When the Facts Change

Steve Saretsky -

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 Vancouver should inflate near 7% year-over-year at the end of the month, and continue accelerating from there, until inventory replenishes to healthy levels.

To say it’s been an incredibly surprising year for the housing market is understatement. It has certainly defied my expectations. It has humiliated every forecast out there, including the one released by our own government agency, CMHC, which has more intel on our mortgage market than anyone else.

In case you need reminding, back on May 27, 2020 CMHC released a forecast, suggesting, “Canada will experience a historic recession in 2020 with significant declines in all housing indicators. Sales are likely to register a decline in the range of 19% to 29% from their pre-COVID level before beginning a slow, gradual recovery in 2021. Our forecasts indicate that sales are not likely to recover to pre-COVID-19 levels by the end of the forecast horizon. Our forecasts indicate that the average MLS price will decline by 9% to 18% from its pre-COVID-19 level. Prices will begin to recover in the first half of 2021.”


Although to be fair, at the time of the report that seemed like a rational forecast, one that I agreed with, given the dire outlook of the economy.

However, as Winston Churchill once famously said, “When the facts change, I change my mind, What do you do?”

Since then, the Bank of Canada has more than tripled their balance sheet, and now owns 35% of the government bond market. The Federal Government is expected to run a $400B deficit. As a result, the household debt bubble that was supposed to implode, has miraculously been defused. In fact, personal checking accounts have grown by $103 billion, or 34%, the most in more than three decades.

In other words, the Canadian housing market is primed for another strong year ahead.

And when my information changes, I shall alter my conclusions.

Three Things I’m Watching:

1. Bank of Canada balance sheet has more than tripled this year.

2. Personal checking accounts have swelled over the past year by C$103 billion, or 34%, the most in more than three decades.

3. CMHC had forecasted average home prices to drop in Vancouver. Instead, they are up 8% year-over-year as of November.

Join the Monday Newsletter

Every Monday morning you'll receive a short and entertaining round-up of news on the Vancouver & Canadian Real Estate markets.

"*" indicates required fields

The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

Steve Saretsky -

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

Steve Saretsky -

The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession...

Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

Get the Saretsky Report to your email every month

The Saretsky Report. December 2022