16 Mar

Canadian CPI Inflation Rises to 5.7% – March 16 2022

Latest News

Posted by: Matthew J. Charlton

MARCH 16 2022

Inflation Pressures Accelerating

StatsCanada today reported that consumer prices rose 5.7% year-over-year in February, up again from the prior month’s 5.1% rise. This was the largest gain since August 1991 (+6.0%).

This was no surprise, as the Ukraine War has stepped up inflation pressure worldwide. The US CPI rose a whopping 7.9% last month (see chart below).

Price increases were broad-based in February, pinching the pocketbooks of Canadians. Consumers paid higher prices for gasoline and groceries in February 2022 compared with the same month a year earlier. Shelter costs continued to trend higher, rising at the fastest year-over-year pace since August 1983.

Excluding gasoline, the Consumer Price Index (CPI) rose 4.7% year over year in February, surpassing the gain in January (+4.3%) when the index increased at the fastest pace since its introduction in 1999.

On a monthly basis, the CPI rose 1.0% in February, the most significant increase since February 2013, following a 0.9% increase in January. On a seasonally adjusted monthly basis, the CPI rose 0.6%.

Gasoline Prices Surge Amid Geopolitical Conflict
Canadian motorists paid 32.3% more at the pump compared with February 2021.

Monthly gasoline prices increased 6.9% amid geopolitical conflict in Eastern Europe and the Middle East, as uncertainty surrounding the global oil supply put upward pressure on prices.

Similarly, prices for fuel oil and other fuels increased 8.5% month-over-month following higher international energy prices.

Grocery Prices Shot Up Again
Prices for food purchased from stores (+7.4%) rose faster in February than in January (+6.5%). This is the most significant yearly increase since May 2009. Higher input prices and heightened transportation costs continued to contribute to inflationary pressure in February.

Price growth for meat (+11.7%), including fresh or frozen beef (+16.8%) and chicken (+10.4%), was higher year over year in February than in January (+10.1%).

Shelter Costs Rise At Fastest Pace Since 1983
In February, shelter costs rose 6.6% year over year, the fastest pace since August 1983. Higher costs for both owned accommodation (+6.2%) and rented accommodation (+4.2%) increased.

Homeowners’ replacement cost (+13.2%), which is related to the price of new homes, and other owned accommodation expenses (+14.3%), which includes commissions on the sale of real estate, remained elevated year over year. In contrast, mortgage interest cost (-6.0%) moderated the shelter index on a year-over-year basis.

According to the Canadian Mortgage and Housing Corporation, improved economic and demographic conditions over the past year, including youth employment recovery and resumption of international migration to Canada, supported rental demand. This, in part, contributed to higher rent (+4.2%) prices year over year in February.

Bottom Line

Inflation has exceeded the Bank of Canada’s 1%-to-3% target band for 11 consecutive months. Other central banks have already begun to hike overnight rates from their effective lower bound introduced in March 2020.

Today, the U.S. Federal Reserve hiked the overnight policy target for the first time since 2018 by 25 basis points and signalled that it expects to hike rates six times more this year.

The global geopolitical tensions and rising risk of a drawn-out conflict exacerbate inflation and supply bottlenecks, delaying a return to sub-3% inflation.

Please note: The source of this article is from Sherry Cooper

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15 Mar

Canadian Home Sales Rose in February as New Listings Increased Sharply – March 15 2022

Latest News

Posted by: Matthew J. Charlton

MARCH 15 2022

New Listings Finally Show Some Life

Statistics released today by the Canadian Real Estate Association (CREA) show that national home sales were up in February 2022 as buyers jumped on the first spring listings. The number of newly listed properties surged a welcome 23.7% from extremely depressed levels, hopefully portending a much-needed increase in supply that will continue for the spring selling season. National home sales rose 4.6% month-over-month in February as prices rose 3.5%, taking the y/y price gain to a record 29.2%.

In February, sales were up in about 60% of local markets, led by some big jumps in Calgary and Edmonton. The GTA also outperformed the national averages.

The actual (not seasonally adjusted) number of transactions in February 2022 came in 8.2% below the monthly record set in 2021. That said, as was the case in January and throughout the second half of 2021, it was still the second-highest level on record for that month.

New Listings

The pullback in new listings in January was reversed in February, rebounding by 23.7% m/m. The monthly gain was led by the GTA, Calgary and the Fraser Valley.

