Economy

More Mixed Signals On The Housing Economy

Published

2 years ago

November 12, 2022

I grew up in the 80s, a period of time when inflation and recession were common language. At the end of the 70s inflation was raging and so the Federal Reserve dialed up interest rates, a recession followed. My memory of 1982 includes endless reports about layoffs and economic hardship and big midterm wins for Democrats. Then things turned around. Today, the story isn’t so simple, and it never is as events are unfolding. The Ringer has a great podcast called Plain English and I found their episode The Housing Recession is Coming informative and interesting. I speculated last month on what’s happening with the housing economy, but the podcast got me thinking again about what might happen to housing in 2023.

Host Derek Thompson starts with the weird signals coming from data sources reporting on various economic trends especially housing. Some measures show housing prices and rents falling beginning earlier this year while the so called “headline inflation rate,” the one reported by the government shows inflation up, driven largely by increased housing costs. A broad category called “shelter” is a third of the CPI calculation, and when that indicator gets hot, then overall inflation goes up. Meanwhile, in the broader economy, Gross Domestic Production (GDP) is down and has been two quarters in a row, yet employment numbers are holding strong.

Thompson hosts Mark Zandi of Moody’s Analytics to tap his brain on what’s going on, especially with housing. First, there is a good conversation on methodology. The rent tracking platforms like Zillow are must faster with their surveys of rent data, while the Bureau of Labor Statistics lags, using a survey instrument that uses a unique sampling methodology. The point Zandi makes is that the BLS numbers lag behind other measures of rent, so rents actually probably, overall, started falling early in the year and continue to fall or flatten. Those changes won’t show up in the BLS tallies until later, perhaps easing inflation toward the end the year.

Zandi takes on the Thompson’s question about whether “this is 2007 again,” with housing teetering on the edge of a precipitous crash. I found Zandi’s answer sensible. Probably not. We are not on the verge of crash but more of a correction; because of lagging production of housing over the last decade, supply still has not caught up after the 2008 housing crash. Therefore, even though prices for housing did rise steeply, the lack of supply creates a ceiling. He echoes my point about people that may have bought houses in places like Boise and Austin at the top of the market with cheap money, but now are seeing the market value of their purchase falling back to earth.

He also echoes my concern that if there is a real and sustained recession, those households who went all in on buying housing may face big challenges. If a Fed driven recession hits in early 2023 to correct for inflation, and hours are cut or jobs are lost, the mortgage payment might be more difficult to make, leading to foreclosures. This all depends on how deep and lasting any recession may be, and Zandi posits that we’re not in a recession now and because of strong job numbers, may not really tip into a deep and lasting one in 2023.

To Thompson’s question about the construction industry and whether jobs will evaporate there, Zandi bets on multifamily housing construction to keep that sector at least flat since that housing type seems to be doing well even while single-family construction is lagging. I’m skeptical for no good reason about Zandi’s view of multifamily other than I think it remains to be seen what happens with job growth and income and growth.

And that’s where I’ll jump in with my own thoughts as we move toward the end of 2022. I’m no economist of course, but I’d revise my early thoughts and guess that we will be entering a period of recession in 2023, one that will see many of the housing purchases of 2021 seem like a big mistake. I also think that building of multifamily projects, especially townhomes, which are for-sale products, will see high vacancy rates. Many townhomes and condominiums will be sitting on the market for months before they get pulled off the market or sold at big discounts. Interest rates are high, and I think people – investors and buyers – are going to stay out of the game through the first quarter of 2023.

The psychology of 2023 is going to be key as it always is an economy. Will people feel happy that we made it through a relatively Covid-free 2022, and will that lead to an exuberance that will keep production high? Won’t that lead to more inflation and thus more pressure from the Fed on interest rates? How will those things work in combination? How will all this impact housing policy, something I know much more about that economics?

That last question depends on something Thompson and Zandi discuss, the nature of our measures of monthly housing costs. Unlike gasoline, prices for housing don’t go up and down perceptibly on a daily, weekly, or even monthly basis. Generally speaking, if the news reports big spikes in rents, most people’s rent stays the same. And mortgages don’t move at all. If the market remains volatile, with “corrections” or “collapses” or “spikes” (choose your adjective or adverb), people will have to compare their own experience with signals in the economy.

I’ve often thought we’d be better off if rent and mortgages were paid on a weekly or even daily bases, or withheld from each pay check. This might ease the sting of fluctuations in prices, making them less perceptible. If people had to write a check for their taxes every month or every quarter like small business owners do, attitudes about taxes might be different. I wonder if people would be less panicked and thus less inclined to call for rent control if they didn’t have to write a huge rent or mortgage check every month. Right now, broad economic volatility in the housing economy doesn’t feel abstract; it makes people worry and crave things like rent control.

Volatility in the housing economy is going to continue well into 2023, and depending on the outcome of the election, there will continue to be pressure on policy makers to regulate the ups and downs out of the market. Whether that pressure pushes us further toward more and more government intervention or better policy will depend on whether policy makers can keep their heads and whether they can find better alternatives like less regulation and more efficient subsidies.

Source link

Business

A timeline of events in the bread price-fixing scandal

Published

9 hours ago

September 19, 2024

Anne Joseph

Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

Source link

Economy

S&P/TSX composite up more than 250 points, U.S. stock markets also higher

Published

9 hours ago

September 19, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

Source link

Economy

Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

Published

23 hours ago

September 18, 2024

Anne Joseph

VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

Source link