DATE

Steve Saretsky -

Canada’s recent population boom has reached it’s strongest growth in nearly three decades. Under Prime Minister Justin Trudeau, Canada’s population has jumped by 1.4 percent over the past year, double the U.S. pace, driven by a surge in non-permanent residents like students and higher immigration levels. Canadian Economists are calling it the “human stimulus.” Amidst the recent population boom one can’t help but reminisce the last time Canada’s population growth was this robust. It was the late 1980’s, and Canada was in the midst of a housing boom. Between 1985 and 1989 the average price of a house in the GTA increased by 113% in real terms. What we have learned from housing booms is that they create knock on effects, and self fulfilling feedback loops. Low interest rates and credit expansion help kickstart housing booms. This expansion spurs new credit growth and foreign capital flows, pushing home prices higher, and spurring new home construction. This in turn creates additional jobs, increased wages, and a flood of new immigration to absorb labour shortages. Many of whom become employed in the booming construction sector. This appears to be the case in Canada, where total housing under construction has reached an all time high, but so too has

Steve Saretsky -

To little surprise the Bank of Canada followed through with another interest rate hike this week, pushing the overnight rate to 1.75%, the fifth increase in just over a year. Perhaps more surprisingly was the hawkish stance Governor Poloz took, effectively putting households on notice that they could be more aggressive in their push towards a neutral interest rate of between 2.5%-3.5%. While Governor Poloz is certainly optimistic on the resiliency of the Canadian economy and the prospects for future growth, recent data points may suggest otherwise. In his monetary policy report yesterday Poloz proclaimed, “Household spending is expected to continue growing at a healthy pace, underpinned by solid employment income growth. Households are adjusting their spending as expected in response to higher interest rates and housing market policies” However, retail sales volumes have fallen in each of the past three months, now growing just 0.7% Y/Y compared to the greater than 8% growth just over a year ago. Meanwhile, Poloz also boasted, “household credit growth continues to moderate and housing activity across Canada is stabilizing. As a result, household vulnerabilities are edging lower in a number of respects, although they remain elevated.” Yet the Canadian Real Estate association noted sales

Steve Saretsky -

It seems not long ago the Vancouver Real Estate market was mired in a frenzy, a widespread panic ensued over rising home prices and buyers eagerly bid up prices in emotional bidding wars. According to a CMHC report released in June 2017, 55% of Metro Vancouver respondents confessed to engaging in a bidding war to secure their recent home purchase. A behaviour which award winning economist Robert Schiller likens to “irrational exuberance”. However, those days appear to be a thing of the past. With the abrupt shift in the housing market having pushed sales to an eighteen year low through the first nine months of this year. The fear of missing out has turned to a sense of nervousness as potential buyers fear home prices could slide further in the months ahead. This appears to be reflecting in the MLS data from the Real Estate Board of Greater Vancouver. The data shows the number of listings across Greater Vancouver which sold above the asking price has slid from a peak of 51% in April 2016 to just 11% this September. While 11% still sounds high, it’s worth noting that even during the bear markets of 2008 and 2012, the number

Steve Saretsky -

With the Greater Vancouver condo market having slowed considerably, sales for the month of September dropped 44% – a six year low, the effects are now trickling into the new development space. Pre sale centres for new developments are beginning to ramp up their incentives and trying to lure buyers with discounts, decorating bonuses, free upgrades, and even a years worth of mortgage payments. Call it desperation, or call it a brilliant marketing strategy, ‘The Landing’ a pre sale condo development in Langley, has perhaps set a new precedent by offering to pay the first year worth of mortgage payments. Just 12 months ago developers were having to contain the madness of crowds, many of whom were lining up overnight to secure a pre-sale contract. Today, incentives have become the new normal. However, this should come as no surprise to market watchers who have witnessed the pressures of rising interest rates and tighter lending conditions. It’s a real estate cycle which is nearing its bitter end. According to MLA Canada, the pre sale absorption rate for new developments fell to 38% in September, down from a high of 94% in January. Further, October is expected to be the busiest month for

