DATE

Steve Saretsky -

According to a report this past week from the National Bureau of Economic Research, the pandemic recession only lasted two months, from February 2020 to April 2020. This makes it the shortest recession in the history of the United States. The Bureau defines a recession usually as “a decline in economic activity that lasts more than a few months.” It was the sharpest and shortest recession in living memory. Pretty incredible stuff, considering there were some pundits calling for a second coming of the great depression. The policy response from governments and central bankers was unbelievable. Helicopter money, mortgage payment deferrals, wage subsidies, you name it. The biggest takeaway, however, is the extent policy makers were willing to go to maintain the exiting financial system, and creating a playbook for the next crisis. Why is this important? Because, as Raoul Pal of Global Macro Investors alluded to recently, global debts of all forms total between $400 trillion net and $1.2 quadrillion gross (yes, Quadrillion), therefor the collateral (assets) can NOT be allowed to fall or the system is wiped out. So we now have a game of whack-a-mole. Every time asset prices start to decline central banks must intervene with more

Steve Saretsky -

I’ve talked a lot about the great reopening trade. People are getting vaccinated, the weather is great, and people are desperate to get out of their house after tiresome lockdowns. In fact, Canada has now fully vaccinated 48.8% of its population against Covid-19, overtaking the U.S. for the first time. It’s no surprise that housing has finally come off the boil. Official housing data released last week from the Canadian Real Estate Association shows seasonally adjusted home sales are off 25% from their peak in March. Sales declined month-over-month in nearly 80% of all local markets. Yes, the pandemic induced FOMO has finally been sucked out of the housing market. Similar to the run on toilet paper at the onset of the pandemic, the run on housing created an acute shortage of supply, driving prices much higher. The MLS home price index, which adjusts for sales composition now suggests the typical home has risen 24.4% from last year- a record pace of home price inflation. Here’s how it looks across major metros: Toronto 19.9% Montreal 27% Vancouver 15% Calgary 12% Edmonton 8% Ottawa 28% Unlike the toilet paper crisis, the housing crisis will take longer to sort itself out. Total active

Steve Saretsky -

Per the most recent data from the Canadian Bankers Association, nearly 17% of all mortgages in Canada received a mortgage deferral at one point or another during the pandemic. At the end of February, 98% of those deferrals expired. Home prices during this time are up 24% nationally. Who saw that coming? Certainly not our own government mortgage and housing agency, the CMHC. Remember the call was for a drop of 9-18% across the board. There were a lot of money riding on that call, ouch. In all fairness to Evan Siddall, then head of the CMHC, it was a reasonable view at the time considering job loss was pervasive, the worst any of us had seen in our lifetimes. This prompted the CMHC to tighten underwriting criteria at the time over fears of buyers entering the housing market and going belly up. Of course the private insurers, Canada Guaranty and Sagen, never followed suit and gladly absorbed the additional business. CMHC’s market share was between 45 -50% pre pandemic but slipped to 23% by earlier this year. In contrast, Sagen’s market share climbed to 44% and Canada Guaranty’s to 33%, according to RBC Bank. What appeared to be a prudent

Steve Saretsky -

The pandemic induced housing boom has been well documented so I won’t go into great detail here. In hindsight it was easy to see, people got locked in their homes, they suddenly needed more space, some people decided to move further away from the office as the prospects of work from home appeared more permanent. Armed with ample liquidity provided by central banks, the government, and the commercial banks, home sales soared to record highs and prices have followed suit. Global property prices have surged. Here in North America, Canadian home prices are up 24% year-over-year, US home prices, as measured by the Case-Shiller index are now up 15%, that’s good for the largest annual gain since the 1980s. Madness. However, now the true test comes. Similar to the stock market, you have the pandemic trade, and now the reopening trade. Most of the US is now fully open, people are emerging from their homes and eager to travel. House shopping is fading. US home Sales of existing homes in May dropped for the fourth straight month. “Sales are essentially returning towards pre-pandemic activity,” Realtors chief economist Lawrence Yun said. Mortgage applications continue to fall, now at their lowest levels since January

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The Canadian Economy

Steve Saretsky -

According to a report this past week from the National Bureau of Economic Research, the pandemic recession only lasted two months, from February 2020 to April 2020. This makes it the shortest recession in the history of the United States. The Bureau defines a recession usually as “a decline in...

Steve Saretsky -

I’ve talked a lot about the great reopening trade. People are getting vaccinated, the weather is great, and people are desperate to get out of their house after tiresome lockdowns. In fact, Canada has now fully vaccinated 48.8% of its population against Covid-19, overtaking the U.S. for the first time. It’s...

Steve Saretsky -

Per the most recent data from the Canadian Bankers Association, nearly 17% of all mortgages in Canada received a mortgage deferral at one point or another during the pandemic. At the end of February, 98% of those deferrals expired. Home prices during this time are up 24% nationally. Who saw...

Steve Saretsky -

The pandemic induced housing boom has been well documented so I won’t go into great detail here. In hindsight it was easy to see, people got locked in their homes, they suddenly needed more space, some people decided to move further away from the office as the prospects of work...

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The Saretsky Report. December 2022