20 Jun

Market Update May 2024: Navigating Slow Market Activity

Posted by: Amandeep Bains

The Canadian housing market as of May 2024 presents a mixed outlook based on slow activity in the month. While there is anticipation of increased activity following the Bank of Canada rate cut, the impact has been slow to materialize. Many prospective buyers are still cautious, waiting on the sidelines to see how further rate cuts will influence market conditions. As a mortgage broker, I believe that working with a mortgage broker will be crucial in navigating these uncertain times. Here’s a detailed look at the current state of the market and why mortgage broker expertise will be vital.

Market Overview: May 2024

May was relatively uneventful for many Canadian housing markets. National home sales recorded a slight dip of 0.6% from April, continuing to stay below the average of the last decade. Despite this, new listings edged up marginally by 0.5%, indicating a slight increase in available properties for sale.

Bar graph showing national home sales activity in Canada over the past decade, with a slight dip in sales between April and May 2024.

National home sales activity in Canada over the past few years, highlighting a 0.6% decrease between April and May 2024.

The actual (not seasonally adjusted) activity showed a 5.9% decline compared to May 2023. Home prices have largely remained stable, showing minimal movement with a 0.2% dip in the MLS® Home Price Index (HPI) month-over-month and a 2.4% decrease year-over-year. The national average sale price fell by 4% year-over-year, settling at $699,117 in May 2024.

Impact of the Bank of Canada’s Rate Cut

On June 5, the Bank of Canada implemented a 25-basis-point rate cut, a move expected to have significant psychological effects on the market. According to Shaun Cathcart, CREA’s Senior Economist, this initial rate cut is likely to encourage many prospective buyers, who have been hesitant, to consider entering the market. The question now is whether additional rate cuts will follow and how quickly they will occur.

James Mabey, Chair of CREA, also emphasized the potential for increased demand, noting that this rate cut could prompt a resurgence of interest from buyers who had been waiting for more favorable conditions. With more homes available now than at any point in almost five years, the market could see a shift in activity in the coming months.

Current Market Dynamics

The national sales-to-new listings ratio eased slightly to 52.6% in May from 53.3% in April, indicating a balanced market. This ratio typically ranges between 45% and 65% in balanced conditions. The inventory of homes for sale increased to 175,000, up 28.4% from a year earlier but still below historical averages.

Bar graph showing the number of new listings in the Canadian housing market from 2019 to 2024, with a slight increase in May 2024 vs April 2024

Number of new listings in the Canadian housing market from 2019 to 2024, showing a slight increase in May 2024.

There were 4.4 months of inventory at the end of May, a slight increase from 4.2 months in April, and the highest level since the fall of 2019, excluding the pandemic-related volatility. This suggests that buyers currently have more options to choose from, which could influence their purchasing decisions in the near future.

Regional Variations in Home Prices

While home prices are generally stable across most of Canada, some regions have seen consistent increases. Calgary, Edmonton, and Saskatoon have experienced a steady rise in prices since early last year, defying the broader national trend of sliding or stagnant prices.

The non-seasonally adjusted National Composite MLS® HPI remains 2.4% below May 2023 levels, reflecting the rapid price increases that began in April of the previous year but have not been repeated in 2024.

Looking Ahead

The recent rate cut by the Bank of Canada is anticipated to invigorate the housing market, but its full impact is yet to be seen. Prospective buyers may still be waiting for further rate reductions, which could delay a significant uptick in market activity. However, with a higher number of listings and a balanced sales-to-new listings ratio, the market is poised for potential growth once confidence returns.

For those considering entering the market, now might be an opportune time given the increased inventory and the possibility of future rate cuts. Consulting with a mortgage broker can provide valuable insights and guidance tailored to your financial situation and the evolving market conditions.

The data and insights provided by The Canadian Real Estate Association (CREA) highlight the current state and potential future trends of the Canadian housing market. As the effects of the recent rate cut begin to unfold, having a mortgage broker on your side will be crucial for making informed and advantageous decisions.

