{"id":11122,"date":"2023-06-19T06:31:26","date_gmt":"2023-06-19T13:31:26","guid":{"rendered":"https:\/\/www.stevesaretsky.com\/?p=11122"},"modified":"2023-06-19T06:31:49","modified_gmt":"2023-06-19T13:31:49","slug":"credit-slump","status":"publish","type":"post","link":"https:\/\/www.stevesaretsky.com\/2023\/06\/news\/credit-slump\/","title":{"rendered":"Credit Slump"},"content":{"rendered":"\n<p>Happy Monday Morning!<\/p>\n\n\n\n<p>As mentioned in&nbsp;<a href=\"https:\/\/stevesaretsky.substack.com\/p\/the-firm-grip-of-tiff-macklem\">last weeks note<\/a>, the great big housing boom is over. You see housing booms need credit, lots of it, to keep the wheels churning. The single largest driver of home prices over the past few years has been cheap and abundant credit. When money is basically free you tend to create speculative bubbles. Suburban houses come to mind.<\/p>\n\n\n\n<p>It doesn\u2019t take a genius to figure out what happens when mortgage rates go from 1.5% to 5.5% in the span of twelve months.<\/p>\n\n\n\n<p>Mortgage borrowing has slowed to a trickle. Canadian households added a net $11.2 billion in mortgage debt in the first three months of this year, that\u2019s the smallest increase in two decades, and down from a cycle high of $58B in Q1 of 2022.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><a href=\"https:\/\/substackcdn.com\/image\/fetch\/f_auto,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fa14bca70-ec87-40c3-8090-bfb210b4a6b0_1294x744.png\" target=\"_blank\" rel=\"noreferrer noopener\"><img alt='https3a2f2fsubstack-post-media-s3-amazonaws-com2fpublic2fimages2fa14bca70-ec87-40c3-8090-bfb210b4a6b0_1294x744-8346115' src='https:\/\/www.stevesaretsky.com\/wp-content\/uploads\/2023\/06\/https3A2F2Fsubstack-post-media.s3.amazonaws.com2Fpublic2Fimages2Fa14bca70-ec87-40c3-8090-bfb210b4a6b0_1294x744-8346115.png' alt=\"\"\/><\/a><figcaption class=\"wp-element-caption\">Source: Bloomberg<\/figcaption><\/figure>\n\n\n\n<p>According to&nbsp;<a href=\"https:\/\/www.consumer.equifax.ca\/about-equifax\/press-releases\/-\/blogs\/increased-demand-for-credit-continues-and-delinquency-rates-rise-as-some-consumers-struggle-with-affordability\/\/?ref=mortgagelogic.news\">Equifax<\/a>, new mortgage originations plummeted by 42% compared to Q1 2022\u2014the lowest volume witnessed since 2014. In the opinion of rockstar veteran mortgage broker Jim Tourloukis, compensation for most brokers is down 60% year-over-year. Suffice to say the industry is entering a significant consolidation in the coming year or two, and it\u2019s not just mortgage brokers, Realtors and developers are also on the hot seat.<\/p>\n\n\n\n<p>Building permits fell 18.8% to $9.6B in April, the lowest level since December&nbsp;2020. Meanwhile, the national housing agency says the seasonally adjusted annual rate of housing starts was 202,494 units in May, down from 261,357 units in April.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><a href=\"https:\/\/substackcdn.com\/image\/fetch\/f_auto,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fff8db3d1-baa1-4f7a-a91d-7a9830cc9578_1824x1268.png\" target=\"_blank\" rel=\"noreferrer noopener\"><img alt='https3a2f2fsubstack-post-media-s3-amazonaws-com2fpublic2fimages2fff8db3d1-baa1-4f7a-a91d-7a9830cc9578_1824x1268-9576000' src='https:\/\/www.stevesaretsky.com\/wp-content\/uploads\/2023\/06\/https3A2F2Fsubstack-post-media.s3.amazonaws.com2Fpublic2Fimages2Fff8db3d1-baa1-4f7a-a91d-7a9830cc9578_1824x1268-9576000.jpg' alt=\"\"\/><\/a><figcaption class=\"wp-element-caption\">Source: Acorn Macro, Richard Dias<\/figcaption><\/figure>\n\n\n\n<p>Anyways, this will all take time to filter through the real economy. Credit origination has slowed dramatically, housing transactions remain below historical averages, and new development projects are going down for the dirtnap. It\u2019s not easy to turn this around on a dime either, many of these developments take years of planning. Let\u2019s not forget that the Bank of Canada just \u201cunpaused\u201d their rate hiking crusade, and bond yields are climbing once again. In other words, this is going to get worse before it gets better.<\/p>\n\n\n\n<p>The supply policy makers so desperately talk about will end up becoming another broken promise. Ironically, our population just surpassed 40 million people this week. Congrats everyone.<\/p>\n\n\n\n<p>Thankfully we have a decent amount of supply under construction in the pipeline today, maybe just enough to get us through this cycle. But make no mistake, we will still be talking about a housing crisis five years from now.<\/p>\n\n\n\n<p>It\u2019s true house prices have held up well so far, but let\u2019s not forget banks have been deferring interest payments en masse and new listings coming to market have been hovering near twenty year lows, neither of which is unlikely to be sustained.<\/p>\n\n\n\n<p>The recent credit slump should serve as a caution sign ahead.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Happy Monday Morning! As mentioned in&nbsp;last weeks note, the great big housing boom is over. You see housing booms need credit, lots of it, to keep the wheels churning. The single largest driver of home prices over the past few years has been cheap and abundant credit. When money is basically free you tend to [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":11123,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[70],"tags":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Credit Slump - Steve Saretsky<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.stevesaretsky.com\/2023\/06\/news\/credit-slump\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Credit Slump - Steve Saretsky\" \/>\n<meta property=\"og:description\" content=\"Happy Monday Morning! As mentioned in&nbsp;last weeks note, the great big housing boom is over. You see housing booms need credit, lots of it, to keep the wheels churning. The single largest driver of home prices over the past few years has been cheap and abundant credit. 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I have a passion for Real Estate, creating a business, and connecting with people. I build my Real Estate business on human relationships not leads and numbers. I believe in advising my clients on making the best real estate decisions not on closing another commission cheque. My goal is to help people build wealth through real estate.\",\"sameAs\":[\"http:\/\/www.buyvancouvercondos.ca\",\"https:\/\/www.facebook.com\/saretsky91\",\"https:\/\/twitter.com\/https:\/\/twitter.com\/SteveSaretsky\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Credit Slump - Steve Saretsky","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.stevesaretsky.com\/2023\/06\/news\/credit-slump\/","og_locale":"en_US","og_type":"article","og_title":"Credit Slump - Steve Saretsky","og_description":"Happy Monday Morning! 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