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August 16, 2022 | No Renewal For You

Desjardins is joining a growing chorus of housing bears, calling for further price declines in the nations housing market this year. The bank is now calling for a 25% drop from peak to trough in the average sales price nationally. Keep in mind the average sales price is skewed predominantly by the GTA, and a change […]

August 8, 2022 | No New Couches

As discussed last week, our early indicators pointed to Greater Vancouver home sales falling to a 22 year low in home sales for July. The Real Estate board has officially confirmed the precipitous decline. July sales were also 35% below the ten year average, and the typical price of a home is now down 4.5% […]

August 3, 2022 | Bond Yields are Responding

The worlds most important central bank, the US Federal Reserve, raised rates another 75bps this past week. The following day, second quarter GDP contracted 0.9%, marking the second straight quarter of contracting economic growth. While policy makers are not officially calling it a recession, we are arguably in one already. As highlighted by the always […]

July 25, 2022 | Historic Correction Underway

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. […]

July 18, 2022 | Front Loading

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 […]

July 4, 2022 | Flushed Down the Toilet

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 […]

June 27, 2022 | Cash for Renters

Another month, another record inflation print here in the Great White North. Headline inflation in Canada ticked up to 7.7% year-over-year in May, a 39 year high. Shelter, which is the largest component of the CPI basket also moved higher, up 7.4% from last year. Of course if you’re relocating in the rental market or […]

June 20, 2022 | News Economically Unfeasible

Over the past several weeks regular readers of this newsletter have heard me rant about the impending slowdown in the development space. A combo of rising financing costs and still elevated construction costs makes for a rather terrible risk/reward ratio for home builders. In fact, it makes some projects economically unfeasible. Mainstream media is now […]

June 13, 2022 | The Great Moderation

Another week, another bump higher in borrowing costs. The Canada 5 year bond yield ripped again, climbing above 3.3%, the highest reading since March 2008. Last time rates were this high bad things happened. As has been the theme of this newsletter for the past month or so, I continue to believe this is a […]

June 6, 2022 | Soft Landings

The Bank of Canada raised interest rates another 50bps this past week, signalling more pain to come. The overnight rate sits at 150bps, just shy of where the Bank of Canada got stopped out in 2019. Markets are still pricing in another 150bps of additional tightening this year, which suggests the overnight rate will sit […]

May 31, 2022 | Appraisers are Skittish

More monetary tightening is heading our way this week with the Bank of Canada fully expected to hike interest rates another 50bps on Wednesday. Assuming they do indeed hike rates by 50bps on Wednesday, Markets are still pricing in another 125bps of tightening by the end of the year. Of course, much of this depends […]

May 16, 2022 | The Rout is On

It was another volatile week for financial markets. Nearly $11 trillion was erased from global equity values. If you start adding the bond and crypto markets we have $35 trillion in wealth that has evaporated. I’m often asked where is all the money coming from? How are people coming up with the down payments for […]

May 9, 2022 | Payment Shock for Some

We need higher rates to moderate demand, including demand in the housing market. Housing price growth is unsustainably strong in Canada. That was the message from senior deputy governor of the Bank of Canada, Carolyn Rogers this past week. Yes, the central banks continues to talk up further rate hikes, with the goal of slowing […]

May 2, 2022 | Team Transitory Has Disbanded

No regrets. That was the message from Bank of Canada governor Tiff Macklem when asked about his broken promise on holding rates at zero until the end of 2023. If you recall, in July 2020 Macklem gave the green light for Canadians to speculate on housing, announcing “If you’ve got a mortgage, or if you’re […]

April 25, 2022 | Not Bullish Sentiment

While this is probably getting tiresome at this point, inflation came in hot once again in March, hitting a 30 year high. Consumer prices are up 6.7% from last year, and are likely to hit 8% in April based on Stats Canada finally adding used car prices to the CPI basket. This is ramping up […]

April 18, 2022 | Arsonist & Firefighter

For the first time in over 20 years, the Bank of Canada raised rates by over 50bps at their most recent meeting. Everyone is panicking, inflation is here and the Bank of Canada is acting tough, they’re no longer going to support the housing market, so naturally a housing crash is just around the corner, […]

April 11, 2022 | Headline Grabbers

The Federal Government unveiled an updated budget this past week, and it included a wide range of housing policies. While many of these were good headline grabbers, some of them will never see the light of day, and others lack any real substance. Let’s dissect some of them further. Foreign Buyer Ban The media took […]

April 4, 2022 | End of the Housing Bull Market?

It’s official, mortgage rates have hit 4% here in Canada. Several of the large banks have increased their popular 5 year fixed rate mortgage above 4%. You’d have to go back to about 2013 when rates were this high. Also worth adding that 2013 was a pretty slow year for housing and so I expect […]

March 28, 2022 | Not Until Something Breaks

Happy Monday Morning! It looks like inflation might not be transitory after all, and the bond market is finally figuring that out. Bonds have been selling off hard lately, sending yields much higher, and tightening financial conditions in the process. This is particularly important for the Canadian housing market. If there was ever a catalyst […]

March 21, 2022 | Purchasing Power is Getting Slaughtered

Consumer prices ripped to a thirty year high in Canada, rising 5.7% from last year. Shelter inflation was up 6.6%, the highest since 1983. Per ScotiaBank, much of that is being driven by the homeowners’ replacement cost, which was up 13.2% y/y. Unlike the US that uses owners’ equivalent rent, Canada captures housing primarily through […]

March 14, 2022 | Stability in a World of Volatility

Inflation concerns continue to percolate. US CPI inflation ripped to 7.9% in February, the highest reading in over 40 years. So now we basically have inflation at 8% and interest rates at zero. Of course this has major implications not only from a financial perspective but a societal perspective. It’s also a fundamental driver behind […]

March 7, 2022 | Volcker Moment?

Brace yourselves, we have liftoff! The Bank of Canada officially raised interest rates a mere 25bps last week. This was the first move since 2018 and comes at a time when inflation is running at 30 year highs. Markets believe another 5-7 rate hikes are still coming this year and some are calling this the […]

February 28, 2022 | Now What?

I have long argued that a sell-off in Canadian housing will not be self-induced. In other words, policy makers are not going to willingly tank the market. If / when you have a downturn it will be due to something out of our control, likely a crisis in emerging markets that ripples through global financial […]

February 22, 2022 | Bullish Government Incompetence

I know you probably don’t need another reminder on inflation so i’ll keep this brief. Inflation figures ticked higher again in January, with consumer prices rising 5.1% from last year. Prices are now rising at their quickest pace since 1991. In other words, so long as you don’t eat, drive a car or own a […]

February 14, 2022 | Not So Fast

Inflation in the United States surged to 40 year highs in January, with consumer prices growing by 7.5% year-over-year. The last time inflation was rising this quickly the fed funds rate was sitting at 15%, today it sits at zero. This is ramping up calls for aggressive interest rate increases in order to quell inflation, […]

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