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Cheerleading Vancouver real estate

Cheerleading the Market

Steve Saretsky -

Why Most Sane People Are Hoping for a Return to Normal

The Vancouver market has been on a torrid pace. With prices surging 39% since February 2015 and condo prices still climbing the risk of a significant downturn remains. The nearly 20% annual return on investment makes Warren Buffett look like an amateur. So much so that other Realtors I have spoken with seem to be hoping for a return to a more neutral market.

The sentiment is also growing in Toronto where they have entered a bubble of their own. Michelle Makos, broker at Royal Heritage Realty recently penned a post on LinkedIn titled ‘Why am I not celebrating?

Despite Makos recently selling a Toronto townhouse for $132,000 over asking price she found it awfully tough to celebrate, in fact she was left shaking her head after receiving 14 offers.

“What happens when all these expensive homes have mortgage renewals in a few years and the interest rates are higher, can they afford the payments? Will the values have decreased and now the homes aren’t worth what they have invested in them? This is just a dangerous ride we are on right now.”

No kidding Michelle. Any wonder the Bank for International Settlements says Canada is showing early warning signs of a financial crisis.

The report says debt service ratios are at manageable levels for most countries provided there are no changes to interest rates. However, Canada is flagged alongside China and Turkey as countries that face “potential risks” under more stressed conditions that assume a 250 basis point increase in rates.

It looks like those rate hikes could be coming. The US federal reserve is now pegged at having an 80% chance of a rate hike next week.

“The Fed is racing to get to 1.5 percent for the interest rate so that they can get above the next recession and get out in front,” says former US Treasury staffer Aaron Klein.

Meanwhile Jeffrey Gundlach, chief executive officer at DoubleLine Capital, said on Tuesday he expects the Federal Reserve to begin a campaign this month of “old school” sequential interest rate hikes until “something breaks,” such as a U.S. recession.

This could very well tie the hands of Stephen Poloz at the Bank of Canada. One things for sure, whether Poloz follows suit or not, Canadians will likely inherit higher fixed term mortgage rates as bond yields shoot higher.

 

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The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

Steve Saretsky -

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

Steve Saretsky -

The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession...

Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

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The Saretsky Report. December 2022