The cost of housing has become a hot button topic across the world, but of course that is not a surprise to anyone. As home prices inflate well beyond wages, affordability is being eroded, particularly in global cities. This has simply been exacerbated through monetary policy, where a decade of cheap credit has funnelled into assets such as housing, enriching those with access to capital. This is the inevitable side effect of keeping rates too low for too long. Creating a crisis between the haves and the have nots, as hedge fund billionaire Ray Dalio has noted in his research, this is “the issue of our time.” Since 1980, median household real incomes have been nearly flat, and the average household in the top 40% earns four times more than the average household in the bottom 60%. Further, those in the top 40% now have on average 10 times as much wealth as those in the bottom 60%. That is up from six times as much in 1980. A recent article in the Wall Street Journal echoed these thoughts, suggesting the bottom half of Americans haven’t recovered from the housing bust. “The share of families in the bottom half who

Greater Vancouver condo sales bounced 9% year-over-year this August. This brought condo sales roughly in line with their 10 year average. Keep in mind these sales are not adjusted for population growth and/or the growth in the housing stock. We are seeing weakness in two and three bedroom condos, particularly the higher up you go. There is still lots of activity for one-bedroom condos as first-time buyers try to squeeze into the housing market. This is perhaps best reflected in the sales actives ratio for one-bedroom condos which shows a ratio of 28%, this is indicative of a seller’s market, although I’d still be hesitant to suggest that sellers truly hold the upper hand in negotiations. Buyers are still relatively picky, opting to neglect older less desirable buildings, particularly those with rental restrictions or pet restrictions. Most of the demand in the condo market is funneling into newer one bedroom units that are reasonably priced. However, again we like to emphasize context, the percentage of one-bedroom condos that sold over the asking price slipped to just 8% in August. This is down from 17% last year, and down significantly from a cycle high set back in June 2017 when 62%

The theme of this report is context. Case in point with the detached housing market. August detached housing sales surged 25% year-over-year. That makes for a great headline and if you didn’t have any context you would assume the detached market was booming. However when we contextualize this movement we can see that detached sales despite the large uptick year-over-year, sales are actually still below the 10 year average.  In fact, detached sales were 21% below the 10 year average for August, and even further below the 19 year average below. Which brings us to our next point. We actually believe that this is a structural problem. Detached home sales have been falling ever since 2015, as prices are simply out of reach for most local buyers. Despite prices falling anywhere between 15% and 35% (high end luxury segment), and mortgage rates hovering near record lows, sales remain weak.  The logical conclusion seems to be that we will slowly see the death of the single-family home as more of these homes get redeveloped into condos and townhomes in the future.  Detached prices remain soft, with both the average and median sales price showing a 4% decline year-over-year.  Further the MLS

The Greater Vancouver property market made headlines, stoking a head turning 46% year-over-year increase in home sales for the month of September. Reading this number without any context would certainly imply the market was red hot, and it is for this reason that The Saretsky Report was first started, to filter out the noise and to distill the important information. What we are seeing is a stabilization in the housing market after an extremely volatile past 12 months which saw sales crater to near multi-decade lows. While the market has stabilized, it is much too soon to declare the correction in home prices is over, but rather it begs the question, where do we go from here? As usual, let’s analyze this further..

The growth in Surrey has caught my attention for quite some time. It’s been an attractive growth city given job creation and the relatively more affordable housing prices. It should be no surprise that the annual population growth is just over 2.5% and more than double the city of Vancouver where the cost of living is out of reach for many. Given the cities growth and the sharp run-up in prices elsewhere, developers have been pretty bullish on the Surrey market. The relatively affordable land prices in years prior sparked a sharp increase in residential land development sales. Per Altus Group, annual land sales for the purpose of residential re-development began increasing in 2014, and more than doubled just two years later. New home sales have also been strong and steady up until the end of 2018. Although, they have since fallen off markedly in 2019. This shouldn’t be overly surprising given new home prices are reaching levels well beyond what is deemed affordable for the area (one of the main reasons people move to Surrey), Concord Pacific’s Park George high-rise reached average sales prices of $875/sqft, record highs for the area. Given the recent slowdown, which has seen the

Global bond yields continue to tumble as investors dogpile into bonds over fears of a looming recession. The worlds central bankers are rewarding such behaviour by slashing interest rates further into negative territory. Negative yielding debt is becoming the norm, surpassing $16T globally, a stunning example of a broken monetary system. Right on cue, In the world’s largest covered-bond market, a Danish bank unveiled its 10-year mortgage-backed notes at a negative coupon. Jyske bank will offer 10 year mortgage bonds to investors at a fixed rate of minus 0.5%. In other words, investors are paying for the privilege to lose money, assuming they hold to maturity. Jyske Bank says it would rather not be setting such records, given the global economic weakness that’s behind the historically low interest rates. “It’s a first not only for us but for all Danish mortgage institutions,” said Christian Bech-Ravn, head of ratings and investor relations at Jyske’s mortgage arm. “Overall, I don’t think it’s a good sign for the economy with these very low interest levels that we are seeing at the moment.” Meanwhile in Australia, with threats of a bursting property bubble, the Aussie central bank has been swift to slash interest rates

BC’s provincial housing market showed signs of stabilizing in July. The month of July notched a 12% increase in home sales year-over-year (not seasonally adjusted). This was the first time sales had increased on a year-over-year basis in eighteen months. However, sales are still below historical averages, ultimately suggesting the housing market is not out of the woods just yet. When looking at seasonally adjusted data, it also appears sales have bottomed, at least in Greater Vancouver which notched a 24% gain year-over-year. However, active listings across the province are still growing, up 12% from last year. A record number of new homes under construction in BC should add to that in the year ahead. Despite the uptick in activity in July, it remains a sluggish year for the BC housing market. The weakness in Greater Vancouver has spread across the province. This has prompted a year to date 14.4% decline in sales and a 5.3% drop in the average sales price.  

