【Canada Living Network lahuo.ca, San San Summary】The Canadian real estate market is now completely calm! Even some warning signals have emerged.

New data from the Canadian Real Estate Association (CREA) shows that the sales-to-new-listings ratio (SNLR) nationwide dropped sharply to 49.3% in June, setting a record low for the same period since 1995. More worrying is that the speed of decline from peak to trough of this key indicator is surprisingly similar to the real estate crash in the late 1980s and early 1990s.

(Image Source: Better Dwelling)

The sales-to-new-listings ratio (SNLR) is a simple but effective indicator used in the industry to measure demand balance. It is a leading indicator of market conditions and price pressure.

The SNLR can be considered as a barometer of the real estate market:

>60%: Seller's market, house prices are expected to rise

40%-60%: Balanced market, house prices fluctuate slightly

<40%: Buyer's market, house prices face pressure

The June data fell below the 50% threshold, meaning that the Canadian real estate market showed weakness for the first time in 29 years during the summer peak season. The number of new listings increased by 8%, far exceeding the 3.5% increase in sales, and the supply-demand balance is tilting at a rate of 32% imbalance - the most intense fluctuation since the real estate market crash cycle from 1988-1990 (a drop of 41%).

Certainly, that real estate market drop directly led to the largest real estate price correction in Canadian history. That period was Canada's last national real estate market downturn and bubble correction.

Do you think this rapid imbalance is a precursor to the next housing price bubble burst in Canada?

Bank of Canada's upcoming actions: interest rate cuts are difficult!

Despite the lifeless real estate market, the Bank of Canada's latest survey data also shows that businesses and consumers need more fiscal relief in the trade war, but many economists still doubt whether the central bank will cut interest rates on July 30th.

(Image Source: Global News)

According to the Bank of Canada's latest business outlook survey released on July 21st, most business owners have become less pessimistic about potential economic recessions compared to earlier this year, but they still feel "dismal."

In the summary of the survey results, the Bank of Canada stated: "Business confidence, although still dismal, has improved from the sharp decline in March and April of this year."

The Bank of Canada noted in the survey results: "A higher than usual proportion of consumers said it is particularly difficult to predict the future. Households deal with uncertainty by reducing spending, postponing major purchases, and increasing savings."

Not only consumers are struggling, but businesses are too.

Due to Trump's tariffs, to avoid increasing consumer prices, most companies are "absorbing" these costs - even if it means reducing profits.

Now, consumers are very sensitive to price increases, and businesses, in order to retain market share, can only try not to raise prices. This method of maintaining the customer base by not raising prices or making minor adjustments may be effective in the short term, but it may not last long.

Doug Porter, chief economist at Montreal Bank, said: "The reality is that companies cannot cut profit margins for a long time, which means they will either raise prices or find other ways to improve efficiency."

For example, laying off staff.

On the issue of layoffs, most companies say it is a "last resort." If possible, they don't want to lay off workers. After the recent layoff wave in Canada in spring, job opportunities have gradually increased.

What does this mean for the central bank?

Before discussing this issue, let's look at the responsibilities of the Bank of Canada. Simply put, it is to maintain an annual inflation rate between 1% and 3% through economic measures such as adjusting interest rates.

The Bank of Canada makes these decisions in an environment full of uncertainty, and many businesses and consumers have felt the pain of interest rates, even though the rates are at historically normal levels, but higher than the levels people have been accustomed to in recent years.

For example, lower interest rates reduce monthly payments for variable-rate loans such as mortgages. At the same time, lower interest rates also stimulate consumers to increase spending.

If borrowing costs are too low, the chain reaction could lead to uncontrolled price increases for goods and services such as food and housing.

On the other hand, if interest rates are too high, economic growth slows down, even leading to a recession, because most consumers and businesses may find it difficult to borrow money, causing them to generally tighten their belts.

The latest inflation report shows that prices rose by 1.9% in June, within the central bank's target range.

Another factor that the Bank of Canada considers is the latest employment report from last month, because a strong labor market usually means Canadians have more ability to afford monthly expenses, including loan interest.

Porter said, "(June) strong employment growth and declining unemployment rates have eased the pressure on the Bank of Canada to cut interest rates."

Therefore, according to most economists' predictions, the Bank of Canada may not make any interest rate adjustments on July 30th.

Porter said that the central bank may still cut interest rates later this year, but it largely depends on "whether we can reach some kind of trade agreement with the United States, even just a framework - as long as it provides some clarity."

Sources: Global News, Better Dwelling

Original article: https://www.toutiao.com/article/7530378393615876649/

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