Housonomix: 📈 Unemployment Up, 🏡 High Inventory, & 📊 Sticky Prices

📊 Rate Watch: 📈 Unemployment Rises, 📉 Bond Yields Fall, & 🏡 Mortgage Advice for Today's Market

Welcome to our latest interest rate watch update, where we bring you the most recent insights and trends in the mortgage and real estate landscape. Here's what you need to know:

• The unemployment rate rose to 6.4% 📈, up 1.4% since January 2023, which often signals an impending recession ⚠️.

• GoC bond yields fell sharply 📉 (from 3.60% to 3.46%) after last week’s employment report, raising the likelihood of a Bank of Canada (BoC) rate cut at its next meeting on July 24th 📅.

• So far, in the last 3 to 4 weeks, we haven’t seen major lenders changing their lower discretionary rates that we can and usually negotiate for our clients 🤝.

In terms of mortgage advice:

• 🏠 The most suitable mortgage product for most clients right now is the 3 yr fixed term (whether it’s insured, uninsured or insurable mortgages).

• ❌ The spread with variables is still too high to recommend these to most clients (except seasoned investors - and even then on a very cautious basis).

• 📅 5 yrs are still not attractive enough as the term is too long to be locked on to such a long duration.

• 🔍 It’s best to understand the terms of the mortgage very clearly as the prepayment penalties can be extremely severe, particularly in a declining rate environment which is what we’re in right now.

Please reach out to us at www.ronmortgages.com to ensure you’re getting the best mortgage solution for your overall requirements 🏡✨.

📊🏡 June 2024 Real Estate Radar: High Inventory, Low Sales, and Sticky Prices 🏡📊

Welcome to this edition’s Real Estate Radar! In June, the market faced high inventory levels and low sales, yet average home prices remained surprisingly stable. Here's a snapshot of the key trends and insights.

• 📉 Sales Decline: June saw a significant drop in sales, continuing a trend with a month-over-month decline of 11.4% and a year-over-year decrease of 16.4%.

• 📈 Increased Listings: New listings rose by 12.3% year-over-year, with a notable 67.4% increase in active listings compared to June 2023, leading to a high inventory level.

• ⚠️ Failed Offer Dates: The success rate of offer dates dropped sharply throughout June, with only 18% of properties selling on their offer nights by the third week.

• 💲 Price Stickiness: Despite lower sales and higher inventory, average home prices remained relatively stable, experiencing only a slight 0.3% decline from May to June.

• 🔄 High Re-Listing Rate: Nearly a third of all new listings in June were re-listings, highlighting the challenge of properties not selling on initial offer dates.

• 📊 Low Absorption Rate: The absorption rate for June was a low 34.6%, indicating a buyer’s market and reflecting the difficulty in selling homes quickly.

🍁 📊 Maple Pulse: Unemployment Rises, Wage Growth Surges, and Household Debt Soars 📉💰💳 

Welcome to this edition of Maple Pulse! In this edition, we delve into some pressing economic trends: rising unemployment, significant wage growth driven by the federal government, and soaring household debt levels. Let's explore what these developments mean for Canadians.

• Canada's Unemployment Rate Climbs to 6.4%: Canada's unemployment rate rose to 6.4% in June, continuing an upward trend since April 2023. The economy lost 1,400 jobs, with declines in sectors like transportation and construction, while accommodation, food services, and agriculture saw increases. Youth unemployment reached 13.5%, the highest since 2014. Wage growth accelerated to 5.4% year-over-year, which could influence the Bank of Canada's upcoming rate decision. (Ron’s take: Unemployment is bad, obviously. There is a silver lining, however. Bank of Canada will see this as a sign and not be scared to keep up with their rate decreases. The chances of another rate cut later this month went up. Except for one problematic issue - wage growth. Commenting on it on a related story below.)

• Federal Government Drives Wage Growth in Canada: Federal civil service wage gains are significantly impacting Canada's overall wage growth, according to a Desjardins report. Average hourly compensation rose by 5.1% year-over-year in May, with public sector wages increasing by 8.4% in Q1 2024. Federal hiring surged by 17% since 2019, skewing wage data. Federal employees now earn an average of $45 per hour, higher than most other sectors, except oil and gas. This trend may distort overall economic conditions and wage growth. (Ron’s take: One of the last holdout domestic indicators that would have given the Bank of Canada the all-clear to go with its rate decreases would have been wages stagnating or declining. Outside of the govt sector, wages are mostly there. But the Federal govt is now so big and wages in the govt are increasing so much, they’re making a noticeable impact on the economy. The Federal govt has much to answer for.)