Amandeep Bains
(416)771-9834
M23007753
Mortgages with Amandeep
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Source: The Canadian Real Estate Association

23 Apr

Master Your Credit: Homeownership Tips

General

Posted by: Amandeep Bains

When you’re considering the journey of homeownership, understanding your credit score is like having a compass guiding you through the process. Unfortunately, many only realize its significance when they’re knee-deep in mortgage discussions. Use these helpful tips to help you navigate the world of credit worthiness.

Unlocking the Power of Your Credit Score

Your credit score acts as a gatekeeper to favorable mortgage rates and greater purchasing potential. Scores range from 300 to 900, with higher scores opening doors to better deals. Ideally, aim for a score of 680 or above, especially if your down payment is less than 20%. However, if you can put down 20% or more, the score becomes slightly less critical.

The Anatomy of a Credit Score

Your credit score is a composite of various financial behaviors:

Payment History: Timely bill payments are paramount to maintaining a positive credit history. Automating payments or setting up reminders can help ensure bills are paid on time, avoiding negative impacts on your score.
Debt Level: Your credit utilization ratio, or the amount of credit you’re using compared to your credit limits, significantly influences your score. Keep balances low and aim to pay off high-interest debt first to improve your utilization ratio.
Credit History Length: Lenders favor longer credit histories, as they provide a more comprehensive picture of your financial behavior. Avoid closing old accounts, as this can shorten your credit history and potentially lower your score.
New Credit: Opening multiple new accounts within a short period can signal financial instability and lower your score. Be strategic about applying for credit and only open new accounts when necessary.

Building Your Credit Score: A Roadmap

Empower yourself with these strategies:

Pay Your Bills: Timely, full payments are non-negotiable to demonstrate reliability. Consider setting up automatic payments or reminders to ensure bills are paid on time each month.
Tackle Your Debts: Prioritize paying off smaller debts first to build momentum. Utilize the debt avalanche or debt snowball method to pay down debt strategically and reduce financial strain.
Use Credit Wisely: Keep credit utilization below 70% to showcase responsible usage. Avoid maxing out credit cards and strive to pay balances in full each month to minimize interest charges (if you are really up for the challenge, try 50%!!!).
Manage Applications: Limit the number of credit applications to minimize negative impacts on your score. Each credit inquiry can temporarily lower your score, so be selective about applying for new credit.

The Perils of Low Credit Scores

A low credit score can be akin to hitting a roadblock on your path to homeownership:

Higher Interest Rates: Low scores often result in higher interest rates, translating to increased costs over time. Improving your credit score can lead to significant savings on mortgage interest.
Limited Mortgage Options: Lenders may offer less favorable terms or deny your application altogether. Taking steps to improve your credit score can expand your mortgage options and increase your chances of approval.
Stress and Uncertainty: Poor credit can lead to anxiety and uncertainty about your financial future. By taking control of your credit and implementing positive financial habits, you can reduce stress and build confidence in your ability to achieve homeownership.

The Path to Credit Redemption

The good news? You have the power to rebuild your credit:

Start Today: Every positive action, no matter how small, contributes to improving your score over time. Set realistic goals and commit to making consistent progress towards achieving them.
Monitor Your Progress: Regularly review your credit report for inaccuracies or signs of improvement. Monitoring your credit allows you to track your progress and identify areas for improvement.
Seek Guidance: Don’t hesitate to seek personalized advice on improving your credit score. A financial advisor or credit counselor can provide valuable insights and strategies tailored to your unique situation.

Confidently Navigating Your Financial Future

Understanding the nuances of credit scoring empowers you to make informed decisions on your journey to homeownership. While low scores may present challenges, they are not insurmountable. By adopting responsible financial habits and seeking guidance when needed, you can pave the way to a brighter financial future.

You’re Not Alone

If you ever feel overwhelmed or unsure about your credit journey, remember that support is available. Feel free to contact me for personalized support and guidance tailored to your unique situation. Together, we can navigate the path to financial success.

