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Construction in canada
Steve Saretsky -

On the heels of weak consumer spending reports, the Canadian economy contracted in November, the second monthly decline in the past three months. The announcement comes on the heels of slumping retail sales which fell 0.9% in November, led by a significant decline at furniture and home furnishing stores- unsurprising given national home sales fell to a six year low in 2018. The construction sector declined for the sixth consecutive month in November, contracting 0.3% to fall to its lowest level since the middle of 2017. This was exacerbated by the Residential construction sector which fell 4.3% year-over-year, the steepest decline since 2009, in large part due to a drop-off in single family home construction. Small gains were reported in apartment construction. The recent slowdown in the Great White North is no doubt being exacerbated by an over leveraged household sector which is facing higher interest payments, slowing loan growth, and a rapid deceleration in the true money supply. The true money supply consists of cash, demand deposits (i.e. checking accounts) at banks, savings and government deposits at the central bank. That is, it consists of money immediately available for transaction. Recent weakening data will keep the Bank of Canada on hold, despite

Steve Saretsky -

Pressures are mounting on the Canadian consumer as the fall in home sales activity begins to portray its knock-on effects on the economy. This should comes as little surprise given national home sales have fallen to a six year low and debt servicing payments have reached a ten year high. Latest data from Stats Canada shows retail sales fell 0.9 per cent to $50.4 billion in November, a larger drop than anticipated from mainstream pundits. Unsurprisingly, furniture and home furnishing stores reported one of the largest declines, with total dollars sinking 3.5% year-over-year. Building material and garden equipment and supplies dealers also registered a 2.3% decline. The often outspoken Douglas Porter of BMO painted a rather bearish outlook on the over indebted Canadian consumer asking “What Have you Done for Me Lately?” Porter added, “with interest rate hikes and other measures weighing on housing and big ticket spending, real retail sales have in fact slipped into reverse in the past year. After a near 6% surge in ’17, sales volumes were barely above water for all of ’18 and were down Y/Y in Q4. Given strong population growth rates, the means spending per person is falling fast.” Adding to the weakness

Steve Saretsky -

As the federal election nears and the housing market continues to wobble- political pressures are mounting. The Canadian housing market finished 2018 with one of its worst years in recent history. Not only did annual home sales plunge to the lowest level in six years but the national average sales price also fell 4%, the first annual decline in a decade. As a result, there is no shortage of media coverage suggesting policy measures aimed at cooling the Canadian housing market should be repealed. Unsurprisingly, the most vocal proponents of removing the mortgage stress test are the ones with the most to lose. David Foster, director of communications at the Canadian Home Builders’ Association, said that the federal government should go further and simply scrap the stress test. Telling Bloomberg, “Ideally at this point the best thing would be for the new stress test to be repealed, just removed. Markets like Calgary, they’re already quite soft, are just hammered by this.” Mortgage Professionals Canada President and CEO Paul Taylor said during a BNN appearance. “We’ve been asking for a reduction in the stress test for quite a while now because it does mathematically kind of accordion how much of a purchasing

Steve Saretsky -

It’s 2007, and dozens of condominium towers conceived during Florida’s real estate boom near completion, investors who snatched up units in the pre construction phase in hopes of turning a quick profit are increasingly trying to break contracts, even walking away from fat deposits. “Motivated” sellers are flooding online forums like Craigslist with advertisements for condo units still months or years from being finished.  Lawyers have been inundated with calls from people hoping to avoid closing on units they bought during the speculative craze of 2004 and 2005. “I get two or three of these calls a day,” said James Ryan, a lawyer in Boca Raton who said he had 40 clients looking to get out of condo contracts. People who thought they could “flip” condos — buying, then selling for a steep profit before construction is done — are parting with that fantasy. After years of stunning price increases — 25 percent in the West Palm Beach-Boca Raton area, for example, from March 2005 to March 2006 — condo prices have started dropping. Foreigners are largely to blame. Real Estate analysts say South Florida drew a barrage of investors. “Between the Latin American influence and the out-of-state buyers who have

Steve Saretsky -

A recent report from the FCAC (Financial Consumer Agency of Canada) shed some light on Canadian households, in particular their desire to tap home equity, which has showered Canadians with cheap credit amidst a two decade long housing boom. As of today, just over 3 million Canadians have tapped a Home Equity Line of Credit (HELOC), with outstanding balances jumping to over $200B. For further context, HELOC balances in Canada have gotten so large they now make up just under 13% of GDP, far surpassing our neighbours to the south when HELOC balances reached 4.5% leading up to the financial crisis. Similar to our US counterparts, our spending behaviours are nearly identical. Per the FCAC report, 49% of HELOC borrowers used the money to pay for renovations. This is strikingly similar to a US federal Reserve study which found 43% of funds pulled out of home equity are used for home improvements. As I had written previously, Canadians are frequently using Home Equity Lines of Credit to facilitate the purchase of second properties. The largest median amounts of HELOC loans were used for residential properties ($59,800). This was followed by vehicle purchases, which up until recently had experienced an unprecedented