• Trudeau Addresses Housing Crisis, Hints at Policies Targeting Older Homeowners: In a podcast with Generation Squeeze, Prime Minister Justin Trudeau highlighted the housing affordability crisis, emphasizing "generational fairness." He suggested that older Canadians, who "scrimped and saved" for their homes, may not grasp the current hardships faced by younger generations. While Trudeau didn't introduce new policies, the podcast’s host advocates for an annual surtax on homes over $1 million. Trudeau’s stance suggests potential measures targeting wealthier homeowners to address the housing crisis. (Ron’s take: A bit misleading to say that Trudeau hinted at policies targeting older homeowners I will admit. He didn’t directly say anything about any such policy. Most likely because even though the data might be suggesting something along these lines, one can imagine how that’ll politically play out if the govt. came in with yet another tax, this time targeting older homeowners.)

• Powell Signals Potential Rate Cuts as US Job Market Cools: Federal Reserve Chair Jerome Powell indicated a shift towards potential interest rate cuts amidst a cooling job market and persistent inflation. Speaking to Congress, Powell noted significant progress in reducing inflation, now at 2.6%, down from a 9.1% peak. While rates remain high at 5.3%, the job market's slowdown and moderated economic growth suggest a possible rate reduction by September. Powell emphasized the Fed's cautious approach to ensure sustainable inflation control without weakening economic activity. (Ron’s take: A major external domino that needs to fall, for Bank of Canada’s rate cuts to go from ‘If’ to ‘when and how fast’. But the signs from the US are becoming clearer. Most likely there will be a US rate cut before their November elections, which is definitely very good news for us in the North.)

• Canadian Households Rank Third Globally in Debt: A Desjardins report reveals that Canadian households are now the third most indebted worldwide, with debt levels surpassing 100% of GDP. The surge, driven by low interest rates, saw household debt climb 25% from Q1 2020 to Q1 2024. Wealthier households hold 55% of this debt, largely through mortgage credit, while the bottom 60% struggle with negative savings due to rising living costs. Recent interest rate cuts offer some relief, but the overall debt burden remains a significant challenge. (Ron’s take: A lot of this increased debt is due to the extreme sensitivity to interest rates we have here in Canada directly and very quickly affecting our mortgage rates. People have less money to spend after paying their existing mortgage. But with even food and gas prices up, they’re going deeper and deeper in debt. Not sustainable.)

Mortgage Mastery: Green Mortgages: Energy-Efficient Financing 🌱🏡

Green mortgages are designed to support environmentally friendly home improvements, making homes more energy-efficient and sustainable. Here are some key points about Canadian green mortgage programs:

CMHC Green Home Program:

• 💰 Mortgage Insurance Rebate: Offers a premium refund of up to 25% for energy-efficient homes.

• 🔄 Energy Upgrades: Qualify if you buy, build, or renovate a home to improve energy efficiency.

• 🌍 Environmental Impact: Encourages the reduction of greenhouse gas emissions and energy consumption.

Ontario-Specific Incentives:

• ⚡ Save on Energy Home Assistance Program: Provides free home energy assessments and upgrades for eligible households.

• 🌿 Ontario Renovates Program: Offers forgivable loans to low-income households for home repairs, including energy efficiency improvements.

• 🔋 GreenON Installations Program: Although now closed, it previously funded energy-efficient home improvements and may be reinstated or replaced by similar initiatives.

Benefits of Green Mortgages:

• 🔋 Lower Energy Bills: Save money by reducing energy consumption.

• 🌱 Increased Property Value: Energy-efficient homes often have higher resale values.

• 💚 Environmental Responsibility: Contribute to a healthier planet by reducing your carbon footprint.

By choosing a green mortgage, you not only save on utility costs but also play a part in promoting sustainable living. 🌏🏠✨

Credit Chuckles & Passionate Pursuits 💳😂❤️