DATE

Steve Saretsky -

Following a recent announcement from the Bank of Canada to hold interest rates firm at 1.25%, the latest round of economic data for Q1 2018 was published. A rather disappointing day for the Canadian economy with GDP growth trickling in at an annualized pace of 1.3%, well below the expected 1.8% GDP growth estimate. This really shouldn’t come as a surprise. As Real Estate goes, so too does the economy. National home sales slid 16% in the first quarter of 2018 with the average sales price also declining by 6.27% from Q1 2017. It was the first negative percentage decline since Q1 2009. The slowdown is starting to spread across the real estate industry where a sluggish real estate market and higher interest rates spurred Housing investment to fall by an annualized 1.9%, the worst showing since the first three months of 2009. Much of the pullback was felt from a drop in ownership transfer costs, down 13.5%. But it’s not just Real Estate brokers who have felt the pinch. Households facing higher interest payments are showing some fatigue. Household spending increased 0.3 per cent, the slowest pace since the first quarter of 2015. Spending on goods such as automobiles

Steve Saretsky -

Housing affordability across Canada continues to erode, at least according to the National Bank of Canada and their latest affordability study released earlier this week. Per the National Bank of Canada, the rise of borrowing costs did not prevent a further sharp rise of prices in Vancouver, inching up 2.7% quarter over quarter (seasonally adjusted), leaving this market less affordable than at any time since 1980. The bank echoes recent findings that the mortgage stress test is starting to bite. With borrowing power being slashed by roughly 20%, the maximum loan amount is down to where it was in 2011 even though interest rates are now 60 bps lower and incomes 17% higher than they were then. Also concluding that about 10% of recent mortgage applicants for uninsured loans would have been disqualified under the new rules. While this may be discouraging for many Vancouver homebuyers, the old saying “the cure to high home prices is higher home prices” appears to be playing out. The reality is with housing affordability stretched to its limits it has drastically reduced the buyer pool. Many applicants, who either no longer qualify, or simply can’t purchase the home they want at current inflated housing prices,

Steve Saretsky -

Following a nationwide slowdown in the Canadian Real Estate sector, home sale activity declined 11.3% year over year in April, it appears Canadian banks could soon feel the pinch. One of Canada’s more aggressive mortgage lenders, CIBC, announced it expects new mortgage originations to fall roughly 50% in the back half of this year. CIBC’s Canadian retail banking head Christina Kramer said new policies such as the mortgage stress test are having an impact on sales of mortgages. “We expect there to be an origination decline in the 50 per cent range relative to the same period last year, A year ago, two-thirds of our revenue would be related to our mortgage business and today that’s about a quarter.” While CIBC still expects their overall mortgage portfolio to grow in the low single digits during the second half, compared with 7 per cent in the latest quarter and 9 per cent in the previous quarter this slowdown in mortgage growth has much wider implications on CIBC and the Real Estate market moving forward. CIBC has been chips all in on Canadian Real Estate. As of Q3 2017 their uninsured lending growth reached 12% growth year over year, That’s nearly triple

Steve Saretsky -

As reported in the Globe and Mail earlier today, China and Canada will begin exchanging tax and financial information for the first time this September. The collaboration will provide Canadian authorities a clearer picture into the activities of some foreign-property owners who evade Canadian taxes in real estate markets such as Vancouver. The exchange of tax information is part of a move by more than 100 jurisdictions in the world that have committed to implementing the Common Reporting Standard, a global agreement for the automatic exchange of tax and financial-account information. The agreements are aimed at combatting tax avoidance and evasion. Under the agreement, all participating countries will require financial institutions to identify financial accounts held by customers who are non-residents for tax purposes and to report these accounts to the customers’ home tax authorities on an annual basis. Canada already has an agreement in place with 61 other countries, however China will be joining the party later this fall. The treaty will also give Chinese authorities the ability to track down economic fugitives in Canada. The moves provoke more concerns about the direction of Vancouver’s property market which has come under heavy regulation following runaway house prices and claims