Steve Saretsky -

The Canadian housing market finished 2018 in unprecedented territory with both sales and prices simultaneously declining for the first time since 2008. “What a difference a year makes,” said Canadian Real Estate Association President Barb Sukkau. Official data released by the organization noted MLS home sales finished the year 11% lower than 2017. Despite a 43 year low in unemployment and robust population growth, annual sales across the nation totalled 458,442, the lowest count since 2012. It was the steepest annual decline since home sales fell 17% in 2008 during the financial crisis. This now marks the second annual decline in home sales since the peak of the housing boom in 2016. As a result, prices are beginning to adjust lower. The average sales price for the year ticked in at $488,699, a 4% decline from last year. The decline marked the first year-over-year drop since 2008, when the national average slipped a mere 0.71%. The deceleration in home prices comes at a time when household debt growth continues to ease, having decelerated for eighteen consecutive months. The annual percent change in household debt growth sits at a mere 3.24%, the weakest pace of growth since the 1980’s recession. Despite the

Steve Saretsky -

The trend in housing starts across Canada continued to slide lower per a recent report from CMHC. “The national trend in housing starts decreased in December, the fifth decline in the last six months,” said Bob Dugan, CMHC’s chief economist. “Reflecting these recent declines, total annual housing starts in 2018 were lower than in 2017, as lower single-detached starts more than offset a slight increase in multi-family starts this year. Nonetheless, total housing starts remain elevated when compared to historical averages.” More specifically, Vancouver, the nations most unaffordable housing market, saw housing starts finish the year down 11%. The 23,404 starts in 2018 marked the second consecutive annual decline, slightly below the all time record set in 2016. With the pre-sale condo market experiencing not only weaker sales but lower prices this is likely to put further downwards pressure on housing starts in 2019. Per MLA Canada the absorption rate for pre sale launches fell to 37.5% in November, down from a record high 94.1% at the start of 2018. Both Urban Analytics and Altus Group are now reporting lower prices at launch. This raises two important questions for the year ahead. How will the continued slowdown in the real

Steve Saretsky -

Back in February 2018 I penned a post titled “Vancouver’s Suburbs Hitting Peak Bidding Wars.” Condo inventory had plummeted, hitting a decade low and the number of condos being sold above the asking price reached a staggering 53%. The MLS benchmark price had recorded an eye watering year-over-year gain of 47%. It seemed nothing could stop the compelling story of ever rising prices in Vancouver’s growing suburban market. What a difference 10 months can make. Since then the Fraser Valley condo market has come to a screeching halt. The sales to actives ratio has plummeted from 80% in February down to just 18% in December. The lowest reading for the month since December 2014. The number of condo sales tumbled 44% year-over-year in December, and 50% when looking at just re-sale units (excludes pre-sales). While this drop may be perceived as over dramatic considering it’s coming off a record 2017, this sudden change in direction is akin to the Titanic pulling a sharp U-Turn. This has allowed inventory levels to spike, with re-sale inventory rising 242% from last December. This marked the highest total for the month since December 2015. As a result, buyers have more options and sellers are

Steve Saretsky -

The city of Vancouver’s detached housing market continues to turn heads. Detached sales fell 38% year-over-year in December. It was the fewest December sales in recent history, with MLS data dating back to 1992. There’s really not much else to say, I believe the data speaks for itself. Buyers are hesitant to pull the trigger, and sellers are somewhat reluctant to adjust their asking prices, although the very few homes that are selling are taking a substantial discount. As with  all housing markets, price discovery becomes very difficult in a down market. Part of this reason is because there is no one price metric that you can look at to determine how much prices have fallen. The official MLS benchmark now shows prices have declined 10% from last year.  However in certain pockets and at certain price points some detached homes are down as much as 25%. Despite weak home sales and falling prices, new listings remain quite low and dropped 16% from last year.  Again, this suggests sellers might not be panicking just yet, there is no flood of new listings hitting the market.  There is however, a backlog of stale inventory failing to sell. There is currently 15

Steve Saretsky -

The housing market started the new year off with a thud. There was no dead cat bounce this month as home sales across all property types declined, slipping to a 10 year low. Indeed, it was not the start home sellers had been looking for. New listings far outpaced the number of sales, pushing inventory higher and home prices lower. Mortgage credit growth continued to decelerate dropping again in the month of December as per the Bank of Canada. With mortgage credit growth slumping to a 35 year low there remains little desire from policymakers to amend the mortgage stress tests despite industry opposition. The market has, however, received a glimmer of hope in the fact that the five-year Canada mortgage bond has plummeted nearly 70 basis points as of this report, and has pushed down five year fixed mortgage rates by about 10 basis points. The Bank of Canada appears to be on hold at least for now and with economic data beginning to sour they could be on hold for good.