With sales up by quite a bit less than new listings in February, the sales-to-new listings ratio fell back to 75.3% after having shot up briefly to 89% in January. The February reading puts the measure roughly back in line with where it has been since the summer of 2020. The long-term average for the national sales-to-new listings ratio is 55.1%.

About two-thirds of local markets were seller’s markets based on the sales-to-new listings ratio is more than one standard deviation above its long-term mean in February 2022. The other third of local markets were in balanced market territory.

There were just 1.6 months of inventory on a national basis at the end of February 2022 — tied with January 2022 and December 2021 for the lowest level ever recorded. The long-term average for this measure is a little over five months.

Home Prices

There were just 1.6 months of inventory on a national basis at the end of February 2022 — tied with January 2022 and December 2021 for the lowest level ever recorded. The long-term average for this measure is a little over 5 months.

Compared to the national year-over-year increase, gains remain about on par in British Columbia, lower in the Prairies and Newfoundland & Labrador, a little lower in Quebec and Prince Edward Island, and a little higher in Ontario, New Brunswick and Nova Scotia. The regional differences under the surface of those provincial numbers can be seen in the table below.

Bottom Line

Canada has the most significant housing shortage in the G7. This began in late 2015 when the federal government decided it would target the entry of much larger numbers of economic immigrants. Canada is “underpopulated” and celebrates a growing population, unlike many other countries. There are many job vacancies to be filled, and more people means more economic growth and prosperity for Canada.

In mid-February, the federal government revised up its targets for immigration this year and next (see chart below), raising the spectre of even more significant housing shortages going forward. While CMHC announced an 8% rise in February housing starts this morning, home completions are not keeping up with the increase in household formation. The only solution is a sharp increase in new home construction for sale and rent. This requires local zoning regulations to increase housing density and measures to speed up the approval processes.

This month, the Bank of Canada began their rate-hiking cycle with much more to come. We believe they will raise the overnight rate again on April 13, with the likelihood of five more rate hikes this year. That would take the overnight rate up to 2.0% by yearend. The Ukraine War has added to future uncertainty, but it has also boosted inflation pressures and increased the risk of a marked economic slowdown. All in, home price pressures are likely to dissipate for the remainder of this year and well into next year.

Please note: The source of this article is from Sherry Cooper

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15 Mar

Determine the Right Term

Mortgage Tips

Posted by: Matthew J. Charlton

Choosing the mortgage term that is right for you can be a challenging proposition for even the savviest of homebuyers. By understanding mortgage terms and what they mean in dollars and sense, you can save the most money and choose the term that is right for you.

There are many factors, either in the financial markets or in your own life, which you will also have to take into consideration when you select your mortgage term length.

If paying your mortgage each month places you close to the financial edge of your comfort zone, you may want to opt for a longer term mortgage, for instance ten years, so that you can ensure that you will be able to afford your mortgage payments should the interest rates increase. By the end of a ten year mortgage term, most buyers are in a better financial situation, have a lower principle balance due, and should interest rates have risen, will be able to afford higher mortgage payments.

If you are shopping for a mortgage for an investment property, you will likely want to consider choosing a longer mortgage term. This will allow you to know that the mortgage payments on the property will be steady for a long time and allow you to more accurately project your future income from the property.

Choosing the right mortgage term is a unique decision for each individual. By understanding your personal financial situation and your tolerance for risk, I can assist you in choosing the mortgage term that’s best for you.

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13 Mar

Spring Cleaning Tips!

Home Tips

Posted by: Matthew J. Charlton

Spring is just around the corner!! 

While few of us enjoy Spring cleaning, we can all appreciate having a fresh home!  

Read on for six Spring cleaning tips to help you tackle your home and get it looking its best for the season ahead:

1. Create a Playlist: Everything is more fun with a great playlist! Not only is music great therapy but it can make the cleaning process go by quicker and make it more enjoyable. Check out my curated Apple Music Playlist and discover new music! 

2. One Room at a Time: Everyone likes the aftermath and seeing their home all sparkly and fresh, but sometimes it can be an overwhelming process to get to that point. It is best to clean one room at a time, starting with the smaller ones or those that need the least amount of cleaning and work your way up to the larger, project rooms!

3. Declutter as You Go: Spring cleaning isn’t just about shining up the brass on the door and dusting. It is just as important to declutter your space as you go! Before you start cleaning a room, pinpoint items that can be discarded and go through closets and cupboards for anything that you can donate.

