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Steve Saretsky -

I must admit, people bidding up house prices amidst the deepest recession in living memory is something I definitely did not see coming. Segments of the Real Estate market remain red hot across much of Canada, although mostly for single family homes. It’s certainly a head scratcher, and defies all rational logic. However, as the old saying goes, “60 million Frenchmen can’t be wrong.” Essentially it is based on the idea that the crowd is collectively smarter than any one individual. This collective intelligence was first stumbled upon by the late great statistician, Francis Galton, who in 1906 observed a competition at a local fair where approximately 800 people tried to guess the weight of an ox. To his surprise, the average of all the guesses was 1,197lbs. The real weight was 1,198lbs. Countless studies have been done since, all showing similar results. Herd following has been a key success for legendary investor George Soros. Soros, who is considered one of the greatest investors of our times has been quoted as saying, “Being so critical, I am often considered a contrarian. But I am very cautious about going against the herd. I am liable to be trampled on. Most of the

Steve Saretsky -

After publishing the industries most bearish housing forecast, which called for a slump in property prices between 9-18% over the coming twelve months, CMHC delivered another blow to the real estate sector. This time, announcing they’ll be choking off credit for Canada’s most levered home buyers. Effective July 1, CMHC will lower both gross debt service ratios and total debt service ratios, pushing minimum credit scores higher, and eliminating sources of down payment that increase indebtedness. “COVID-19 has exposed long-standing vulnerabilities in our financial markets, and we must act now to protect the economic futures of Canadians,” said Evan Siddall, CMHC’s President and CEO. “These actions will protect home buyers, reduce government and taxpayer risk and support the stability of housing markets while curtailing excessive demand and unsustainable house price growth.” n other words, CMHC is making good on its own forecast by directly reducing credit flowing into real estate. These changes result in a 10-11% reduction in how much one can borrow for the purchase of home using an insured mortgage, ie home purchases under $1M using less than a 20% down payment. The moves are not insignificant, as nearly 1 in 3 new mortgage originations in Canada are insured.

Steve Saretsky -

Love him or hate him, Bank of Canada Governor Stephen Poloz is on the way out. Poloz has been lauded for his near perfection in managing inflation, earning him the Central Banker of the year award in 2018.  During his tenure, the Consumer Price Index has stayed within the central bank’s comfort zone for inflation 92% of the time, a better record than any governor since the central bank started targeting inflation in the early 1990s. However, there are certainly debates over the accuracy, or for that matter the relevancy of the consumer price index, which tends to disguise real inflation for you average hard working Canadian. In fact, if you were to ask any young or middle age citizen how much, on average, the cost of living was rising each year, you’d most certainly get an answer higher than 2%. Once dubbed “The Candyman”, Poloz’s lower for longer stance on interest rates encouraged household debt levels to reach unsustainable levels, and allowed house prices to detach from incomes. Both of which have reached a point of no return. I’ll be the first to admit, Poloz was merely following his Central banking peers, caught between a rock and a hard

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The Canadian Economy

Steve Saretsky -

I must admit, people bidding up house prices amidst the deepest recession in living memory is something I definitely did not see coming. Segments of the Real Estate market remain red hot across much of Canada, although mostly for single family homes. It’s certainly a head scratcher, and defies all rational...

Steve Saretsky -

After publishing the industries most bearish housing forecast, which called for a slump in property prices between 9-18% over the coming twelve months, CMHC delivered another blow to the real estate sector. This time, announcing they’ll be choking off credit for Canada’s most levered home buyers. Effective July 1, CMHC...

Steve Saretsky -

Love him or hate him, Bank of Canada Governor Stephen Poloz is on the way out. Poloz has been lauded for his near perfection in managing inflation, earning him the Central Banker of the year award in 2018.  During his tenure, the Consumer Price Index has stayed within the central...

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The Saretsky Report. December 2022