Steve Saretsky -

Following a rather dismal April which saw national home sales decline 13.9% year-over-year and the average sales price sink 11.3%, the Canadian real estate Association noted that much of the slowdown came in the province of British Columbia, in particular the Fraser Valley and Greater Vancouver. Across the province of BC, home to Canada’s hottest real estate market, which has seen home prices nearly double since encountering a small dip in 2008, there appears to be a rather noteworthy slowdown. Buyers have stepped to the sidelines following a barrage of housing policies aimed at cooling demand. Perhaps none more impactful than the mortgage stress test coupled with quickly rising borrowing costs. Amidst rising interest rates and inflation concerns, the bond market has sent prices tumbling and yields spiking, particularly in recent days. The Canada 5 year bond yield has jumped from .09 in May 2017 to 2.337 as of today. In lockstep, the five year fixed mortgage rate has seen it’s costs jump, with a typical mortgage now hovering around 3.5%, up from roughly 2.5% a year ago. It should come as no surprise that home sales across BC fell to a five-year low in April, dropping 17% year-over-year. Despite

Steve Saretsky -

The Canadian Real Estate association, CREA, released their latest figures for the month of April. Home buying activity across the nation continued to slump for the month of April, registering a 13.9% decline year over year. The slump in sales marked a six year low for April, with home sales sinking 6.9% below the ten year average. CREA noted about 60% of all local housing markets reported fewer sales, led by the Fraser Valley, Calgary, Ottawa and Montreal. Snubbing the media darling city of Vancouver which already reported a 20% decline in home sales. Prices have begun to follow sales, with the average sales price declining 11.3% year over year and the The Aggregate Composite MLS® Home Price Index (MLS® HPI) registering a 1.5% increase in April 2018. This marks one full year of decelerating year over year gains and the smallest year over year increase since October 2009. The resulting plunge in home sales and prices seems to be exacerbated by the ensuing mortgage stress test which has extinguished 20% of purchasing power already and isn’t stopping there. Following recent mortgage rate increases, the Bank of Canada hiked the mortgages stress test qualifying rate last week to 5.34%, a twenty

Steve Saretsky -

According to MLA Canada, a pre sale marketing firm in Vancouver, the Vancouver pre sale condo market has begun to cool. In April, just 43% of pre-sale condos offered in Metro Vancouver sold, compared to 94% in January, 83% in February and 63% in March, per Cameron McNeill, a partner at MLA Canada. Also adding, “as predicted new multi-family developments are slowing towards more normal sales rates as April saw just over 40 per cent of its inventory absorbed.” The slowing absorption rate of pre sale condos comes at a rather interesting time. In April, resale condos in the city of Vancouver fell to a five year low, dropping 18% year over year. Despite condo sales slowing considerably in both the pre sale and the re sale market, a record number of new construction is set to roll out. The month of May is anticipated to be the busiest month of 2018 to date, with over 2,300 pre sale units expected to come to market, including seven new high-rise towers. It’s expected about 85% of total units for sale will be condos. The construction boom across Greater Vancouver is firing on all cylinders. Housing starts, housing under construction, and housing completions are

Steve Saretsky -

With Scotiabank increasing their posted fix rates today, following their counterparts at BMO, CIBC, RBC, and TD Bank, the new mortgage qualifying rate also known as the mortgage stress test benchmark, is set to move higher by tomorrow, assuming the Bank of Canada follows through. The new qualifying rate for all mortgage borrowers should move from 5.14% to 5.34%. In other words, borrowers will have to qualify for a mortgage at a minimum of 5.34% regardless of your actual mortgage rate. This is expected to chip away an additional 1.5% of borrowing power, in addition to the 20% reduction of purchasing power the stress test has already evaporated. The continued tightening of mortgage credit comes at a rather intriguing time. Just last week Bank of Canada Governor Stephen Poloz warned about higher rates jumping too quickly on over indebted households. Canadian households owed just over $2 trillion in debt, with mortgages making up nearly three-quarters of this debt. “Canadians, regardless of their age group, are increasingly relying on mortgages. Among people under 35 years old, the percentage of homeowners with a mortgage has edged higher from about 85 per cent in 1999 to 90 per cent in 2016. For people

