DATE

Vancouver housing construction
Steve Saretsky -

With home sales trickling in at an eighteen year low, and house flipping declining to a six year low, the Vancouver real estate market is becoming less liquid. In particular, and by design, the pre-sale market is exposed, and should be bracing for an uncomfortable landing. The pre-sale market in Vancouver is essentially selling futures contracts, although not marketed as such, they are defined as a legal agreement to buy or sell something at a predetermined price at a specified time in the future. While this has worked beautifully in recent years, it creates a recipe of problems in a declining market. Speculators who were once hopping to flip the contract prior to completion are running short on buyers, as evidenced by condo sales falling to a six year low. This creates a few problems for pre-sale purchasers who have a legal obligation to close upon completion of the building. Completions, which are already at record highs, are expected to ramp up even further in the years ahead with both housing starts, and units under construction at record highs. In a market of declining values, which makes pre-sale contracts harder to flip, it also creates issues for the buyers who have to

Steve Saretsky -

With this Vancouver real estate cycle coming to an end, and home sales across Greater Vancouver sliding to an 18 Year low in July, liquidity is evaporating rather quickly. This spells trouble for housing speculators, or housing flippers, which up until recently, have made out like bandits. When times are good and credit is easily available a rising market lifts all boats. Increased volume and quick turnover creates a welcoming environment for house flipping, which is generally dependent on a liquid market in order to extract profits and pay off any short term loans. However, when the credit tides rollout, only then can you see who’s been swimming naked. With sales falling and total loans across Vancouver dropping 18% in 2017, market liquidity is drying up. As a result, house flipping activity (which is considered a house bough and re-sold within 24 months) has dropped, falling to its lowest monthly total since January 2015. It was the fewest house flips for the month of July since 2012. Detached house flippers were hit particularly hard. After peaking in March 2016, when flips accounted for 11% of total sales, they have since plummeted to just 2% of all sales in July 2017.

Steve Saretsky -

While it may sound hard to believe, it appears the Canadian credit binge is slowly winding down. Canada’s household debt which currently sits at the highest among the 35 developed and developing countries the OECD group monitors, has reached an unfathomable 101% of GDP. It’s safe to assume any type of fall from the current sky-high levels won’t feel good. However, with the Bank of Canada raising interest rates, effectively tripling rates in less than a year, and regulators curtailing mortgage lending, we appear well on our way to a nasty stumble. Per the Bank of Canada, year-over year growth and the 3 month annualized pace of mortgage credit growth is at its weakest pace of growth since early 2001. Recent mortgage data from CMHC also confirms mortgage credit and or the desire to borrow is in the dumps. Hence the sluggish and quickly evaporating liquidity in Canada’s housing market. In 2017, there were 959,074 new mortgage loans, a 6.5% decline across the nation. The slowdown was exacerbated in Vancouver where new loans collapsed by 18%. In Toronto new loans declined by 9.2%. Across Canada, the number of refinances, mortgage renewals with a new lender, repeat buyers, and new owners all declined.

Steve Saretsky -

It was a slightly more rosy picture for the Canadian real estate market in the month of July. Despite a tumultuous month for the province of BC,  which witnessed home sales fall 24%, a slight rebound in Ontario, Canada’s largest housing market helped support the nations housing statistics. Home sales across the nation dipped just 1% year-over-year in July. While this could be considered encouraging news following double-digit sales declines in the early part of 2018, it was still the fewest July home sales since 2012. Meanwhile year to date (January through July) home sales remain at their lowest total since 2009. While the average sales price increased by 1% year-over-year it doesn’t paint the whole picture. A large run-up in Ontario, which saw the average sales price increase by nearly 9%, is a nice bounce back following a flash crash in the last three quarters of 2017. Price movements were spread out across the nation. With mortgage credit growth still churning out it’s weakest pace of growth since 2001, and another rate hike from the Bank of Canada cemented for this fall, it’s safe to suggest any upbeat sentiment would be pre-mature. It seems CREA’s chief economist agrees, stating

Steve Saretsky -

It’s been a tough year for BC real estate,  and that trend continued in July.  while the decline this month was  slightly less dramatic than the month of June, where home sales declined 33%,  there’s no  signals suggesting the housing market across BC is strengthening. while the BC Real Estate Association noted that “summer home sales slowed to a simmer” the numbers suggest it may be more of a cold bath.  Home sales across BC declined 24% year-over-year in July. The 7060 home sales for the month was the lowest total since July 2012 which was considered a weaker year for housing.  While Greater Vancouver made up the bulk of the declines, slipping to 29% to an 18 year low for the month,  the slowdown was widespread.  Home sales in the Okanagan Mainline (Kelowna area)  fell 23%,  Victoria slipped 19% decline, while the Fraser Valley plunged 34% year-over-year. Dollar volumes, which the government relies on for property transfer tax revenues, also took a hit in July.  Volumes slipped 24% year-over-year to 4.9 billion,  the lowest total for the month since July 2014. Overall the average sales price across the province remained virtually untouched, slipping just 0.4%.  However, it’s safe to

Steve Saretsky -

After Years of plunging interest rates, Canadian households now face the unthinkable, higher borrowing costs. Recent data from the Bank of Canada, and compiled by Better Dwelling, shows the effective weekly borrowing rate at a seven-year high. The effective borrowing rate is the interest rate which the typical household would get if they went to the bank for a loan. The weekly effective borrowing rate reached 3.77% at the end of July, a jump of 18.55% from last year. This was the highest level Canadians have experienced since May 2011. As borrowing costs ratchet higher, and lending standards become more stringent,  mortgage growth continue slow. Recent mortgage data shows the him slowest pace of growth since 2001. Unsurprisingly this has weighed on national home sales, which through the first six months of 2018 have declined by 14.6% year-over-year. The slow down is particularly acute in Vancouver where home sales for the month of July slowed to an 18 year low, virtually in line with the pace of mortgage growth. While CMHC has recently announced it will create more favourable lending conditions for self-employed individuals, it is ironically reviewing ways to curb mortgage fraud which is arguably more prevalent from self employed

