This Week’s Top Stories: Canadian Real Estate Rules The Underground Economy, & Delinquencies Rise

Time for your cheat sheet on this week’s top stories.

Canadian Real Estate

Canada’s Real Estate Bubble Is Even Consuming Its Underground Economy

One unfortunate consequence of a real estate bubble is the concentration of capital. As people spend more money on real estate, they have less to spend in other industries. This causes human capital to concentrate in real estate, where the money is flowing. Most real estate bubbles see this occur with GDP, but Canada is a special case. Not only has it seen GDP concentrate, but it’s even consuming underground GDP. Even Canada’s criminals don’t see a better opportunity than housing. That tells us a lot about Canada’s money laundering problem.

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Canadian Credit Delinquencies Are Rising For Everything But Mortgages

Canadians are showing signs of financial stress, according to Transunion data . The credit reporting giant reported rising consumer delinquencies for nearly all credit products. The one exception is mortgages, which tend to lag the other indicators since it’s the last bill people stop paying. It’s not a concern at this level, but a trend worth keeping an eye on.

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Canadian Real Estate Affordability Got Worse With Higher Rates, What Gives?

Canadian real estate prices are falling, but rising rates have eroded affordability further. What gives? Bank of Canada (BoC) research shows monetary policy changes take 18 to 24 months to fully hit the market. Since they fell behind on the inflation fight, even the first hike in March 2022 hasn’t fully hit yet. Rates climbed much faster than usual, but prices have yet to reflect that increase. In short, affordability is widely expected to improve, it just needs time.

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Bank of Canada May Be Forced To Hike Rates Despite Debt Loads: BMO

The Bank of Canada (BoC) may have to walk back the “pause” it recently announced. US inflation came in hot last month, leaving the market to price at more aggressive rates. Combined with the pause in Canada, the loonie is likely to depreciate against the US dollar. That won’t just make your vacation more expensive, but it’s likely to cause inflation. Government yields are already climbing, reflecting expectations of further hikes from the BoC.

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Toronto Real Estate

Toronto Real Estate Prices Just Made The Biggest Jump Since Rates Began Climbing

What real estate correction? Toronto real estate prices made a surprise move last month—it showed climbing prices. The price of a typical home increased by $12,400 in February, the first increase since rate hikes began nearly a year ago. Inventory squeeze? Nope, inventory continued to improve as sales fell further. Just a cohort of exuberant buyers, likely fueled by the BoC’s comments on “pausing” rate hikes. The signal was read by many as the beginning of the end for the downturn.

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