Steve Saretsky -

With the Vancouver detached market cratering, home sales fell 31% in April to their lowest total since the Real Estate Board of Greater Vancouver began collecting data, all eyes are focused on the condo market. The resilient condo segment has been propelling the entire Vancouver Real Estate market forward. However, with affordability quickly eroding, and borrowing costs inching increasingly higher the condo segment may finally be beginning to crack. Sales in the city of Vancouver dropped 18% year over year for the month of April, a five year low. Meanwhile, price growth has been decelerating. The average and median sales price grew 12% year over year for the month of April. While this is still impressive growth it pales in comparison to the 30% annual growth homeowners have become accustomed to. Further, price growth appears to have stalled over the past four months. The average price per square foot now sits at $1098 in the city of Vancouver. The sales to actives ratio still sits at a relatively high 41%, suggesting there is still some upwards pressure on prices moving forward. Although, it is down 25% from the same period one year ago. New listings also climbed a whopping 34% year

Steve Saretsky -

The Vancouver detached housing market appears to have skipped the historically busy spring market. Following a miserable first quarter, with just 352 sales from January 1st to March 31st, eroding the previous low set in the first quarter of 2009, home sellers held their breath for a spring turnaround. However, those hopes were dashed, with April home sales ticking in at their lowest levels in recent history dating all the way back to 1990. There were just 173 detached home sales in the city of Vancouver this April. This marked a 31% decline year over year. The fewest home sales for the month of April per the Real Estate Board of Greater Vancouver MLS data. While home sellers have been reluctant to slash prices it appears those who need to get out are having to take a haircut. The average sales price of a detached home sunk 5% year over year in April, dropping to $2,397,464. There appears to be a rather obvious downwards trend after prices re tested previous highs back in 2017. The combination of a mortgage stress test and higher interest rates appear to be choking off would be buyers from the expensive detached housing segment. Three

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The Canadian Economy

Steve Saretsky -

Following a recent announcement from the Bank of Canada to hold interest rates firm at 1.25%, the latest round of economic data for Q1 2018 was published. A rather disappointing day for the Canadian economy with GDP growth trickling in at an annualized pace of 1.3%, well below the expected...

Steve Saretsky -

Housing affordability across Canada continues to erode, at least according to the National Bank of Canada and their latest affordability study released earlier this week. Per the National Bank of Canada, the rise of borrowing costs did not prevent a further sharp rise of prices in Vancouver, inching up 2.7%...

Steve Saretsky -

Following a nationwide slowdown in the Canadian Real Estate sector, home sale activity declined 11.3% year over year in April, it appears Canadian banks could soon feel the pinch. One of Canada’s more aggressive mortgage lenders, CIBC, announced it expects new mortgage originations to fall roughly 50% in the back...

Steve Saretsky -

As reported in the Globe and Mail earlier today, China and Canada will begin exchanging tax and financial information for the first time this September. The collaboration will provide Canadian authorities a clearer picture into the activities of some foreign-property owners who evade Canadian taxes in real estate markets such...

Steve Saretsky -

Following a rather dismal April which saw national home sales decline 13.9% year-over-year and the average sales price sink 11.3%, the Canadian real estate Association noted that much of the slowdown came in the province of British Columbia, in particular the Fraser Valley and Greater Vancouver. Across the province of...

Steve Saretsky -

The Canadian Real Estate association, CREA, released their latest figures for the month of April. Home buying activity across the nation continued to slump for the month of April, registering a 13.9% decline year over year. The slump in sales marked a six year low for April, with home sales...

Steve Saretsky -

According to MLA Canada, a pre sale marketing firm in Vancouver, the Vancouver pre sale condo market has begun to cool. In April, just 43% of pre-sale condos offered in Metro Vancouver sold, compared to 94% in January, 83% in February and 63% in March, per Cameron McNeill, a partner at MLA...

Steve Saretsky -

With Scotiabank increasing their posted fix rates today, following their counterparts at BMO, CIBC, RBC, and TD Bank, the new mortgage qualifying rate also known as the mortgage stress test benchmark, is set to move higher by tomorrow, assuming the Bank of Canada follows through. The new qualifying rate for...

Steve Saretsky -

With the Vancouver detached market cratering, home sales fell 31% in April to their lowest total since the Real Estate Board of Greater Vancouver began collecting data, all eyes are focused on the condo market. The resilient condo segment has been propelling the entire Vancouver Real Estate market forward. However,...

Steve Saretsky -

The Vancouver detached housing market appears to have skipped the historically busy spring market. Following a miserable first quarter, with just 352 sales from January 1st to March 31st, eroding the previous low set in the first quarter of 2009, home sellers held their breath for a spring turnaround. However,...

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The Saretsky Report. December 2022