Canadian home sales fall again while housing starts pick up before a live rate decision

Canadian home sales fell in September as mortgage rates increased, Reuters reported, citing the Canadian Real Estate Association, whose account attributed the weaker activity to a Bank of Canada rate rise¹. Canadian housing starts rose in September though the pace remains soft, as the broader market shows signs of cooling into the end of the year, the Wall Street Journal reported³. An economist quoted in that report said the weakening was not surprising given the latest increase in fixed mortgage rates and the prospect of the Bank of Canada raising interest rates further².

The central bank will get a raft of fresh data at the start of next week as it weighs what could be a pivotal interest rate decision at the end of the month, the Canadian Press reported in an article describing the decision as live^5,6. Reuters reported that Toronto stock futures edged higher, with gains in metals offsetting oil weakness, while investors weighed Governor Tiff Macklem’s warning on persistent energy-price pressures and their implications for rates⁴.

Why it matters to investors

Canada is where the tightening cycle is visible in transaction data rather than in surveys. Sales are falling because mortgage rates have risen, which the real estate association said directly¹, and the housing-starts pickup sits against a market the Journal describes as cooling³.

The two data series are pointing in opposite directions, and that is the useful part. Starts measure decisions taken earlier; sales measure demand now^1,3. The economist in the Journal’s account ties the weakness to fixed mortgage rates and to the expectation of further rises, which makes the housing slowdown a function of policy rather than of supply². The Journal also notes a longer-term supply gap that the current pace of starts does not close³.

What to watch

Next week’s data releases and the end-of-month decision are the events, and the Canadian Press describes that decision as genuinely live^5,6. Macklem’s warning on persistent energy-price pressures is the argument for moving again⁴.

At the IMF and World Bank meetings, Macklem compared the employment effects of artificial intelligence to those of more open trade, according to NY1’s report of the discussion⁷. That is a signal about how the governor is thinking about the supply side, which matters for how he reads inflation that is coming from energy costs^4,7.