Residential Market Commentary - The future is unclear

Rising inflation.  A Bank of Canada interest rate hike.  Provincial elections in British Columbia and Quebec.  Municipal elections in B.C. and Ontario.  A new federal budget and an ugly jobs report.  It has been a busy time for the Canadian economy.  All that activity is making it hard to see what is ahead for the housing market and interest rates.

Broadly speaking, the analysts and the markets see more rate hikes in the future.  There had been a lot of confidence that the Bank of Canada would hold its policy rate at 2.50% in December then increase by another quarter point in January.  However, confidence in that increase has diminished, dropping from a 96% to 77% by one measure.  That is still high, but it is a big drop and it strongly suggests a lack of clarity.

Much of that decline in confidence came after the latest Statistics Canada employment report that showed a significant miss for the October job numbers.  The economy shed 4,700 jobs for the month, against expectations for a 13,600 gain.  It was the third consecutive month of job losses and it bumped the unemployment rate to 6.7%, up from 6.5% a month earlier.

All of the economic and political activity seems to have distracted home buyers.  On a seasonally adjusted basis most real estate boards across the country reported sales gains, but there is a definite lack of enthusiasm.  The numbers remain below last year’s figures.  Home values are flat or declining, and home sellers are retreating from the market.

The Canadian Real Estate Association will release its detailed summary of the national resale housing market next week.