Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canadian Housing Affordability Improves, Still Near 90s Peak: RBC
RBC data shows housing affordability has improved for a seventh straight quarter. The bank estimates a median household needs to spend 53.2% of its disposable income on ownership costs in Q3. If that doesn’t sound very affordable, that’s because it isn’t. Affordability is roughly equal to the 1990s bubble peak, the worst level previously recorded. After nearly two years of improvements, affordability remains close to the worst ever—emphasizing just how out of control valuations became.
Canadian GDP Reverses Months of Gains, Broadest Erosion Since Pandemic
Canada’s gross domestic product (GDP) just made a strong pullback. GDP fell 0.3% in October, returning to July levels and only 0.4% higher than last year. A Big Six bank economist warns that the breadth of declines is the most concerning issue. October saw 11 out of 20 industrial sectors decline, and nearly half haven’t grown in the past year. Diffusion is now the weakest since the pandemic, warn National Bank’s economists.
Low growth and weak diffusion are a much bigger issue than most realize. The country is seeing a K-shaped restructuring: uneven growth amplifying inequality. Winners in this economy include non-productive industries like finance and real estate. At the same time, key productive industries like manufacturing and construction have become losers. Concentration doesn’t just mean widening inequality—it means amplifying economic vulnerability.
Canadian Mortgage Debt Surges To $2.4 Trillion, Fastest Pace Since 2021
Canadian households are back to racking up mortgage debt at a brisk pace. Mortgage debt climbed 0.47% (+$11.1 billion) to $2.39 trillion in October, up 4.8% (+$109.2 billion) from last year. It marks the highest growth for the month since 2021, and was nearly double the rate seen post-rate hikes in 2022. This is usually a strong sign for the economy, but this time may be different. The increase isn’t due to new demand, but old demand for pre-construction homes. In short, this means upward pressure on borrowing costs and a headwind for the market this spring.
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