also slightly above (+2.4 per cent) the 10-year average for year-to-date sales.

The number of newly listed homes edged down 0.4 per cent in November compared to October. Led by Greater Toronto, new supply was down in just over half of all local markets.

The national sales-to-new listings ratio was 56 per cent in November. While this is marginally tighter compared to the previous three months in which it averaged 55.7 per cent, the broader trend for the ratio indicates that it has remained balanced and largely stable for the past four months.

A sales-to-new listings ratio between 40 and 60 per cent is usually consistent with a balanced housing market, with readings above and below this range indicating sellers’ and buyers’ markets respectively.

The ratio was within this range in almost 60 per cent of all local markets in November. About 60 per cent of the remaining markets posted ratios above this range, almost all of which are located in British Columbia, Alberta and Southern Ontario.

The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.

There were 5.8 months of inventory nationally at the end of November 2014. As with the sales-to-new listings ratio, the number of months of inventory has been stable for the past four months and remains well within balanced market territory.

The Aggregate Composite MLS® HPI rose by 5.19 per cent on a year-over-year basis in November. Price gains have held steady between five and five-and-a-half per cent since the beginning of the year.

Year-over-year price growth decelerated among all property types tracked by the index in November compared to October.

Two-storey single family homes continue to post the biggest year-over-year price gains (+6.79 per cent), followed closely by townhouse/row units (+5.63 per cent). Price growth was comparatively more modest for one-storey single family homes (+4.20 per cent) and apartment units (+3.18 per cent).

Price growth varied among housing markets tracked by the index. As in recent months,

Calgary (+8.53 per cent), Greater Toronto (+7.73 per cent), and Greater Vancouver

(+5.69 per cent) continue to post the biggest year-over-year increases. By contrast, prices in Regina declined by 3.36 per cent.

In other markets from West to East, prices were up between 1.6 and 2.8 per cent on a year-over-year basis in the Fraser Valley, Victoria, and Vancouver Island, by less than one per cent in Saskatoon and Ottawa, flat in Greater Montreal, and down by less than one per cent in Greater Moncton (Table 1).

The MLS® Home Price Index (MLS® HPI) provides a better gauge of price trends than is possible using averages because it is not affected by changes in the mix of sales activity the way that average price is.

The actual (not seasonally adjusted) national average price for homes sold in November 2014 was $413,649, up 5.7 per cent from the same month last year.

The national average home price continues to be raised considerably by sales activity in Greater Vancouver and Greater Toronto, which are among Canada’s most active and expensive housing markets. Excluding these two markets from the calculation, the average price is a relatively more modest $331,743 and the year-over-year increase shrinks to five per cent.

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PLEASE NOTE: The information contained in this news release combines both major market and national sales information from MLS® Systems from the previous month.

CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.

MLS® Systems are co-operative marketing systems used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 109,000 REALTORS® working through some 90 real estate Boards and Associations.

Further information can be found at http://crea.ca/statistics.

The Bank of Canada announced on December 3^rd, 2014 that it was holding its trend-setting overnight lending rate at 1 per cent.

Economic conditions around the world have changed rapidly in recent months. The Bank’s December 3^rd announcement took a decidedly “on the one hand, on the other hand” approach in addressing how recent developments have altered not only the outlook for inflation and the economy, but also the risks to that outlook.

While it considers the potential upside and downside risks to be balanced, the Bank sees them as having intensified.

1. Risks to the Canadian economy: On the upside, the Bank acknowledged Canadian exports as having improved, resulting in stronger business investment and employment, suggesting the return of balanced and self-sustaining growth. On the downside, the Bank indicated lower prices for oil and other commodities will act as a drag on the Canadian economy, and that household imbalances present a significant risk to financial stability.
2. Inflation risks: On the downside: weaker oil prices could lower inflation. On the upside, The impact of lower oil price may be tempered by a stronger U.S. economy, Canadian dollar depreciation, and recent federal fiscal measures. The Bank acknowledged inflation is up by more than expected due largely to what it considers to be temporary factors, and while underlying inflation has edged up it remains below the 2 per cent target.
3. Interest rate risks: On the upside, developments as outlined above together with upward revisions to past economic data suggest that slackness in the Canadian economy may be less than the Bank previously thought. That means the expected date for the first interest rate hike could be moved up. On the downside, conditions in the labour market continue to suggest there is still plenty of slackness in the Canadian economy. Additionally, lower oil prices could mean slower growth and more time before the Bank starts raising interest rates.

What does all this mean for the interest rate outlook? At this point, not much. The first hike is still pencilled in for later next year. Whether that outlook changes will depend on what happens in the months ahead – and perhaps most importantly, what happens to the price of oil.

As of December 3rd, 2014, the advertised five-year lending rate stood at 4.79 per cent, unchanged from the previous Bank rate announcement on October 22nd, 2014 and down 0.55 percentage points from the same time one year ago.

The next interest rate announcement along with the next update to the Monetary Policy Report will be on January 21^st, 2015.

(CREA 12/03/2014)

The Bank of Canada announced on October 22nd, 2014 that it was holding its trend-setting overnight lending rate at 1 per cent.