Steve Saretsky -

It appears higher borrowing costs and tighter lending conditions are working their way through the Canadian housing market. Per The Royal Bank of Canada housing has not been this unaffordable since 1990. As a result, sales activity has slowed significantly, total home sales across the nation fell 9% year over year in September. It was the fewest sales for the month of September in six years. According to the Canadian Real Estate Association, home buyers retreated across the country, “About 70% of local markets were down on a y-o-y basis, led primarily by declines in major urban centres in British Columbia, along with Calgary, Edmonton and Winnipeg.” Meanwhile, active listings across the nation ticked higher by 2% year over year, bringing the national sales-to-new listings ratio to 54.4% in September compared to 56.2% in July and August. The long-term average for this measure of market balance is 53.4%. As a result of fewer sales and rising inventory, the average sales price remained virtually unchanged from September 2017, increasing just 0.2%, or negative when adjusted for inflation. The MLS Home Price Index Benchmark Price suggested a more rosy outlook, showing a slight gain of 2.28%. Price inflation topped out in Victoria +9%, and

Steve Saretsky -

It is becoming more well known how interconnected credit markets have become, and with that many global property markets are following a very similar housing cycle. With global credit tightening we are seeing widespread reports that once hot housing markets such as Sydney, Manhattan, Denver, London, and even Hong Kong have gone cold. Two Canadian markets which have historically followed a very similar trajectory is Vancouver & Toronto. However, more recently pundits or bank economists are suggesting the two markets have diverged with Toronto now rebounding and Vancouver mired in a slump which has pushed sales to an 18 year low. However, historical data suggests Toronto may simply be lagging behind Vancouver’s property cycle. When looking at a 12 month rolling average of housing sales we can see how closely correlated the two cities are. The most recent run-up shows Vancouver home sales peaked in July 2016. Toronto home sales peaked in April 2017, a nine month lag between the two cities. While Toronto is experiencing a recent uptick, sales remain weak. Further analysis by The Six housing Sense and Better Dwelling also shows Toronto appears to trail Vancouver’s major price gains and losses by roughly three quarters. Here is the year

Steve Saretsky -

With the recent slowdown in the Vancouver housing market becoming more widespread, Greater Vancouver (REBGV) home sales for all property types through the first 9 months of the year fell to an all time low. There appears to be some denial or perhaps confusion over current market conditions. Sellers are reluctant to slash prices and buyers feel disgruntled over how little prices have budged. This has ultimately resulted in fewer bids, creating more difficulty for price discovery. Amidst the confusion, some pockets or price segments remain stronger or perhaps more resilient than others. One way of gauging market conditions in certain price brackets is to compare months of inventory, in other words the time it would take for all the current inventory to sell if it all sold at the current rate without new inventory coming on the market. It is considered a sellers market when the months of inventory falls below 4, and a buyers market when months of inventory climbs above 6. In the condo market, entry level condos priced from $300,000- $599,999 remain quite strong. There is just 2.9 months of inventory for sale. However, as prices move higher the months of inventory begins to accelerate. Greater Vancouver condos priced from $700,000-$999,999

Steve Saretsky -

To little surprise it was another quiet month for single family homes in Vancouver.  Liquidity has essentially evaporated for higher end homes. Overall, home sales across the city of Vancouver declined 34% year-over-year.  There were just 111 home sales, the lowest total ever recorded, surpassing the previous low of 114 sales set back in September 2008. On a slightly more positive note, the East side of Vancouver, where homes are relatively more affordable, seem to be holding up better.  However sales still dipped by 23%. With sales volumes having tumbled over the past eighteen months, inventory has continued to build. However, it took a surprising decline in September. Total inventory for sale dipped by 2.1% on a year-over-year basis. It appears sellers are trying to weather the storm and wait for better market conditions in the spring of 2019. New listings plunged 28% year-over-year. This will be an important metric moving forward, however despite the plunge in new listings and inventory growth having stalled, there remains 15 months of inventory for sale. Unwelcoming news for sellers. Price declines are becoming more prominent. The average sales price of a detached home in Vancouver registered a 19.7% decline in September. The median

