From CBC news:

The governor of the Bank of Canada, Mark Carney, said Wednesday his inclination toward raising interest rates is “less imminent,” given risks to economic growth from tepid global demand and high household debt in Canada.

“The case for adjustment of interest rates has become less imminent,” Carney said at a news conference, but adding that “over time, rates are more likely to go up than not.”

Carney spoke after the release by the Bank of its most recent monetary policy report, which predicted relatively robust growth for Canada next year mostly as a result of increased exports as the global economy begins to mend.

The bank said Canada's real gross domestic product only grew by about one per cent in the July-September period, in part due to temporary factors and headwinds from weak global conditions.

That's half what it had expected in July and the weakest quarter of growth since the spring of 2011.

The main cause, it said, was temporary production shutdowns in the oilpatch during the summer.

"The bank expects growth in the Canadian economy to pick up in the coming quarters to a somewhat faster pace than that of its production potential," it said.

"The pick-up in growth from its trough in the third quarter of this year is expected to be driven primarily by a modest increase in net exports. This balances ongoing competitiveness challenges (high dollar) with the projected improvement in the growth of foreign activity."

But the bank has forecast the last three months of 2012 will see a rebound to 2.5 per cent growth and GDP advances of 2.6 per cent in each of the next three quarters.

Bank sees 2.3% growth in 2013

On an annual basis, the bank says growth will average 2.2 per cent this year, 2.3 in 2013 and 2.4 in 2014.

However, the economy is still operating below capacity and won't be firing on all cylinders until the end of next year, it said.

CIBC economist Avery Shenfeld says the latest forecast suggests the bank will postpone any interest rate hike until early 2014.

Shenfeld bases that on his view that, although the Bank is prepared to hike in late 2013 if inflation moves higher, that economic growth will fall short of the bank’s prediction for 2013 and that the increase in household debt will slow down on its own.

The bank hardened its warning about household debt, explicitly saying it would consider the vulnerability of family finances in future decisions about interest rate levels, which it concedes have driven the housing market boom of the past few years.

On Wednesday, the bank noted that household debt, now calculated at more than 160 per cent of annual income, will likely continue to rise until levelling off in 2014.

"There are conflicting signals or mixed signals" about the financial health of Canadian households, Carney said.

Carney told reporters he hopes the central bank has made it clear in its various communications that if monetary policy has a role to address these issues, it will be "the last line of defence after taking in all other aspects and all other measures that could be taken into account."

Globally, the bank says risks have moderated somewhat because of aggressive action taken by the European Central Bank to provide breathing room for reforms to be implemented, and the announcement of a third-round of quantitative easing from the U.S. Federal Reserve.

Housing crash not expected

The bank said the latter move will likely boost growth by 1.3 percentage points in the U.S. in 2014. A stronger U.S. economy also lifts the Canadian boat, the bank said, by about 0.4 percentage points in the same year.

Although the bank expects exports to pick up gradually, the main drivers of the Canadian economy remain consumer consumption and business investment. The public sector has practically abandoned the field in terms of a growth generator as governments move to restraint, it said, resulting in a modest drag this year and equally modest stimulus next.

The bank also expects housing activity to continue to slow, but does not anticipate a crash, noting that despite "signs of overbuilding, the level of housing investment still remains near historical highs." That's especially true in the condo market, it said.

The bank still sees considerable risks to its base case scenario of a gradual improvement in the economy, particularly failure among policy-makers in Europe to control their debt crisis and in the U.S. to avoid a fiscal cliff at the end of this year that could sap four percentage points from growth.

The report followed the Bank's decision yesterday to keep its trendsetting policy interest rate, as expected, at one per cent for the 17th consecutive time.

Economists had been looking for signs the bank might soften its warning about hiking interest rates in the future but it kept the previous language largely intact.

http://www.cbc.ca/news/business/story/2012/10/24/bank-canada-monetary-policy-report.html

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The number of houses and condos being sold is definitely a casualty of this soft market.  However, at this point at least, the softening of home prices seems to have stopped.  Yes, we do see the median price drop in this report.  But, it had actually risen for the last three weeks.

I believe that we are seeing a bit of a stand-off right now.  Buyers want to see prices come down, while most sellers have decided that if they can’t sell at a price that is comfortable to them, they simply won’t sell.  Of course, those that must sell, must sell and there can be some good deals out there. 

Over the last 30 days, 168 single family houses were sold, down by 31 houses from last week.  The median price is down $13,500 to $524,500. The average house was on the market for 46 days. 

In the last 30 days, 104 condos were sold, down by 7 condos from last week.  The median price is unchanged at $255,000. The average condo was on the market for 60 days.

There are now 2,305 houses for sale, up by 6 from last week.  Condo inventory has risen by 6 to 1079 suites.