The speed of Canada\u0027s housing market correction surprised forecasters. Now its recovery is too. what does this mean to the Bank of Canada?
The spring surge has Capital Economics rethinking its forecast.
“With sales now taking off, there are clear upside risks to our forecast that house prices will be little changed over the rest of this year,” wrote deputy chief North America economist Stephen Brown in a note. One reason the housing market is bouncing back faster than expected is that borrowers are coping with higher interest rates, Brown said. Mortgage delinquency rates declined last year even as borrowing costs rose, according to data from the Bank of Canada. and wages continue to rise, up 5.2 per cent in April from the year before., the recent decline in job vacancies and evidence that labour shortages are easing suggest its pace will slow, said Capital.
But even if it does cool over coming months, the Bank of Canada won’t be inclined to cut rates when housing prices are soaring higher. “Housing, rather than the labour market, is currently the key risk to our forecast and the market-implied view that the Bank will cut interest rates by the end of the year,” said Brown.Article content
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