DATE

Steve Saretsky -

A quick updated on the Vancouver housing market here. I have been tracking data on a weekly basis for the Bank of Canada. It’s unquestionably difficult to try and discern any trends in the Real Estate market on a weekly basis, but we are starting to get a sense of how buyers and sellers are behaving. Weekly sales over the past four weeks have averaged 43% lower than last years levels. That is incredibly weak considering last April/May was the slowest in nearly two decades. However, new listings are also very low, at the beginning of April they plunged 65% and have since been steadily increasing as the number of COVID-19 cases slow. As quarantine measures ease, new listings are picking up. They have increased for three consecutive weeks. New listings are outpacing sales, and this has pushed the months of inventory for sale higher. There is currently 7.4 months of inventory for sale, indicative of a buyers market. Prices are all over the place, as should be expected when volumes collapse. Ironically, condos, which were the hottest segment of the market pre-virus, are now seeing the most downwards pressure in terms of pricing. I have condo prices down about

Steve Saretsky -

In his final press conference before stepping down next month, Bank of Canada governor Stephen Poloz went out with a bang. Sunny Steve painted a more rosy outlook, suggesting recent concerns are overblown. “We have to be able to manage the risks around those things, so I’m not going to dismiss dire scenarios”, Poloz said during a media roundtable, conducted online. “But, me personally, I do think on balance what I’m hearing, the flow that I’m hearing, is a little too dire, a little bit overblown.” It was just a few months ago, Poloz gave the all clear, suggesting the economy was close to “home” as he prepared to sail off into the sunset. Since then, the Bank of Canada has pumped $300B of cash into the financial system, more than tripling their balance sheet during their first foray into Quantitative Easing. Actions speak louder than words. While Sunny Steve has been relieved of his duties, there is still a lot of cleaning up to do. CMHC boss Evan Siddall notes that 12% of all mortgages are currently in deferral, and that number could rise to 20% by September. Further, due to the outright collapse in economic activity, household debt

Steve Saretsky -

As anticipated, national home sales came to a screeching halt in April. Home sales across Canada plunged both 57% on a year-over-year and a month-over-month basis. In other words, either way you want to slice it, it was the slowest April on record, dating back to 1984 when our population was one third smaller. Thankfully for the housing market it was in a strong footing prior to the pandemic, with relatively low levels of inventory. There was just 4.3 months of supply for sale in March, although that figure, which measures how long it would take to liquidate current inventories at the current rate of sales activity- has now ballooned to 9.2 months in April. he question everyone wants to know now is when, and perhaps how much, will home prices fall? Of course that is an impossible question to answer. Yet there seems to be no shortage of predictions today. I have to laugh and feel somewhat empathetic to the economists who are trying to model home prices. According to CMHC, in a best case scenario national home prices will rebound to their pre-virus levels at the end of 2022. On the other hand, I read a report from

Steve Saretsky -

About 12% of all mortgages are now in deferral per Evan Siddall of CMHC. This includes both insured and uninsured mortgages, and that number could balloon to 20% by September, noted Siddall in a speech to members of the finance committee. Furthermore, its expected household debt to GDP ratios will blow out in the coming quarters. Canadians are among world leaders in household debt. Pre-COVID, the ratio of gross debt to GDP for Canada was at 99%. Due in part to increased borrowing but even moreso to declines in GDP, we estimate it will increase to above 115% in Q2 2020 and reach 130% in Q3, before declining. These ratios are well in excess of the 80% threshold above which the Bank for International Settlements has shown that national debt intensifies the drag on GDP growth. As a result of elevated levels of household debt and a surge in unemployment, CMHC estimates national home prices will decline between 9-18% in the coming twelve months as they meet a growing debt “deferral cliff” that looms in the fall. In the chart below, we can see the majority of CMHC insured mortgage deferrals are concentrated in Quebec, Alberta, and Ontario. IIF stands

Steve Saretsky -

We received a rather horrifying glimpse behind the curtain this past week, as the number of unemployed Canadians reached levels not seen since 1982. Two million jobs evaporated in April, pushing the official unemployment rate to about 13%, nearly triple what it was a few months ago. Even more heartbreaking, these numbers are grossly underreported. Per Stats Canada, those who were employed but worked zero hours or who lost their job and have simply stopped looking for one, are not counted towards the official unemployment rate. Some estimates suggest the real unemployment rate is around 30% today. Like in every recession, the economic pain is not dispersed evenly. Employment for workers aged 15-24, also known as Gen Z, dropped by 22%. Generation Zers who are entering into the workforce now face lower lifetime earnings. Historic data shows young people who graduate during a recession earn on average 10% less than cohorts who graduated when the unemployment was lower. This can result in longer periods of student debt and delays in buying a home and starting a family. Employment among very recent immigrants (five years or less) fell more sharply from February to April (-23.2%) than it did for those born in Canada (-14.0%). Furthermore, as

Steve Saretsky -

News on the Coronavirus front has been getting better, and there appears to be some light at the end of the tunnel. As we brace for a possible re-opening in the next few weeks, there is a lot of talk within the real estate industry about the direction of the housing market. Nearly all of those discussions focus on the idea of “pent-up demand”. This belief that a swarm of eager buyers, finally released from their quarantine shackles, will be tripping over themselves to snatch up condos, thanks to a flood of cheap credit and a lack of supply. But what if demand remains impaired? While the virus may be fading, it is still very much with us, and it seems it will be here for the foreseeable future. All this talk about money printing and stimulus saving us all, as if we can simply paper over a wave of insolvencies. The reality is many businesses will not survive, as John Mauldin of Mauldin Economics recently noted, unlike manufacturing, retailing, or agriculture, service businesses can’t hold inventory. They can’t just close for a few weeks and then make up the lost time. There is no second chance to sell that

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The Canadian Economy

Steve Saretsky -

A quick updated on the Vancouver housing market here. I have been tracking data on a weekly basis for the Bank of Canada. It’s unquestionably difficult to try and discern any trends in the Real Estate market on a weekly basis, but we are starting to get a sense of...

Steve Saretsky -

In his final press conference before stepping down next month, Bank of Canada governor Stephen Poloz went out with a bang. Sunny Steve painted a more rosy outlook, suggesting recent concerns are overblown. “We have to be able to manage the risks around those things, so I’m not going to...

Steve Saretsky -

As anticipated, national home sales came to a screeching halt in April. Home sales across Canada plunged both 57% on a year-over-year and a month-over-month basis. In other words, either way you want to slice it, it was the slowest April on record, dating back to 1984 when our population...

Steve Saretsky -

About 12% of all mortgages are now in deferral per Evan Siddall of CMHC. This includes both insured and uninsured mortgages, and that number could balloon to 20% by September, noted Siddall in a speech to members of the finance committee. Furthermore, its expected household debt to GDP ratios will...

Steve Saretsky -

We received a rather horrifying glimpse behind the curtain this past week, as the number of unemployed Canadians reached levels not seen since 1982. Two million jobs evaporated in April, pushing the official unemployment rate to about 13%, nearly triple what it was a few months ago. Even more heartbreaking, these...

Steve Saretsky -

News on the Coronavirus front has been getting better, and there appears to be some light at the end of the tunnel. As we brace for a possible re-opening in the next few weeks, there is a lot of talk within the real estate industry about the direction of the...

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The Saretsky Report. December 2022