Steve Saretsky -

The correction in the Vancouver condo market is now fully underway after prices peaked at the beginning of 2018.  This should really not come as a surprise given how weak the detached housing market has been for nearly 2 years, and considering the tightness in the mortgage lending space. As as a result, Vancouver condo sales fell to a 10 year low in December with sales plunging 47.5% year-over-year, the sharpest annual decline since 2008. Unlike the detached housing market, price declines in the condo market are easier to quantify. Although once again price declines will vary depending on the metric used. Both the average and the median sales price declined on a year-over-year basis in December. Since prices peaked at the start of 2018 it is a fair assumption to suggest condo prices have dipped about 10%, even across entry-level one-bedroom units. It is important to remember that prices are seasonal with home prices typically decelerating in the winter months. However this should not be used to discount the significant deceleration in condo prices. The average price per square foot for resale condos now shows a 4.5% decline from December 2017. An important catalyst for a continued decline, or

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The Canadian Economy

Steve Saretsky -

On the heels of weak consumer spending reports, the Canadian economy contracted in November, the second monthly decline in the past three months. The announcement comes on the heels of slumping retail sales which fell 0.9% in November, led by a significant decline at furniture and home furnishing stores- unsurprising...

Steve Saretsky -

Pressures are mounting on the Canadian consumer as the fall in home sales activity begins to portray its knock-on effects on the economy. This should comes as little surprise given national home sales have fallen to a six year low and debt servicing payments have reached a ten year high....

Steve Saretsky -

As the federal election nears and the housing market continues to wobble- political pressures are mounting. The Canadian housing market finished 2018 with one of its worst years in recent history. Not only did annual home sales plunge to the lowest level in six years but the national average sales...

Steve Saretsky -

It’s 2007, and dozens of condominium towers conceived during Florida’s real estate boom near completion, investors who snatched up units in the pre construction phase in hopes of turning a quick profit are increasingly trying to break contracts, even walking away from fat deposits. “Motivated” sellers are flooding online forums like...

Steve Saretsky -

A recent report from the FCAC (Financial Consumer Agency of Canada) shed some light on Canadian households, in particular their desire to tap home equity, which has showered Canadians with cheap credit amidst a two decade long housing boom. As of today, just over 3 million Canadians have tapped a...

Steve Saretsky -

The Canadian housing market finished 2018 in unprecedented territory with both sales and prices simultaneously declining for the first time since 2008. “What a difference a year makes,” said Canadian Real Estate Association President Barb Sukkau. Official data released by the organization noted MLS home sales finished the year 11%...

Steve Saretsky -

The trend in housing starts across Canada continued to slide lower per a recent report from CMHC. “The national trend in housing starts decreased in December, the fifth decline in the last six months,” said Bob Dugan, CMHC’s chief economist. “Reflecting these recent declines, total annual housing starts in 2018...

Steve Saretsky -

Back in February 2018 I penned a post titled “Vancouver’s Suburbs Hitting Peak Bidding Wars.” Condo inventory had plummeted, hitting a decade low and the number of condos being sold above the asking price reached a staggering 53%. The MLS benchmark price had recorded an eye watering year-over-year gain of...

Steve Saretsky -

The city of Vancouver’s detached housing market continues to turn heads. Detached sales fell 38% year-over-year in December. It was the fewest December sales in recent history, with MLS data dating back to 1992. There’s really not much else to say, I believe the data speaks for itself. Buyers are...

Steve Saretsky -

The housing market started the new year off with a thud. There was no dead cat bounce this month as home sales across all property types declined, slipping to a 10 year low. Indeed, it was not the start home sellers had been looking for. New listings far outpaced the...

Steve Saretsky -

The correction in the Vancouver condo market is now fully underway after prices peaked at the beginning of 2018.  This should really not come as a surprise given how weak the detached housing market has been for nearly 2 years, and considering the tightness in the mortgage lending space. As...

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The Saretsky Report. December 2022