4. Think Green! Spring cleaning is starting the season off on a fresh, clean note. Don’t muddy that up with harsh chemical cleaners. In today’s eco-friendly environment, there are many eco-friendly and safe alternatives to regular cleaners. Vinegar is a great substitute in the bathroom or kitchen as well as combining vinegar, baking soda and water as a deep clean alternative. You can also opt for a steam cleaner to manage tile, hardwood floors, appliances and even outdoor areas as they only use hot water and vapor.

5. Don’t Forget The Fridge & Freezer: The best time to clean out your fridge and freezer is right before you do your grocery shopping, so they will be at their most empty. Dispose of anything that is past its expiration date and any almost-empty items you won’t use. Before you restock be sure to wipe down the interior of the fridge with disinfectant and a damp cloth. The same can be done for the freezer but you’ll have to defrost it first!

6. Clean Air Reduces Allergies: Replacing furnace and HVAC filters is one of the most overlooked parts of Spring cleaning. Going as far as replacing your standard filter with a more robust one with a higher rating will help keep you even healthier (and allergy free!) this year as they catch smaller particles to ensure your home is void of allergens, chemicals and even odors.

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11 Mar

Blockbuster Canadian Jobs Report for February – March 11 2022

Latest News

Posted by: Matthew J. Charlton

MARCH 11 2022

Canada Reached Full-Employment in February

Statistics Canada released the February Labour Force Survey this morning, reporting a much more significant than expected 336,600 net new jobs, with the unemployment rate falling a full percentage point to 5.5%. This is the first time the unemployment rate fell below its pre-Covid level and reinforces the expectation for another Bank of Canada rate hike in April and as many as five more increases this year. Last month’s recovery more than offsets the losses that coincided with the Omicron lockdowns in January and points to the continued resilience of the Canadian economy.

The loonie jumped on the news, as did Canadian government bond yields.

Other indicators point to an increasingly tight labour market in February. Total hours worked surged 3.6% to a record high, while the employment rate rose 1.0 percentage points to 61.8%. Gains were most notable in the hard-hit accommodation and food services sector (+114,000; +12.6%), and information, culture and recreation (+73,000; +9.9%) industries. Employment increases were widespread across provinces and demographic groups.

Average wages increased 3.1% from February 2020, significantly faster than the 2.4% rate recorded in January. That could signal that inflationary pressures, already intense, continue to build.

Bottom Line

This Labour Force Survey was conducted in mid-February, before the start of the Ukrainian War. Since then, many commodity prices have surged, especially oil, gasoline, aluminum, wheat and fertilizer. This will accelerate CPI inflation worldwide, which dampens consumer and business confidence and reduces family purchasing power. The war has also contributed to continuing supply disruptions, all of which point to increased uncertainty and potentially slower growth.

The Bank of Canada is likely to hike interest rates when it meets again on April 13 by 25 basis points. Any more than that is imprudent given the risk of an economic slowdown. The outlook for the remainder of this year is more uncertain and likely to be volatile, depending on how long the war lasts. Right now, the likelihood for another five or six rate hikes this year and a few more next year. This, however, is subject to change.

Please note: The source of this article is from Sherry Cooper

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7 Mar

Preparing a Budget & Determining Affordability

Mortgage Tips

Posted by: Matthew J. Charlton

The Importance of Preparing a Budget Before Purchasing a Home.

The homebuying process, especially for first-time homebuyers, can be an exciting time. The idea of purchasing a home conjures up many emotions, dreams, and possibilities. While the homebuying experience is positive for most, it can be daunting for many. The importance of working with qualified professionals (Realtor, Mortgage Advisor, Lawyer) cannot be understated.

As a licensed mortgage pro, I help people like you achieve the dream of homeownership. In my experience, there is one element of the process that I regularly see being overlooked… The importance of preparing a budget and determining the true affordability of home ownership.

Why is it important?

People are generally under the impression that getting approved for a mortgage means they can move forward with the purchase. It’s not so simple. The calculations used by lenders to determine affordability do not include many expenses that most Canadians incur. Preparing a budget will help you factor in all your monthly costs to give you a true sense of affordability.

When should you prepare it? What should your budget tell you?

