July 18, 2022 9 am eastern time

Posting today and for the next month from Nova Scotia and the Atlantic provinces and time zone.

Markets are set to open higher this morning.

CMHC released the June  housing starts data this morning and they remain strong. Single family starts in Alberta are up 26% versus June  last year. Calgary was flat but Edmonton was up a whopping 58% in single Family starts. But monthly data can be volatile.  Year to date, Calgary is up 12% and Edmonton 13%. That’s positive but not fantastic given the price of oil. Total housing starts of all types are up 20% year to date in Alberta. All of this data is positive for Melcor Developments and most businesses in Alberta including also the Melcor REIT and Canadian Western Bank. It remains to be seen if higher interest rates will put the brakes on housing starts. Clearly higher rates are a negative factor but population growth and a strong economy (particularly in Alberta) are positive factors.

Home prices in Toronto and Vancouver and many areas have of course already declined with higher interest rates. 

Housing starts in Canada are trending at 258,000 per year. On a per capita basis, Canada has been building far more houses than the U.S. and this has been the case since at least 2008. It may be due to higher immigration rates in Canada especially most recently.  U.S housing starts are about 1.7 million per year. They would need to be far higher at about 2.6 million per year to equal Canada on a per capita basis. I have never seen this explained or even discussed in the financial press. 

Meanwhile it is interesting how the big banks in Canada increase their prime rates by exactly the same 1.00%  in complete and total lockstep with the Bank of Canada. I know the Bank of Canada has a huge impact on their costs but is it really such a complete lockstep or do the big banks use it as an opportunity to quietly avoid competing by having different prime rates?  I am not a conspiracist at all. All big industry players like to avoid price competition if they can. Well functioning competitive markets drive companies to compete on price.  The big banks do compete on new mortgages but they seem not to in their headline prime rates which affect a lot of business. There is probably far less competition when it comes to renewing mortgages since customers are less likely to shop around on renewals.

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