Steve Saretsky -

There is plenty of research to support the enormous wealth effect of rising home prices. As household wealth increases, at least on paper, consumers tend to spend more and access to credit simultaneously becomes more abundant. In the United States, for example, from 2002-2006 low credit-score homeowners borrowed an average of $0.40 for every $1 increase in home equity value. However, as Real Estate begins to slow, it isn’t long before the knock on effects leak into the overall economy. Per the Canadian Real Estate Association, home sales are down 14.6% through the first six months of this year. Meanwhile, residential investment, which measures the amount of capital spent on major renovations, new homes in a period as well as transfer costs and commissions, has been slowing. As of Q1 2018, residential housing investment soaked up $36.42 billion worth of capital, up 1.36% compared to last year. The annual rate of growth, however, is at the slowest pace since 2013. Generally, the slowing of the housing market begins to show up in consumer durables first, aka less frequent big ticket items such as cars. In recent years Canadian car dealerships have been the benefactor of cheap credit. Dealerships have been pumping out

Steve Saretsky -

The downturn in Vancouver’s detached market continues to be the most obvious of all property types. Once again sales churned in at all time lows this month. July witnessed just 126 house sales, the lowest total on record, surpassing a previous low of 193 sales set in July of 2012. Despite limited public data, it doesn’t take an astute investor to figure out something isn’t quite right. Detached sales sunk an eye watering 50% below the ten year average for the month of July. To no surprise, this has solved the mysterious supply issue. Nearly two years of weak home sales has allowed inventory to play catch-up. Inventory for the month of July increased 2% year-over-year and sits at the highest level for the month since July of 2012. Buyers have plenty of options and are clearly in the drivers seat. While many sellers are reluctant to cut their price, the ones that need to sell are having to take hefty reductions. This ultimately sets the neighbourhood benchmark lower as future buyers will look at the most recent sales to determine fair market value moving forward. This is beginning to reflect in the data and although sales mix can distort

Steve Saretsky -

The Vancouver condo market continued to slow in July. While part of this is seasonal a trend, there’s definitely more to it this time around. Condo sales have declined each month this year, and fell to their lowest total for the month in six years. Overall, Vancouver condo sales declined by 22% on a year over year basis. The one bedroom condo space remained the strongest, but was not immune, with sales dropping 19%. Two bedroom condo sales dipped 24%, while three bedroom sales plunged by 31%. For further context, the 427 condo sales this month was 20% below the ten year average for July.  With sales dropping off and new condo supply beginning to hit the market, inventory has been taking the escalator up. For sale inventory climbed 32% year over year in July, pushing inventory to a three year high for the month. Condo Inventory remains low despite recent gains, which has helped cushion the recent slowing of sales. Despite the slowdown there’s no reason for sellers to panic, and they haven’t, new listings increased by 4% on a year over year basis, ticking in near historical averages. While bidding wars appear to be a thing of the

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The Canadian Economy

Steve Saretsky -

With home sales trickling in at an eighteen year low, and house flipping declining to a six year low, the Vancouver real estate market is becoming less liquid. In particular, and by design, the pre-sale market is exposed, and should be bracing for an uncomfortable landing. The pre-sale market in...

Steve Saretsky -

With this Vancouver real estate cycle coming to an end, and home sales across Greater Vancouver sliding to an 18 Year low in July, liquidity is evaporating rather quickly. This spells trouble for housing speculators, or housing flippers, which up until recently, have made out like bandits. When times are...

Steve Saretsky -

While it may sound hard to believe, it appears the Canadian credit binge is slowly winding down. Canada’s household debt which currently sits at the highest among the 35 developed and developing countries the OECD group monitors, has reached an unfathomable 101% of GDP. It’s safe to assume any type...

Steve Saretsky -

It was a slightly more rosy picture for the Canadian real estate market in the month of July. Despite a tumultuous month for the province of BC,  which witnessed home sales fall 24%, a slight rebound in Ontario, Canada’s largest housing market helped support the nations housing statistics. Home sales...

Steve Saretsky -

It’s been a tough year for BC real estate,  and that trend continued in July.  while the decline this month was  slightly less dramatic than the month of June, where home sales declined 33%,  there’s no  signals suggesting the housing market across BC is strengthening. while the BC Real Estate...

Steve Saretsky -

After Years of plunging interest rates, Canadian households now face the unthinkable, higher borrowing costs. Recent data from the Bank of Canada, and compiled by Better Dwelling, shows the effective weekly borrowing rate at a seven-year high. The effective borrowing rate is the interest rate which the typical household would get...

Steve Saretsky -

There is plenty of research to support the enormous wealth effect of rising home prices. As household wealth increases, at least on paper, consumers tend to spend more and access to credit simultaneously becomes more abundant. In the United States, for example, from 2002-2006 low credit-score homeowners borrowed an average of $0.40...

Steve Saretsky -

The downturn in Vancouver’s detached market continues to be the most obvious of all property types. Once again sales churned in at all time lows this month. July witnessed just 126 house sales, the lowest total on record, surpassing a previous low of 193 sales set in July of 2012....

Steve Saretsky -

The Vancouver condo market continued to slow in July. While part of this is seasonal a trend, there’s definitely more to it this time around. Condo sales have declined each month this year, and fell to their lowest total for the month in six years. Overall, Vancouver condo sales declined...

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The Saretsky Report. December 2022