Steve Saretsky -

It’s been a long time coming. It appears the Vancouver condo market has finally surrendered to a plethora of market forces, the noticeable downwards shift in the month of September has it following the historically quiet detached housing market. Following a sluggish summer, there was much hope the Vancouver condo market would rebound in September. However, Vancouver condo sales dropped 22% from August to September. The decline was even more pronounced when comparing on a year-over-year basis, sales plunged 43% from September 2017. It was the fewest sales since September 2012. With sales just 3% higher than September 2008, when the global financial system was completely falling apart, the slowdown this year comes amidst relatively healthy and stable economic conditions. Unemployment across BC is near record lows, while wage growth and population growth remain rampant. Interest rates, although rising, are still negative in real terms. This certainly begs the question about future vulnerabilities considering unemployment has almost nowhere to go but up, economic growth is slowing, and the Bank of Canada seems determined to push interest rates higher. The recent weakness in sales has now pushed inventory considerably higher. Condo inventory in the city of Vancouver jumped 73% from a

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The Canadian Economy

Steve Saretsky -

Canada’s recent population boom has reached it’s strongest growth in nearly three decades. Under Prime Minister Justin Trudeau, Canada’s population has jumped by 1.4 percent over the past year, double the U.S. pace, driven by a surge in non-permanent residents like students and higher immigration levels. Canadian Economists are calling it the “human...

Steve Saretsky -

To little surprise the Bank of Canada followed through with another interest rate hike this week, pushing the overnight rate to 1.75%, the fifth increase in just over a year. Perhaps more surprisingly was the hawkish stance Governor Poloz took, effectively putting households on notice that they could be more...

Steve Saretsky -

It seems not long ago the Vancouver Real Estate market was mired in a frenzy, a widespread panic ensued over rising home prices and buyers eagerly bid up prices in emotional bidding wars. According to a CMHC report released in June 2017, 55% of Metro Vancouver respondents confessed to engaging...

Steve Saretsky -

With the Greater Vancouver condo market having slowed considerably, sales for the month of September dropped 44% – a six year low, the effects are now trickling into the new development space. Pre sale centres for new developments are beginning to ramp up their incentives and trying to lure buyers...

Steve Saretsky -

It appears higher borrowing costs and tighter lending conditions are working their way through the Canadian housing market. Per The Royal Bank of Canada housing has not been this unaffordable since 1990. As a result, sales activity has slowed significantly, total home sales across the nation fell 9% year over...

Steve Saretsky -

It is becoming more well known how interconnected credit markets have become, and with that many global property markets are following a very similar housing cycle. With global credit tightening we are seeing widespread reports that once hot housing markets such as Sydney, Manhattan, Denver, London, and even Hong Kong...

Steve Saretsky -

With the recent slowdown in the Vancouver housing market becoming more widespread, Greater Vancouver (REBGV) home sales for all property types through the first 9 months of the year fell to an all time low. There appears to be some denial or perhaps confusion over current market conditions. Sellers are reluctant...

Steve Saretsky -

To little surprise it was another quiet month for single family homes in Vancouver.  Liquidity has essentially evaporated for higher end homes. Overall, home sales across the city of Vancouver declined 34% year-over-year.  There were just 111 home sales, the lowest total ever recorded, surpassing the previous low of 114...

Steve Saretsky -

It’s been a long time coming. It appears the Vancouver condo market has finally surrendered to a plethora of market forces, the noticeable downwards shift in the month of September has it following the historically quiet detached housing market. Following a sluggish summer, there was much hope the Vancouver condo...

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The Saretsky Report. December 2022