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Posthaste: Home price drop within 'striking distance' of the last big downturn — and it's not over yet – Financial Post

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RBC sees home prices falling 14% before the dust settles

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Seven months and 300 basis points into the Bank of Canada’s hiking cycle and homebuyers remain on the defensive.

Housing data last week revealed that the national composite MLS Home Price Index fell another 1.6 per cent in August from the month before.

“It’s now down 7.4 per cent since February’s peak, within striking distance of the 8% peak-to-trough decline recorded during 2017-2019 downturn,” wrote RBC assistant chief economist Robert Hogue in a note.

And most agree it’s not over yet.

RBC sees the housing market decline continuing with the Bank expected to keep hiking interest rates until the end of the year. After the Bank’s last increase on Sept. 7, RBC economists now forecast the policy rate will rise to 4 per cent, up from the 3.5 per cent they had previously expected.

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“Higher interest rates will disqualify more buyers from obtaining a mortgage and shrink the size of a mortgage others can qualify for,” said Hogue.

Ontario and British Columbia, and increasingly Quebec and parts of Atlantic Canada, are suffering the biggest declines, Hogue said, with home sales falling below pre-pandemic levels last month.

Corrections are steepest in the most overheated markets. Over the past six months, the composite MLS Home Price Index has plunged 19 per cent in Cambridge, Ontario, 16 per cent in Kitchener-Waterloo and London, 15 per cent in Brantford and 13 per cent in Guelph. Chilliwack, B.C., is down 14 per cent and the Fraser Valley, nine per cent.

Eastern Canada has fared better, but “downward pressure is intensifying,” said Hogue. Montreal prices are down 3.3 per cent over the past three months, about half the drop in Toronto. But Halifax has fallen 6.3 per cent in the same time period, with a 3.9 per cent drop in August alone. Prices in Saint John, New Brunswick, fell 4.2 per cent last month.

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Still August’s national data leaves some room for optimism. Home sales fell one per cent from the month before, and while it’s the sixth monthly drop in a row, it was also the smallest. Compared to a year ago, sales were down 24.7 per cent in August, a smaller decline than the 29 per cent seen in July.

“August saw national sales hold steady month-to-month for the first time since February which, along with a stabilization of demand/supply conditions in many markets, could be an early sign that this year’s sharp adjustment in housing markets across Canada may have mostly run its course,” Canadian Real Estate Association chair Jill Oudil, said in the release of August’s data.

The average national home price, different than the composite home price index, was also up 1.9 per cent in August from July to $663,000 on a seasonally adjusted basis, the first increase after five months of decline.

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However, Randall Bartlett, senior director of Canadian economics at Desjardins, says a closer look at the details should curb any budding enthusiasm.

Gains in the average price month over month were concentrated in the Greater Toronto Area, and the composite benchmark prices, which he says better reflects market conditions, are still falling.

“We believe this is more likely to be a dead cat bounce than a bounce back in the Canadian housing market,” he wrote in a note Thursday.

RBC, which predicts home sales will fall 23 per cent this year and another 15 per cent next, doesn’t expect the market to hit bottom until the spring, by which time prices will have fallen 14 per cent from their peak nationwide.

Ontario and B.C. will experience bigger declines of 16 per cent, while markets in Alberta and Saskatchewan prices are expected to lose just four per cent.

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THE QUEEN’S QUILT As the world marks the funeral of Queen Elizabeth II today, here is a story of a woman in Nunavut who over the decades has accumulated what she believes is the largest private collection of Queen Elizabeth-themed souvenirs in the Canadian Arctic. Teacups, saucers, cookie tins, pots, spoons, old newspapers, magazines, books about the royal family, Joy Suluk has it all, totalling some 200 objects. But there is a twist in this tale. One day in 1994, the Queen herself showed up on an official visit to Rankin Inlet, and while touring an artisanal fair, bought a handmade blue-and-white quilt with polar bears and whales on it from a speechless Suluk. That’s the quilt above. Get the whole story from the Financial Post’s Joe O’Connor. Photo from Joy Suluk

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  • The government of Canada will hold a national ceremony in honour of the late Queen Elizabeth II, who passed away on Sept. 8
  • Today’s Data: Canadian industrial product and raw materials price indices

 

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Send your small business questions to the Financial Post

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Everybody is watching housing starts these days for signs of whether construction will follow the housing market into a historic downturn.

Data from the Canada Mortgage and Housing Corporation Friday showed Canadian housing starts fell 2.8 per cent to 267,443 units on a seasonally adjusted annual basis in August. Despite the decline, housing starts are still near record levels and the six-month moving average inched higher to 267,309 units.

“Construction activity continues to hold up remarkably well in the face of an historic downturn in the Canadian home resale market. Still, starts are showing signs of weakening,” wrote Marc Desormeaux, Desjardins principal economist, in a note after the data was released.

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Desjardins believes this is just the early innings of a downturn in home construction and it expects the effects of the cooling housing market to increasingly spill over into the building sector, gaining force as the Bank of Canada raises interest rates again in October.

“We are of the mind that this will eventually push the Canadian economy into recession in the first half of 2023,” Desormeaux wrote.

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Rents are soaring in Canadian cities, up 32 per cent in Metro Vancouver and 18 per cent in Toronto.

Our content parent MoneyWise has some tips on how to navigate today’s “unreal” rental market and find an affordable place to live as demand and prices increase.

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Today’s Posthaste was written by Pamela Heaven (@pamheaven), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com, or hit reply to send us a note.