Prepare a budget before you begin looking for a new home. This will allow you to determine how much of your take-home pay you are spending, where it is being spent (discretionary vs. non-discretionary expenses), and how much you have left at the end of the month. Preparing and analyzing your budget at this point should give you an idea of what kind of mortgage payment you can comfortably afford while maintaining your current lifestyle. It can also give pause for thought… Perhaps you did not realize the effect a mortgage payment might have on your monthly budget. Consider whether you want to take on this added cost, or start restructuring your budget to accommodate for this new expense.

If you are not sure how much your potential mortgage payment might be, get in touch with me and I can take your expenses into account and provide you with your monthly mortgage payment based on today’s rates, which will give you an approximate dollar amount. 

If you feel like running some numbers right now, download my free app “My Mortgage Toolbox” on the Apple App Store or Google Play Store. My app guides you through all the expenses and considerations you’ll need to be aware of and generates clear reports for you to download and keep for your reference.

If you have zeroed in on a few properties or are ready to submit an offer, it would also be wise to prepare a budget at this point. If you have already created one, revisit it and add in the numbers based on the property or properties you are considering. You should now be including all the new costs you will be incurring once you’ve purchased your new home, including (but not limited to) your:

  • Mortgage Payment
  • Property Taxes
  • Home Insurance 
  • Estimated amounts for Heating, Hydro & Water
  • Car Insurance –  
    • If you are moving to an area where you’ve never lived, you should check to see what impact (if any) it could have on your car insurance premiums. If you have 2 or more vehicles, this is an added expense you will want to factor in.
  • Cable & Internet – 
    • If you are a first-time homebuyer, chances are you have not paid for this in the past, making this a new expense.

You should also allocate some money for miscellaneous expenses such as repairs, as there are always unexpected costs that arise when you are a homeowner. Once you’ve factored in every expense, your budget should clearly show if you can afford a new home. It can be a real eye-opener but also a valuable tool that you can use to help plan for your immediate future. Remember, if your budget shows it would be difficult to afford your new home, it doesn’t mean that home ownership is out of reach. It may just require some thoughtful consideration on your part in your other areas of spending. 

The purpose of these budget exercises is not to discourage you from home ownership, but to help you prepare for it!

Who can help you prepare the budget?

A budget is something that you can easily prepare yourself. There are many templates available online. The point of the exercise is to provide you with an accurate breakdown of where your money is being spent, so do yourself a favour and set aside some time to prepare a comprehensive budget.

If you feel that you would be better served if you had some assistance in preparing your budget, possibly because you would not be honest enough with yourself, or you may not think of all the expenses to include, reach out to someone you know and trust. Consider speaking with your Accountant, your Financial Planner, or a trusted member of your family. If nobody comes to mind, I’d be happy to introduce you to professionals who can provide you with the objectivity you need.

Not just for first-time homebuyers…

Preparing a budget is recommended not just for first-time homebuyers — it should be done by anyone purchasing a new home. If you are moving into a larger home, where the mortgage expense and other homeownership costs will increase, it would be prudent to put everything down on paper to see exactly how your total monthly expenditures will change. What can you afford? Will you be able to afford your current lifestyle? Or do you need to reduce your spending in other areas?

Preparing and maintaining a budget is something everyone should do regularly, even if it’s simply to determine where your money is being spent. It can help to identify areas where spending can be curbed and where opportunities to save may exist. Budgeting is an essential part of any Financial Plan and something we should all get in the habit of doing.

Check out my Homebuyers Guide, which outlines the homebuying process, great tips for securing your financing, and references to all the things you need to know! Request a copy of the Homebuyers Guide here!

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4 Mar

Preparing for the Spring Market

Mortgage Tips

Posted by: Matthew J. Charlton

Spring is just around the corner! Some of you might be anxious to buy or sell this season, so let’s take a look at the trends for the upcoming Spring market. 

From a seller’s perspective, this is the best time to sell with motivated buyers and a huge demand that may diminish as the Bank of Canada raises interest rates and governments work to increase supply. As always, it is important to ensure that you properly list and market any home you are looking to sell to attract the right buyers. 

For buyers, it is likely that Spring is going to be somewhat hectic as most individuals will be anxious to get into their new homes before interest rates rise further. You will want to be as prepared as possible if you are looking to buy this season by keeping a finger on new listings, and being prepared to extend an offer almost immediately after a viewing if you found what you’re looking for so it is not snatched up.