Its most recent rate announcement and Monetary Policy Report suggest a number of reasons why interest rates aren’t going up anytime soon:

1) Recovery in exports not ready to stand on own legs. Recent growth in the U.S. has led to a weaker Canada–U.S. currency exchange rate. That is good news for Canadian exports to the U.S. , our largest trading partner. The Bank still expects that the engine for Canadian economic growth will switch from consumer spending to exports. A hike in its trend-setting interest rate would put that in jeopardy, so making that switch depends in part on the Canadian dollar remaining at its weakened level.

2) Business investment remains weak. Stronger investment is the other engine for Canadian economic growth that the Bank expects to take over from consumer spending. Stronger business investment continues to rely on — and will likely lag — a sustained improvement in exports. Stronger exports and investment both require that interest rates remain low.

3) Inflation is on target. The Bank said it views overall inflation as evolving in line with the Bank’s expectations. The Bank also said, “underlying inflationary pressures are muted”. That means it thinks its trend-setting policy interest rate is right where it needs to be. That makes raising or lowering it is unnecessary. Inflation remains close to the Bank’s 2 per cent target.

4) Global uncertainty. The Bank noted that global economic growth was weaker than it anticipated in its July Monetary Policy Report, and is facing headwinds. It also recognized a “significant correction in global financial markets”. European economic growth was revised down significantly over the forecast horizon. The recent decline in oil prices also introduces uncertainty for investment in Canada’s energy sector.

5) Canadian economic growth will be running below capacity for longer. The Bank pushed back the date as to when it expects the economy to return to full capacity. It previously expected it to happen “around mid-2016”. Now it expects it will take until “the second half of 2016”.

As of October 22nd, 2014, the advertised five-year lending rate stood at 4.79 per cent, unchanged from the previous Bank rate announcement in September and down 0.55 percentage points from one year ago. The next interest rate announcement will be on December 3rd, 2014.

The next update to the Monetary Policy Report will be on January 21st, 2015.

(CREA 10/22/2014)

Ottawa, ON, October 15, 2014 – According to statistics released today by The Canadian Real Estate Association (CREA), national home sales activity in September 2014 was down from the previous month.

Highlights:

• National home sales fell 1.4% from August to September.
• Actual (not seasonally adjusted) activity stood 10.6% above September 2013 levels.
• The number of newly listed homes declined by 1.6% from August to September.
• The Canadian housing market remains balanced.
• The MLS® Home Price Index (HPI) rose 5.3% year-over-year in September.
• The national average sale price rose 5.9% on a year-over-year basis in September.

The number of home sales processed through the MLS® Systems of Canadian real estate

Boards and Associations fell by 1.4 per cent on a month-over-month basis in September 2014, marking the first monthly decline since January of this year.

Activity was down in about 60 per cent of all local housing markets in September, led by monthly declines in Calgary, Edmonton, Central Toronto, Kitchener-Waterloo, London & St. Thomas, Windsor-Essex, and Ottawa. Home sales rose on a month-over-month basis in Fraser Valley, Vancouver Island, the Okanagan region, Mississauga, Durham and York regions of the Greater Toronto Area, Sherbrooke, and the Northern region of Nova Scotia.

“Affordably priced single family homes are in short supply in some of Canada’s hottest housing markets, which contributed to the monthly decline in national sales activity in September,” said CREA President Beth Crosbie. “That said, there are other markets with ample supply but sellers there are holding firm on price. There is a lot of variation in housing market trends depending on the type of housing, neighbourhood and price segment. All real estate is local and your REALTOR® is your best source for information about how the housing market is shaping up where you currently live or might like to in the future.”

Actual (not seasonally adjusted) activity in September stood 10.6 per cent above levels reported in the same month last year. September sales were up from year-ago levels in about 80 per cent of all local markets, led by Greater Vancouver and the Fraser Valley, the Okanagan region, Calgary, Greater Toronto and Montreal. The increase reflects activity in September 2013 that was handicapped by the occurrence of five Sundays, since that day is the lowest volume trading day for home sales.

Sales activity for the year-to-date in September was five per cent above where it stood in the first nine months of 2013, and remains broadly in line (+1.6 per cent) with the 10-year average for the period.

The number of newly listed homes declined by 1.6 per cent in September compared to August. New supply was down in just over half of all local markets, led by Calgary, Edmonton, Greater Toronto, Kingston and Ottawa.

The national sales-to-new listings ratio was 55.7 per cent in September. With sales and new listings having fallen in tandem, it was little changed from its reading of 55.6 per cent the previous month. A sales-to-new listings ratio between 40 and 60 per cent is usually described as a balanced market.

Just over half of all local markets posted a sales-to-new listings ratio in this range in September. Two-thirds of the remainder posted readings above the 60 per cent threshold that marks the border between balanced and seller’s market territory, almost all of which are located in British Columbia, Alberta and Southern Ontario.

The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.

There were 5.9 months of inventory nationally at the end of September 2014, up slightly from 5.8 months in August and slightly below the 6.0 months reported in May, June and July.