As the global economy slows Central Banks across the world are aggressively slashing interest rates towards zero. Desperately trying to avoid a recession, there remains little room to maneuver as interest rates slide closer into negative territory. Stimulus in the form of lower interest rates is nearing an end game, however, it appears to be providing one last shot in the arm to the housing market. National home sales in Canada increased slightly in June, growing 0.2% month-over-month, and 0.3% on a year-over-year basis. Further, July data from local Real Estate Boards across Canada suggest National home sales should increase again in July. This was bolstered by a jump in home sales in both Greater Toronto and Greater Vancouver which both recorded a 23% year-over-year increase in July home sales. Credit growth is also showing signs of picking up. Residential mortgage credit growth increased to 3.68% in June after hitting an eighteen year low earlier this year. Meanwhile, household credit growth also increased in June, after initially slowing to its weakest pace of growth since 1983. The recent uptick along with potential rate cuts coming from the Bank of Canada has stoked concerns of potentially re-inflating a property bubble. In

The Greater Vancouver condo market was responsible for most of the rebound in the July sales figures. Condo sales increased 15.2% year-over-year and were nearly in line with the ten year average (just shy by 3.9%) for the month of July. We believe falling mortgage rates, and relatively easy access to credit are responsible for the increased purchasing activity. Yes there is a mortgage stress test but banks are still eager to lend, as seen in the mortgage rate wars this year, and borrowers are still credit worthy (fully employed). However, buyers are still bargain hunting and looking for deals. Overpriced and or less desirable condos are not selling. Units in a poor location, or in a poorly run strata building are sitting for long periods of time. Condos that are priced sharply are still moving quickly, albeit at lower prices. This is reflected in the benchmark price of a condo which fell again in July, dropping 8.8% from last year. We also saw the average price per square foot drop 6.8% from last year.  Condo inventory continued to build off a low base from last year, increasing 30% year-over-year. Inventory still remains low from a historical perspective and that

Last July marked the fewest detached sales in Greater Vancouver since data was collected back in 1991. It should be no surprise that this year marked a noticeable uptick with sales jumping 31% year-over-year. As you’ll see in the chart below, this year was still one of the slowest from a historical context. Dating back to the year 2000, there have only been two other years with fewer detached sales in July (2012 & 2008).  It is much too soon to conclude the sharp bounce in sales year-over-year is indicative of a housing market that has “bottomed”. As we will highlight further in our report, sales increased on lower prices. The benchmark price of a detached home slipped further in July, now down 10.5% year-over-year. The benchmark price has now been in contraction for twelve consecutive months, the longest correction period since 2012/13.  It does appear that the sharpest annual price declines are behind us, at least for now, as we are seeing the year-over-year rate of price declines bottom, and begin to trend higher. This could further be solidified through the reduction in inventory, the number of homes for sale actually fell year-over-year, dropping 8% from last year. Sellers

Greater Vancouver home sales bounced again in August, increasing 16% year-overyear. This was the second consecutive month home sales had increased on a yearover-year basis. However, it is important to contextualize the movements before jumping to conclusions and getting too far ahead of ourselves. Without a doubt sales activity has increased, which shouldn’t be overly surprising considering we endured a twenty year low in purchasing activity through the first half of this year. It appears some of the demand that was cautiously sitting on the sidelines is finally pulling the trigger, thanks to lower prices and much lower mortgage rates. Today we are seeing 5 year fixed uninsured mortgages as low as 2.69% with further indications that those should sink lower as the 5 year Government of Canada bond yields continues to tumble. Despite the massively inverted Canadian yield curve, banks are still eager to lend, many of whom are actively competing for new borrowers despite shrinking margins. As a result, the housing market appears much stronger, sales activity is picking up, banks are lending and prices appear to have stabilized. However, resounding calls echoing that the bottom is in, are likely premature. Let us dive in further.

The Greater Vancouver housing pipeline remains fully bloated surpassing 44,000 units under construction as of the end of June, a fresh record high. Despite the softness in the housing market with home sales hovering near two decade lows to start the year, developers are still jamming through new projects at a record pace. Year to date (as of the end of June), housing starts hit 15,723 units, that’s up 25% from the same period last year. While these housing starts are likely to ease prices further, ultimately aiding in the battle of affordability, they still need to find willing buyers. Per data from MLA Canada and Urban Analytics, pre-sale activity remains weak. Perhaps even threatening the viability of some of these projects. In June, MLA reported the pre-sale absorption rate at 14%, the lowest count since MLA began tracking the data in January 2018. Urban Analytics second quarter data shows the growing divergence between sales and unsold inventory. Buyers of course are the real winners here as the abundance of options are being further incentivized through increased bonuses and decorating allowances from developers. However, it’s not just property developers who are vying for the attention of buyers, condo flippers too