Get in touch with me and one of my Realtor partners can assist you through the process, whether you’re buying, selling or both.

Having your mortgage pre-approved and rate-hold secured during this busy market will become vital as not only will it indicate to the seller that you will not have issues obtaining financing (assuming nothing changes between now and purchase with your job, savings, etc.), but it will also allow you to lock in the interest rate for up to 120 days while you shop. Don’t get caught waiving financing conditions quickly and then have to scramble later!

Another key component to note if you’re looking to buy this year is to consider moving further from your workplace. With supply issues currently within the housing market, it might be hard to find that perfect home nearby. Fortunately, most employers are now allowing remote work a few days a week. If this is something you’re open to, you’ll want to keep an eye out for potential office space in any homes you look at.

If you are looking to purchase a home this Spring, download my app to see what you can afford and don’t hesitate to reach out to me so we can discuss your goals and lock in your rate-hold for the best chance of success!

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2 Mar

Bank of Canada Hikes Policy Rate by 25 bps, and Sustains Current Bond Holdings – March 2 2022

Latest News

Posted by: Matthew J. Charlton

MARCH 2 2022

Bank of Canada Starts Hiking Rates, Signalling More To Come

The Governing Council of the Bank of Canada raised the overnight policy rate target by a quarter percentage point in a widely expected move and signalled that more hikes would be coming. This is the first rate hike since 2018. In a cautious stance, the Bank announced it was continuing the reinvestment phase, keeping its overall Government of Canada bonds holdings on its balance sheet roughly stable.

The Bank’s press release highlighted the major new source of uncertainty provided by the unprovoked invasion of Ukraine by Russia and suggested that it is a new source of substantial inflation pressure. Prices for oil, metals, wheat and other grains have skyrocketed recently. Moreover, this geopolitical distention negatively impacts confidence worldwide and adds new supply disruptions that dampen growth. “Financial market volatility has increased. The situation remains fluid, and we are following events closely.”

The Bank commented that economies have emerged from the impact of the Omicron variant more quickly than expected. Demand is robust, particularly in the US.

“Economic growth in Canada was very strong in the fourth quarter of last year at 6.7%. This is stronger than the Bank’s projection and confirms its view that economic slack has been absorbed. Both exports and imports have picked up, consistent with solid global demand. In January, Canada’s labour market recovery suffered a setback due to the Omicron variant, with temporary layoffs in service sectors and elevated employee absenteeism. However, the rebound from Omicron now appears to be well in train: household spending is proving resilient and should strengthen further with the lifting of public health restrictions. Housing market activity is more elevated, adding further pressure to house prices. Overall, first-quarter growth is now looking more solid than previously projected.”

Canadian CPI inflation has risen to 5.1%, as expected in January, well below the 7.5% level posted in the US.” Price increases have become more pervasive, and measures of core inflation have all risen. Poor harvests and higher transportation costs have pushed up food prices. The invasion of Ukraine is putting further upward pressure on prices for both energy and food-related commodities. All told, inflation is now expected to be higher in the near term than projected in January. Persistently elevated inflation increases the risk that longer-run inflation expectations could drift upwards. The Bank will use its monetary policy tools to return inflation to the 2% target and keep inflation expectations well-anchored.”

The final paragraph of the Bank’s press release speaks with great clarity: “The policy rate is the Bank’s primary monetary policy instrument. As the economy continues to expand and inflation pressures remain elevated, the Governing Council expects interest rates will need to rise further. The Governing Council will also be considering when to end the reinvestment phase and allow its holdings of Government of Canada bonds to begin to shrink. The resulting quantitative tightening (QT) would complement the policy interest rate increases. The timing and pace of further increases in the policy rate, and the start of QT, will be guided by the Bank’s ongoing assessment of the economy and its commitment to achieving the 2% inflation target.”

Bottom Line

The Bank of Canada has made a clear statement regarding the outlook for a normalization of interest rates. We expect a series of rate hikes over the next year. Expect another 25 basis point increase following the next meeting on April 13. The increased uncertainty and volatility arising from the war in Ukraine is front of mind worldwide. Still, it will not deter central banks from tightening monetary policy to forestall an embedded rise in inflation expectations.

The Bank of Canada has postponed Quantitative Tightening, for now, a prudent move in the face of geopolitical uncertainty.

Please note: The source of this article is from Sherry Cooper

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