The Gold Rush

Steve Saretsky -

The Canadian labour market disappointed for a second straight month, this time shedding 68,000 jobs in May according to Stats Canada. This pushed the unemployment rate back up to 8.2%. If the Bank of Canada was looking for some air cover in order to maintain current stimulus measures, look no further. Sure inflation is running a bit hot at 3.4% but the central bank still thinks its transitory. In fact, I think a bout of inflation is welcomed considering the mountain of debt we have to ultimately inflate our way out of.

Inflation has always been a tricky thing to measure, perhaps intentionally. Just think, according to official inflation statistics, food prices are up only 0.9% from last year and shelter costs by just 3.2%. Do either of these sound accurate?

To no surprise, the bulk of the inflation is showing up in assets, particularly here in the housing market. Recent data released by local Real Estate Boards highlights rampant price growth across the nation. Here’s the preliminary data for May:

– Greater Vancouver +14%
– Greater Toronto +19%
– Calgary +11%

We’re still waiting for other Real Estate Boards to report their numbers but its largely expected the National home price index will hit 25% year-over-year price growth for May.

Not going to lie, it’s obviously a good time to be a Real Estate agent. Canadian real estate commissions and fees hit a record high recently. Seasonally adjusted commissions and fees reached $19.14 billion in March, that’s up 79.75% from last year. No surprise that everyone is trying to cash in on the gold rush, people at the real estate licensing boards tell me enrolment and new license requests are at record highs. People lost their jobs during the pandemic and then saw the bull market in housing and thought, “maybe if I can sell enough houses to other people i’ll be able to get one for myself.” After all, it might be the only profession keeping up with the real rate of inflation.

This is ultimately bad for everyone, ironically including the real estate profession. More competition, and more newbie agents who don’t know what they’re doing, representing people in the largest financial transaction of their lives.

Happy house hunting.

Three Things I’m Watching:

1. Stats Canada thinks food inflation is running at just 0.9% year-over-year. (Source: Richard Dias)

2. At the end of a 5 year mortgage term, homeowners in the 1980’s paid off just 3.8% of the outstanding mortgage. At today’s low interest rates homeowners now pay off 16.2% of their total mortgage in the first 5 years. (Source: Edge Analytics)

3. Seasonally adjusted Real Estate commissions and fees reached $19.14 billion in March, up 79% from last year. (Source: Better Dwelling)

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The Saretsky Report. December 2022