Canadian Real Estate Association data show that national-level home sales fell 0.9% (sa m/m) in December 2019 after rising in the previous nine months. Limited availability looks to be increasingly weighing on sales activity. The month saw another broad-based decline in new listings—18 of the 31 centres for which we have data witnessed falls—that lifted the national sales-to-new listings ratio to 66.9%. It was the highest ratio since 2004 and a third straight month of supply- demand conditions tilted in favour of sellers (after data revisions). Fourteen cities reported sellers’ market conditions; the rest were balanced. The aggregate MLS Home Price Index (HPI) rose 3.4% (nsa y/y), its best gain since March 2018.

The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate boards and associations this year and for 2020.

Evidence suggests housing activity will continue to improve into 2020, with prices either continuing to rise or accelerating in many parts of Canada. Indeed, many housing market indicators continue to support this outlook.

The national HPI increase in November is atypical at this time of the year, as it dropped seven times in that month over the last ten years. Furthermore, the two index monthly drops among the 11 metropolitan areas comprised in the national HPI constitute the lowest diffusion of declines in November over the last decade. If we add 14 other metropolitan areas not comprised in the national index, we have seven index drops last month, which is also the lowest diffusion of declines for a month of November over the decade.

The Bank of Canada today maintained its target for the overnight rate at 1 ¾ percent. The Bank Rate is correspondingly 2 percent and the deposit rate is 1 ½ percent.

The Bank’s October projection for global economic growth appears to be intact. There is nascent evidence that the global economy is stabilizing, with growth still expected to edge higher over the next couple of years. Financial markets have been supported by central bank actions and waning recession concerns, while being buffeted by news on the trade front. Indeed, ongoing trade conflicts and related uncertainty are still weighing on global economic activity, and remain the biggest source of risk to the outlook. In this context, commodity prices and the Canadian dollar have remained relatively stable.

Real gross domestic product (GDP) grew 0.3%, following a 0.9% increase in the second quarter. Third quarter growth was led by higher business investment and increased household spending, boosting final domestic demand by 0.8%.

Expressed at an annualized rate, real GDP advanced 1.3% in the third quarter. In comparison, real GDP in the United States grew 1.9%.

Business investment rose 2.6% in the third quarter, the fastest pace since the fourth quarter of 2017. Growth in household spending accelerated to 0.4%, after rising 0.1% in the second quarter. These increases were moderated by a 0.4% decline in exports, while imports were flat.

Following two consecutive months of growth, employment held steady in October. The unemployment rate was unchanged at 5.5%.

On a year-over-year basis, employment grew by 443,000 or 2.4%, driven by gains in full-time work. Over the same period, total hours worked were up 1.3%.

In October, employment increased in British Columbia and Newfoundland and Labrador, and was little changed in the other provinces.

Employment was down for men in the core working ages of 25 to 54, and grew for the population aged 55 and over.

CANADIANS BORROWING HAND OVER FIST

Total Canadian household credit growth continued to accelerate in September, reaching a pace last seen in mid-2018. Despite a slight deceleration from the previous month to 4.3% at a seasonally adjusted annualized rate (m/m saar), trend growth remains at elevated levels. Both mortgage and consumer credit growth contributed to the 68 bps slowdown from the prior month (46 bps and 22 bps, respectively), but borrowing conditions remain favourable overall with trend growth still in strongly positive territory.

The national HPI has grown at a below-inflation rate of 0.6% over the last 12 months. However, the weakness is not regionally broad-based. The national HPI has been depressed by 12 consecutive months without a rise in Vancouver’s index, which dropped a cumulative 6.6%. Other Western metropolitan areas (Victoria, Calgary, Edmonton, and Winnipeg) also contributed to slow the national HPI. At the opposite, annual growth has been decent in most of the regions located in the central and eastern part of the country. That being said, home sales in August were up 55% from March in Vancouver, where market conditions went from “favorable to buyers” to “balanced”. Over that period, home sales rose 19% in Calgary and 12% in Edmonton. These improvements, if sustained, will sooner or later help limit home-price deflation in this region.

The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate boards and associations – for the rest of 2019 and looking ahead to 2020.

Economic fundamentals underpinning housing activity remain strong outside of the Prairies and Newfoundland and Labrador. Population and employment growth have both remained supportive and the unemployment rate remains low. At the same time, expectations have become widespread that the Bank of Canada is unlikely to raise interest rates over the rest of the year and into next.