Listen to Down to Business for in-depth discussions and insights into the latest in Canadian business, available wherever you get your podcasts. Check out the latest episode below:

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Retail sales fall for 1st time this year as consumers start to tap out – CBC News

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Facing sky-high inflation, consumers put away their wallets more often in July, new data revealed Friday, as retail sales fell for the first time since 2021.

Canadian retailers rang up $61.3 billion in sales in July, Statistics Canada reported Friday. That’s a decline of 2.5 per cent from the previous month’s level as lower sales at gas stations and clothing stores led the way down.

Sales at gas stations fell by 14 per cent. A big part of that was lower prices for the fuel itself, but even in volume terms sales were down by seven per cent. Fewer people were filling up during the month, which was in keeping with the vehicle segment overall as auto sales edged down 0.5 per cent. Both new and used car dealers reported declines.

Consumables like food and drink also weren’t flying off the shelves, as supermarkets and grocery stores saw sales slip by 0.9 per cent, while liquor stores saw a decline of 1.2 per cent.

The soft retail sales numbers suggest consumers are starting to put away their wallets in the face of sky-high prices and a gloomy outlook for the economy.

“This retail sales report was unambiguously weak, suggesting that consumers tightened their purse strings in July,” TD Bank economist Ksenia Bushmeneva said of the numbers. “Consumer demand appears to have broadly cooled across most categories of spending.”

“All in all, given the triple headwinds emanating from higher consumer prices, rapidly rising interest rates and a drop in wealth, consumers are becoming more frugal,” she said.

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Dow drops but narrowly avoids confirming bear market status – Reuters.com

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Sept 23 (Reuters) – The blue-chip Dow Jones Industrial Average (.DJI)tumbled to its lowest level since November 2020 on Friday, but narrowly missed ending more than 20% below its Jan. 4 closing record high.

A Dow close below 29,439.72 would have confirmed a bear market that began from that record, according to a widely used definition. read more The Dow fell 486.27 points, or 1.62%, to end at 29,590.41.

The Dow is the only one of the three main indexes not to have bear market status. The S&P 500 (.SPX) notched that grim milestone in June and the Nasdaq (.IXIC) in March.

The renewed selling pressure in markets came in a week that saw the U.S. Federal Reserve raise interest rates by three-quarters of a percentage point for a third straight time and a vow to keep it going until inflation is under control.

It has been a tumultuous year for Wall Street, plagued by worries about Russia’s invasion of Ukraine, an energy crisis in Europe and the end of easy money policy globally.

The S&P 500 has lost 23% this year and the Nasdaq has shed 31%.

The last time the three indexes pulled back so sharply was in 2020 during the heights of the pandemic selloff.

Heightened fears of a U.S. economic downturn next year and its impact on corporate profits has prompted brokerages to downgrade their year-end targets for the S&P 500. read more

Dow Jones Industrials bear markets

Dow Jones Industrials bear markets

(This story refiles to fix typo in headline)

Reporting by Medha Singh in Bengaluru; additional reporting by Caroline Valetkevitch in New York; Editing by Shounak Dasgupta, Shinjini Ganguli, Maju Samuel and Diane Craft

Our Standards: The Thomson Reuters Trust Principles.

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TSX slumps as oil falls below $80 and economic gloom settles in – CBC News

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Canada’s benchmark stock index dropped heavily on Friday as prospects of a global recession cause investors to sell first and ask questions later.

The S&P/TSX Composite Index was off by more than 520 points or 2.75 per cent to close at 18,480, dragged down by a plunge in the price of oil. That’s the lowest level for the benchmark Canadian stock index since July.

The benchmark price of crude oil in North America lost almost $5 to close at $79.13 a barrel, its lowest price since January. The catalyst for oil’s decline seems to have been central banks signaling this week that they are so committed to reining in inflation that they are willing to create a recession to achieve it.

The U.S. Federal Reserve hiked its benchmark interest rate on Wednesday, and nine other countries around the world followed suit the next day. That will help bring down inflation, but it will likely come at great cost to the economy.

“Clearly what they are saying is they are so determined to bring inflation down that they are going to bring down the economy in the process,” said John Zecher, the founder of Toronto-based money manager J Zechner & Associates. “That’s the way the market is reading it … They aren’t going to stop until the economy turns down.”

Oil price down to lowest since January

A recession would lead to much less demand for energy, which is why oil sold off. About a fifth of the companies on the TSX are in the energy sector, and they were among the biggest losers Friday. Shares in Suncor, Cenovus, MEG Energy and Crescent Point all lost more than eight per cent on the day.

More and more economic indicators are starting to suggest Canada’s economy either already has derailed or is about to. Employment numbers last week showed the economy has lost jobs for three months in a row, and retail sales data on Friday showed that Canadians are putting away their wallets once more.

Stock markets are responding to that gloom, and some analysts think there is a lot more pain to come.

“The lows that we saw recently in the summer months are going to be challenged in the next couple of days to weeks,” said Larry Berman, chief investment officer with Toronto-based money manager QWealth, in an interview.  “The market [isn’t] priced for what the central banks are going to do.”

The Canadian dollar dipped as low as 73.61 cents US, its lowest level in more than two years.

Shares in New York also sold off, with the Dow Jones Industrial Average closing down almost 500 points to 29,590 — its lowest level of the year.

“Over the next couple of weeks, long-term investors may hesitate buying into weakness,” said Edward Moya, an analyst with foreign exchange firm Oanda. “How far we go below the summer lows is anyone’s guess.”

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