4 Mar

Modest Growth Amidst Mixed Signals: Unveiling Canada’s Economic Pulse

General

Posted by: Amandeep Bains

In the intricate dance of economic indicators, Canada’s gross domestic product (GDP) showed a modest uptick of 0.2% in the fourth quarter of 2023, following a slight decline in the previous quarter. This marginal growth, albeit modest, plays a pivotal role in steering the narrative away from recessionary concerns.

Balancing Act: Key Drivers of GDP

Examining the key drivers of this GDP movement unveils a nuanced picture. The increase in exports, particularly in crude oil and travel services, buoyed economic growth, reflecting the resilience of certain sectors. Concurrently, a decrease in imports, coupled with a marginal rise in household spending, contributed to this delicate balance.

Challenges Amidst Resilience: Business Investment and Housing Market

Despite these positive indicators, the shadows of uncertainty loom large. Business investment, a cornerstone of economic vitality, witnessed a decline for the sixth time in seven quarters. Investment in non-residential structures and machinery and equipment faltered, reflecting a cautious sentiment amidst economic headwinds.

The housing market, often a barometer of economic health, echoed a similar sentiment. Housing investment declined, mirroring a subdued resale market despite upticks in new construction and renovations. This trend underscores the intricacies of supply and demand dynamics, coupled with evolving consumer preferences.

Eyes on the Central Bank: Implications of Monetary Policy

Amidst these fluctuations, the upcoming interest rate announcement by the Bank of Canada assumes heightened significance. With all eyes on the central bank, the decision-making process becomes a delicate balancing act. How will policymakers navigate the terrain of conflicting signals, weighing the need for stimulus against inflationary pressures?

International Dynamics: Terms of Trade and Global Competitiveness

The terms of trade, a vital metric of international competitiveness, witnessed a decline, adding another layer of complexity to the economic landscape. Export prices trailed behind import prices, underscoring the challenges posed by global market dynamics.

Labor Markets and Household Resilience

Compensation of employees, a linchpin of household income, grew at a slower pace, reflecting nuanced trends across industries. While certain sectors witnessed robust growth, others grappled with labor market disruptions, accentuated by localized factors such as strike actions.

Meanwhile, household net saving remained relatively stable, offering a semblance of resilience amidst economic flux. However, the trajectory of property income payments underscores the varying impacts of monetary policy on different segments of society, highlighting the imperative of inclusive economic strategies.

Corporate Realities: Sectoral Dynamics

On the corporate front, while non-financial sectors exhibited growth in operating surplus, the financial sector faced headwinds stemming from narrowing net interest margins. These divergent trends underscore the sectoral nuances shaping Canada’s economic narrative.

Charting the Course Forward

As Canada navigates the complexities of its economic landscape, the path forward remains fraught with uncertainties. The Bank of Canada’s forthcoming decision holds the key to navigating these turbulent waters, with a delicate balance between supporting growth and managing inflationary pressures. In this intricate dance of economic indicators, each move carries profound implications for the nation’s economic future.

20 Feb

Canadian Inflation Slows amid Mixed Market Dynamics, Prompting Speculation on Bank of Canada’s Next Move on Rate Cuts

General

Posted by: Amandeep Bains

As Canadian inflation shows signs of a slowdown and speculation swirls around potential moves by the Bank of Canada, the dynamics of the real estate market face renewed scrutiny. Against a backdrop of tightening supply and heightened activity, the impact of shifting economic trends on the housing sector becomes increasingly pertinent. With key indicators such as mortgage interest rates and rent costs affected by the broader inflationary landscape, understanding the interplay between these factors is essential for stakeholders navigating the evolving real estate market.

Overview

In January, the Consumer Price Index (CPI) experienced a noticeable deceleration, with a year-over-year increase of 2.9%, down from December’s 3.4%. Excluding gasoline, the headline CPI slowed to 3.2% year over year. On a monthly basis, the CPI remained unchanged, following a decline in December.

