As the pandemic rages on, and government mandated shut-downs ramp up, Canadians have a bit more spare time this holiday season. Bored and stuck at home, Canadians are doing what they do best, buy real estate. In what is normally considered the slowest time of the year for residential real estate, buyers have been incredibly active this year. It is expected that 2020 will mark a new record high for annual home sales across Canada, once December figures come out. And while we don’t have the national data for December just yet, real-time data out of Vancouver provides some early indications for the rest of the country. As of December 27th, there have been over 2700 sales across Greater Vancouver, putting us on pace to surpass the previous record of just over 2800 home sales set in December 2015. (Prices were rising near 20% annually back in December 2015). New listings are also coming on at an unusual pace for this time of year, and will set record highs here in December. Although, as has been the trend throughout 2020, sales continue to outpace new listings, squeezing inventory levels lower and pushing prices higher. The home price index for Greater

As everybody is well aware, housing is THE pillar supporting the Canadian economy. It is also responsible for burdening households with a mountain of debt. In fact, the majority of Canadian household debt, 69 per cent, is made up of mortgage debt and by continuing to pile on more debt, house prices have increased, contributing to a 70% increase in the aggregate net worth of Canadian households since the end of 2010. And so, when the economy plunged into a deep recession, it’s no surprise policy makers were so quick to intervene. The Bank of Canada’s quantitative easing program ran into overdrive. Remember, Quantitative easing involves, large-scale purchases of government bonds which lower the interest rates or ‘yields’ on those bonds. This pushes down on the interest rates offered on loans (eg mortgages or business loans) and is designed to stimulate the economy by boosting a wide range of financial asset prices. Yes, rising real estate prices are quite literally the desired outcome. Ironically, when Bank of Canada Governor, Tiff Macklem, was asked this past week about concerns over rising debt loads and home prices, the Governor naturally downplayed those concerns. Quoting, “it’s certainly something that we’re watching, housing markets have come back

The sovereign debt bubble continues to expand, with Government debt around the world inching closer towards the $18 trillion dollar mark. With global central banks essentially nationalizing bond markets, investors continue to pile into alternative assets. Of course housing has been one of the largest benefactors during this hunt for yield, and the pandemic has only compounded returns for homeowners. In fact, American homeowners are $1 trillion richer as the pandemic-driven housing boom pads their pockets. According to data from CoreLogic, in the past year, homeowners with mortgages, representing about 63% of all properties, have seen their equity increase by 10.8%. That equates to a collective $1 trillion in gained equity, or an average of $17,000 per homeowner, the largest equity gain in more than six years. This gilded recession is not exclusive to the United States. North of the border, Canadian homeowners are also flourishing. According to third quarter data released this past week by Stats Canada, the nation’s households have seen their net worth jump by more than C$600 billion since the end of last year. Despite three million Canadians losing their job, a plunge in debt servicing costs and government support have pushed per capita household net worth to

The big six banks are flush with cash. At least that was the headline promoted by BNN Bloomberg this past week. Adding, “When shares of the banks began rallying on Oct. 29, investors were buying because they believed the banks’ outlook on credit quality was about to take a sharply positive turn.  And they were right. Each of the big banks decided to set aside – or “provision” – much less money than they did just a quarter ago for an anticipated wave of loans slipping into default because of the economic shock from COVID-19. In fact, each of the banks cut provisions for credit losses (PCL) by more than analysts had forecast. Because every dollar of a PCL is a dollar lost to the net income line, earnings per share topped expectations in every case.” This crisis has become a classic coin toss for the banks, heads I win, tails you lose. Through federal government support, and generous asset purchases from the Bank of Canada, the Canadian banks are in a significantly better spot than initially feared at the start of the pandemic. In fact, they have become the cornerstone for the remarkable housing boom underway across the nation. Canadian

As I illustrated in last months report, I continue to shift away from the idea of pent-up demand and pivot towards the view of a new bull market. I don’t know how long it will last, but the data is simply too difficult to ignore. Following the trend, December recorded new record highs for home sales across Greater Vancouver. Home sales surpassed the 2015 bull market, and were up a whopping 54% on a year-overyear basis. Months of inventory for sale trickled lower, coming in at a mere 2.6 months of supply- the lowest reading since June 2017. These supply constraints are largely concentrated in the single family housing market, and is putting immense upwards pressure on prices, officially up 10% on the year as measured by the hedonically adjusted MLS benchmark price.