This week we tackle the new inflation print from our friends down south (US) and we take a macro look at the Real Estate Market across the country. As inflationary pressures begin to ease, we ask the question - Are we starting to see signs of relief or is this a bear trap that will lead to further downward pressures?

The US Federal Reserve and Jerome Powell have been quoted as saying that they will not change the course of the current tightening of monetary policy until there’s compelling evidence that we are headed back to their target policy rate of 2-3%. While a massive rate hike may be off the table come September, we still think there will be a sizeable interest rate hike - perhaps multiple - as we head towards the end of the year. 

We also cover the current state of the Real Estate Market in majors centres like Toronto which has seen an HPI (Housing Price Index) drop of 13%. A huge swing considering it’s a lagging price indicator. What’s worse, we are hearing stories of some markets in Ontario seeing price corrections as high as 48%! While inventory still remains tight in Vancouver, up just 5% - Toronto has a seen a whopping 58% increase in inventory. 

A recession is still very much a possibility with some asking the question if it’s already here. Another major concern we discuss is that the Yield Curve on the Canadian 10 year Government Bond has fallen 50 basis points which now puts it below the 2 year yield. Analysts typically refer to an inverted yield curve as a strong indicator of a coming recession. With the BoC still targeting a policy interest rate of 3.5% (currently sitting at 2.5%) it’s possible we’ll see a recession before the end of inflation. 

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Dan Wurtele, PREC, REIA

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Ryan Dash PREC

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www.thevancouverlife.com