DATE

Monetary Imprudence

Steve Saretsky -

Christmas came early for the 69% of Canadians who own a home. The latest data released from the Canadian Real Estate Association shows national home prices inflated at the quickest pace ever, rising 25% from last year. The home price index which measures the price of a typical home in Canada now sits at $780,400, up from $582,700 or 34% from when the pandemic commenced in March 2020.

Through the end of November 630,634 residential properties have traded hands via Canadian MLS® Systems, already surpassing the annual record of 552,423 sales for all of 2020. There is currently just 1.8 months of inventory on a national basis, tied with March 2021 for the lowest level ever recorded. Yes, the housing bull market is still in tact and growing more obscene by the day.

Prices gains over the past 12 months:

Greater Vancouver +16%
Victoria +22.4%
Calgary +9.3%
Edmonton +4.1%
Montreal +20.9%
Greater Toronto +28.3%
Winnipeg +12.8%

As I wrote in last weeks piece, Canada is running wartime fiscal and monetary policy. There are no guns this time, but there is a virus, and so there is seemingly no limit on how much money we should throw at this. We just found out the federal government is forecasting a budget deficit of $144B this year. For context, in 2009, following the financial crisis, the deficit that year was less than $35B. Obviously the excesses are showing up in asset prices.

Meanwhile, rolling lockdowns are back, which means more government spending and more central back accommodation is coming. In fact, the house of Commons just passed Bill C-2 (An Act to Provide Further Support In Response To Covid-19) which was slated to be a $7B relief program. An hour after the bill passed that number was raised to $12B. A rounding error perhaps.

Is it possible that all of this money printing, albeit well intentioned, is creating adverse side effects? After all, we have printed 23% of all Canadian dollars into existence over the past 18 months. Unfortunately I’m not sure building a few more homes will solve our monetary imprudence but that is what we are going to try. Let’s watch.

Three Things I’m Watching:

1. Canada’s budget deficit as a percentage of GDP is unlike anything we’ve experienced in modern history. (Source: Acorn Macro)
ff7f61c8-4945-81ca-3a1b-c52f818a59a2-9433119

2. Canada’s non financial sector debt is 345% of GDP. One of the highest in the world. (Source: Acorn Macro) 0085bb26-2546-98fe-dcd7-612a29905b35-7273495

3. National home prices are up 34% since the start of the pandemic. (Source: CREA)
4416467b-f0a2-2045-c42c-2c48c59aba61-5455491

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! Anyone following this newsletter since about January knows that the housing market has surged back to life. Inventory has fallen off a cliff at the same time buyer sentiment has rebounded, coinciding with the BoC’s Tiff Macklem taking his foot off the gas. In the GTA, home...

Steve Saretsky -

Happy Monday Morning! We get readers of all stripes on this newsletter. Policy makers, bankers, property developers, and every day people trying to figure out what’s going on in the crazy world of Real Estate up north. We’ve hit nearly seven thousand subscribers now which i’m incredibly grateful for. I’m...

Steve Saretsky -

Happy Monday Morning! We’ve talked a lot about the recent mismatch between population growth in this country and the ability to deliver enough new housing supply to not only meet demand but actually moderate price growth. Housing is all about supply and demand after all. We’ve tried to obliterate demand...

Steve Saretsky -

Happy Monday Morning! We’ve talked a lot about immigration. Remember, the Feds targeted 430,000 permanent residents in 2022 and hit those with ease. Those targets have been set even higher moving forward. However, the real issue here is these figures do not include non-permanent residents. It seems strange to omit...

Steve Saretsky -

Happy Monday Morning! For the first time in a year Canadian home prices ticked higher. Monthly data published by CREA noted a very modest 0.2% month over month increase in national home prices. However, regular readers here know this has been ongoing for several months now. Prices in most major...

Get the Saretsky Report to your email every month

The Saretsky Report. December 2022