Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canadian Mortgage Borrowers Received “Over 8,000 Relief Measures”: FCAC
Canadian mortgage borrowers have just discovered they weren’t richer than they thought, and now require significant assistance to handle their bills. The Financial Consumer Agency of Canada (FCAC), the country’s consumer watchdog, has delivered “over 8,000 relief measures” for mortgage borrowers over 1 year. The update based on mid-year data includes waving millions in penalties for late payments and eliminating compound interest for overleveraged borrowers. The generosity is surely appreciated, but this highlights an under discussed issue—households aren’t handling their debt loads gracefully. That makes recent measures to increase leverage more questionable.
Canada Has Less Than 1 Job Vacant For Every 2 Unemployed Jobseekers
Canada’s immigration surge was built on the pitch the economy has a labor shortage. That wasn’t the case, as unemployment continued to climb to 6.8% in November, the highest non-pandemic rate since 2017. At the same time, the number of vacant jobs employers are looking to fill has also fallen sharply, resulting in more jobseekers competing for fewer jobs. The country now has just one job vacant for every two unemployed workers actively seeking a job.
Canadian Dollar Plunges As Bank of Canada & Federal Reserve Diverge
The Canadian and American economies typically move together, but not this time. Earlier this month, the Bank of Canada (BoC) made an emergency, “supersized” rate cut and opened the door for further rate cuts down the road. Canada’s central bank justified the decision with fears of a weakening economy failing to meet already weakened forecasts. The exact opposite is happening in the US, where the US Federal Reserve warned this may be the end of rate cuts needed as the economy heats up. The rare divergence between the two economies has led to a very weak loonie, with weaker performance against the US dollar only seen a handful of years within the past two decades.
Canadians Still Moving To Alberta, East Coast Appeal Fizzles Out: BMO
Young Canadians fled to Alberta and Nova Scotia during the pandemic. That trend’s come to an end… but only for one of those provinces, according to BMO. Core-aged workers are still flocking to Alberta at a near-record pace, especially from pricey provinces like BC and Ontario. The combination of a strong economy and relatively affordable housing continues to draw in talent. However, the surging migration to Nova Scotia stopped after home prices became one of the fastest climbing in the country. Combined with higher tax rates, it no longer provides the arbitrage opportunity it once did for those migrating from BC and Ontario.
Canadian Inflation Slows, Mortgages Pull Back While Rents Accelerate
Canadian inflation as measured by the CPI continues to slow. That’s good news for those looking for cheaper credit, but it is generally a sign of a weak economy. The divergence in housing costs was among the more interesting details in last month’s report. Rate cuts and falling yields have helped bring down the cost of financing a mortgage and helps investors with leverage. The result is that the cost of paying for a home may be cheaper, but the cost of renting continues to rise, according to Stat Can.
Canadian Real Estate Prices Halt Declines As Cheaper Credit Boosts Demand
Canadian real estate prices may have found its footing, as declines halt amidst higher demand. The benchmark price of a home across Canada was unchanged in November, ending months of declines as cheaper mortgages motivate more buying. The buying activity isn’t quite back to a bustling market, and there’s significantly more inventory available than pre-pandemic. The firming of prices and increased activity also occurred along a backdrop of fundamental outlook deterioration, including rising unemployment and a declining population outlook. If cheap credit and increased leverage are the sole drivers of this activity, market exuberance just picked up where it left off pre-bail outs.
Many who are very wealthy rent and turn cash over 24/7/365 in the markets.