CPI continues its movement towards the BoC target range

Factors

The decline in gasoline prices was a significant contributor to the overall slowdown, driven by base-year effects and temporary tax suspensions. While grocery prices maintained elevated levels, their growth rate decelerated across various categories. Airfare prices also decreased notably, reflecting reduced demand post-holiday season. Wage growth remains elevated, coupled with a strong start to the year for labor markets. Mortgage interest cost growth is slowing but continues to drive a disproportionate share of CPI growth. Home rent growth is still accelerating, highlighting persistent challenges in the housing market. These dynamics underscore the complex interplay between labor market trends, housing costs, and inflationary pressures, which will likely influence monetary policy decisions moving forward.

Outlook

Looking ahead, the inflation trajectory remains uncertain amidst ongoing economic uncertainties and supply chain disruptions. Despite January’s better-than-expected inflation report, inflation remains well above the 2% target. Shelter inflation is expected to persist, driven by higher mortgage rates and housing shortages impacting rents.

The renewed real estate activity in the market amid tightening supply could potentially face moderation in growth due to the deceleration in inflation observed in January. While the housing market continues to experience robust demand, the slowdown in inflation, particularly in housing-related costs such as mortgage interest and rent, may slightly alleviate pricing pressures. However, sustained wage growth and ongoing supply constraints could mitigate the impact, maintaining resilience in the real estate sector.

Bank of Canada Meeting

The upcoming Bank of Canada Governing Council meeting on March 6 will be crucial in assessing monetary policy decisions. While January’s inflation report suggests a narrowing breadth of inflation, it still exceeds the targeted level. With wage gains remaining high and core inflation measures above 3%, the Bank is likely to maintain a cautious stance. It’s anticipated that the Bank will closely monitor economic indicators and inflation trends, with the possibility of rate cuts in the future. Amidst these factors, there’s a prevailing view that the Bank may initiate rate cuts, possibly starting in June.

Source: Statistics Canada

20 Feb

Canadian Real Estate Sees Renewed Activity: A January 2024 Market Update

General

Posted by: Amandeep Bains

The Canadian Real Estate Association (CREA) has unveiled compelling data indicating a promising resurgence in the real estate sector, signaling a potential turnaround after a sluggish period in 2023. Notably, home sales surged by 3.7% between December 2023 and January 2024, with vibrant markets such as the Greater Toronto Area, Montreal, and Vancouver spearheading this revitalization.

Sales activity trend over the past 17 years - January 2024

Sales picked up in the past month but still below the 10-year monthly average

While this upward trend is encouraging, it’s vital to acknowledge that the market still trails the 10-year average by approximately 9%, underscoring ongoing recovery efforts. In January 2024, while the MLS® Home Price Index (HPI) experienced a slight 1.2% month-over-month decline, the national average home price demonstrated robust growth, rising by 7.6% year-over-year to $659,395.

Residential Price Movement - January 2024

Slight decline in the average price

Additionally, new listings saw a noteworthy increase of 1.5% month-over-month from December 2023 to January 2024, adding further dynamism to the market. With sales consistently outpacing new listings, the market increasingly favors sellers, potentially influencing pricing dynamics. Amidst evolving interest rates and mortgage conditions, informed decision-making remains crucial for both buyers and sellers navigating the real estate landscape.

New listings saw a noteworthy increase of 1.5% month-over-month

Looking ahead, CREA’s insights emphasize the importance of strategic planning for real estate transactions in 2024. Collaborating with trusted real estate professionals and mortgage agents can provide tailored guidance for navigating the shifting market landscape and achieving optimal outcomes.

If you’re looking for assistance or guidance in your real estate endeavors, don’t hesitate to reach out. Contact me today for personalized support and expert advice tailored to your needs. In summary, while challenges persist, CREA’s latest data reveals resilience and adaptability in Canada’s real estate sector. By staying informed and seeking expert advice, individuals can confidently navigate the market, ensuring informed decisions and successful transactions in the dynamic real estate environment.

Amandeep Bains
(416)771-9834
M23007753
Mortgages with Amandeep
Instagram
Facebook

Source: The Canadian Real Estate Association