Still Dancing

Steve Saretsky -
From the Monday Newsletter. Join for Free HERE. 
Happy Monday Morning!

The Toronto housing market continued its torrid pace in the month of October, pushing the multi-decade long bull market to new lengths.

The benchmark price rose 5.8% from a year ago to $810,900, as per the Toronto Real Estate Board. That’s the biggest jump since December 2017 and takes it to within about $4,300 of the record set in mid-2017.“As market conditions in the GTA have steadily tightened throughout 2019, we have seen an acceleration in the annual rate of price growth,” said Jason Mercer, TREB’s chief market analyst. “We will likely see stronger price growth moving forward if sales growth continues to outpace listings growth, leading to more competition between home buyers.”

This has prompted another celebrity appearance for the city of Toronto, with hip hop singer Pharrell Williams announcing he is making his foray into residential development. Pharrel is partnering with two local firms to help design a dual-tower condo project in Canada’s most populous city. The 750-unit project, dubbed “untitled,” will start sales early next year.

“From music to fashion and footwear, some design, working with amazing visual artists, now we’re talking about physical structures,” Williams said in a separate statement. “I’m going into the realm that I’ve never gone into before, on a commercial level.”

Let’s hope the timing works out for Mr. Williams. Celebrity appearances are infamous for marking the tops of bull markets.

However, Canadians lust for debt remains strong. A new report from CMHC highlights the growth in Mortgage Investment Corporations (private lenders) continues to grow. In a sample of 100 Mortgage investment Corporations, mortgage credit outstanding ballooned by 51% over the past two years.

While the private lending space serves a valuable purpose, they ultimately supply loans to borrowers who are, for the most part, not credit worthy enough to be approved at large financial institutions. Some might prefer to call it subprime.

These loans are typically less than 18 months in duration, with an average lending rate of 9.8% as of 2018 per CMHC. In other words, they are a short term fix to satisfy ones appetite for real estate.

But, alas, to quote Citigroups bossman Chuck Prince who was made famous for remarking the following in 2007, “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”


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The Canadian Economy

Steve Saretsky -

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The Saretsky Report. December 2022