Both the sales-to-new listings ratio and the number of months of inventory remain well within balanced market territory while pointing to a national market that has tightened since the beginning of the year.

The MLS® Home Price Index (MLS® HPI) provides a better gauge of price trends than is possible using averages because it is not affected by changes in the mix of sales activity the way that average price is. Greater Moncton joins the MLS® HPI this month, bringing the total number of markets covered by the index to 11, representing more than half of sales activity across Canada.

The Aggregate Composite MLS® HPI rose by 5.28 per cent on a year-over-year basis in September. Price growth has been steady at about five to five-and-a-half per cent since the beginning of the year.

Year-over-year price growth accelerated slightly for two-storey single family homes and slowed further for apartment units. Price gains for one-storey single family homes and townhouse/row units were little changed compared to August.

Two-storey single family homes continue to post the biggest year-over-year price gains (+6.52 per cent), followed closely by townhouse/row units (+5.51 per cent) and one-storey single family homes (+5.07 per cent). Price growth for apartment units remains comparatively more modest (+3.05 per cent).

Price growth varied among housing markets tracked by the index. As in recent months, the biggest gains were posted by Calgary (+10.11 per cent), Greater Toronto (+7.82 per cent), and Greater Vancouver (+5.26 per cent). Price gains were fairly flat elsewhere, with only Vancouver Island having posted year-over-year gains greater than consumer price inflation.

The actual (not seasonally adjusted) national average price for homes sold in September 2014 was $408,795, up 5.9 per cent from the same month last year.

The national average price continues to be skewed upward by sales activity in Greater Vancouver and Greater Toronto, which are among Canada’s most active and expensive housing markets. Excluding these two markets from the calculation, the average price is a relatively more modest $325,406 and the year-over-year increase shrinks to 4.5 per cent.

“Sales activity and prices in the third quarter were up compared to the second quarter, although momentum going into the fourth quarter is showing tentative signs of waning,” said Gregory Klump, CREA’s Chief Economist. “The continuation of extraordinarily low mortgage rates has been and will continue to be the key support for home sales activity amid continuing price increases in some of Canada’s most active and expensive urban centres.”

- 30 -

PLEASE NOTE: The information contained in this news release combines both major market and national sales information from MLS® Systems from the previous month.

CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.

MLS® Systems are co-operative marketing systems used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 111,000 REALTORS® working through some 90 real estate Boards and Associations.

Further information can be found at http://crea.ca/statistics.

The Bank of Canada announced on September 3^rd, 2014 that it was holding its trend-setting overnight lending rate at 1 per cent.

The overnight rate has not moved in four years. It’s likely that it will remain where it is for some time yet.  Why?

1. Inflation is on target — Inflation recently increased and is tracking close to the Bank’s 2 per cent target. However, the Bank believes the increase reflects temporary factors and cited evidence in support of this in its policy rate announcement. As a result, it does not see interest rate hikes as being necessary to rein it in. Instead, the Bank thinks inflation will keep itself in check as temporary factors dissipate.
2. Uncertainty remains high — While the U.S. economic recovery appears to be back on track after a dismal first quarter, European economic growth has faltered due in part to its trade sanctions with Russia. This means low interest rates are still needed to support Canadian economic growth while questions marks loom about the outlooks for global economic growth, demand for Canadian exports, and Canadian economic growth.
3. Canadian exports need help from the currency exchange rate –The Bank rate announcement noted that “Canadian exports surged in the second quarter”. The reasons cited were strengthening U.S. investment and “the past depreciation of the Canadian dollar”. Hiking interest rates too soon would result in a stronger loonie and dampened Canadian exports. The Bank is counting on stronger exports to lift business investment and economic growth.
4. Higher exports have not yet translated into stronger investment or hiring:The Bank was pleased to see the pickup in exports but noted, “While an increasing number of export sectors appear to be turning the corner toward recovery, this pickup will need to be sustained before it will translate into higher business investment and hiring.” As such, interest rates will need to remain stimulative in order to entice firms into increased investment and hiring even if exports remain strong.

With these reasons in mind, interest rates are unlikely to rise in the near future.

One notable change in language in the September 3^rd announcement was the removal of any references to a soft landing in the housing market. This Bank said that the housing market has in fact remained stronger than previously anticipated and that risks associated with household imbalances have “not diminished”.

That said, it is possible that stronger U.S. growth, a surge in exports, and the current strength of the housing market could all reflect a rebound from weak performances this past winter, which was unusually harsh.

As such, the Bank said that it remains “neutral with respect to the next change of its policy rate”, and will wait for new information as regards their outlook and assessment of risks to economic growth and inflation.

As of September 3^rd, 2014, the advertised five-year lending rate stood at 4.79 per cent, unchanged from the previous Bank rate announcement on July 16^th, 2014 and down 0.55 percentage points from the same time one year ago.

The next interest rate announcement will be on October 22^nd, 2014, and will be accompanied by an update to the Monetary Policy Report which contains the Bank’s outlook for the economy and inflation, risks to its economic projections, and an update to its estimate for potential Canadian economic growth.  

(CREA 9/3/2014)