The "Forever" Canadian Housing Bubble

[GRG55]

Re: The "Forever" Canadian Housing Bubble

The upward inflections in Canadian SFD housing prices continues in most markets...in the face of record unemployment, closed borders, massive government support payments and collapsing businesses. Toronto up, Ottawa up, long moribund Montreal up, even battered Edmonton and Calgary are showing signs of price inflation. Difficult to discern any serious correction going on in stratospheric Vancouver. Condos in the three major cities went flat long before COVID showed up.

Shows what Central Bank cheap money policy can really do. Extraordinarily powerful influence. For now.

5 year mortgages from the banks in Canada are now below 2%, if you can qualify.
So, hands up everyone here who thinks its those dastardly Chinese buyers doing this.

[Mega]

Re: The "Forever" Canadian Housing Bubble

I die-grass for a sec:-

[GRG55]

Re: The "Forever" Canadian Housing Bubble

Good news ?.......Bad news?
?
Mike

Great news if one is selling a home. Not so sure it will be good news for all of the buyers if thus liquidity crisis morphs into a solvency event in the next 6 months or so.

[Mega]

Re: The "Forever" Canadian Housing Bubble

Good news ?.......Bad news?
?
Mike

[GRG55]

Re: The "Forever" Canadian Housing Bubble

5 year term mortgage rates can now be had at <2% in Canada. Despite COVID-19 the property markets in Victoria, Vancouver, Toronto, Ottawa, Montreal, Halifax and a number of smaller centers throughout the country are back on fire again.

This in the face of record job losses this year:




The latest from Brian Ripley. Check out the upward inflections.

[GRG55]

Re: The "Forever" Canadian Housing Bubble

May data. Every major city except Ottawa and Montreal, the two cities that benefit most from Federal Government largess, is headed south now. By all appearances we are setting up for a "winter of discontent" in the Canadian property markets. Eight million households in Canada are on the COVID related income support program. Of 3.65 million mortgage holders almost 1 million elected to start deferring mortgage payments. Mortgage deferrals are significant and therefore total household debt is rising (the deferred payments are added to the end of the mortgage period, so are not forgiven, but add to the debt load). But then I thought Vancouver was in a bubble in 2010, a full decade ago, so WTF do I know...

"...Realtors across the country reported a jump of almost 70% in properties hitting the market in May after a barren April. Says (Robert) Hogue (economist at RBC): “There are early signs demand and supply are decoupling. We expect further decoupling in the period ahead. Economic hardship is no doubt taking a toll on a number of current homeowners — including investors. Some of them could be running out of options once government support programs and mortgage payment deferrals end, and may be compelled to sell their property.”


From Brian Ripley's chpc.biz site: http://www.chpc.biz/6-canadian-metros.html

[GRG55]

Re: The "Forever" Canadian Housing Bubble

do you know anything about sales volumes? usually at tops sales volume goes way down as sellers don't want to adjust to the new reality. otoh, maybe it was the lifting of restrictions in china, eh?

Two part post.

Part I is response to above question regarding sales volumes. Three charts: Vancouver, Calgary and Toronto. All showing marked downtrend in sales volumes (mauve lines near bottom of each chart is sales volume).

Part II, "Owe Canada", below the charts, is an interesting read from the head of the Canada Mortgage and Housing Corporation, Evan Sidall. CMHC is a Federal agency, backed by the taxpayers, and is the largest mortgage insurance organization in the country. It's balance sheet has ballooned in the last 15 years as Canada has enjoyed the MOAB (Mother Of All (housing) Bubbles). If the downpayment is below a certain government mandated threshold (I think 20%?) then it is mandatory that buyers secure mortgage insurance.

Although the speaking notes carry the innocuous title "Supporting Financial Stability During the COVID-19 Pandemic", in actual fact there was some very sobering commentary from Mr Sidall to the Government of Canada's Standing Committee on Finance in Ottawa yesterday.


PART I







PART II

[Highlights below are mine]

https://www.cmhc-schl.gc.ca/en/media-newsroom/speeches/2020/supporting-financial-stability-during-covid19-pandemic

Supporting Financial Stability During the COVID-19 Pandemic

Thank you, Chair, for this opportunity to update the Committee on how CMHC is helping to stabilize Canada’s financial system and support the economic well-being of households and small businesses during the COVID-19 pandemic. My appearance before you today is also timely in informing you about new measures we are contemplating to promote housing affordability and to reduce risks to CMHC and to our economy.

Early in the crisis, in co-ordinated action with the Bank of Canada and the Department of Finance, we relaunched the Insured Mortgage Purchase Program...Under the current revised program, we stand ready to purchase up to $150 billion of insured mortgages...

...In addition, we acted quickly to help Canadians who are having difficulty paying their mortgages or rent due to income loss because of COVID-19. In co-ordination with private mortgage insurers, we are offering temporary deferral of mortgage payments for up to six months. We estimate that 12 per cent of mortgage holders have elected to defer payments so far, and that figure could reach nearly 20 per cent by September...

...However, as the Committee is no doubt aware, almost everything we have done in response to the crisis involves borrowing. Just as governments are taking on more debt to finance the COVID-19 response, mortgage deferrals are adding to already historic levels of household indebtedness.

Canadians are among world leaders in household debt. Pre-COVID, the ratio of gross debt to GDP for Canada was at 99 per cent. Due in part to increased borrowing but even more so to declines in GDP, we estimate it will increase to above 115 per cent in Q2 2020 and reach 130 per cent in Q3, before declining. These ratios are well in excess of the 80 per cent threshold above which the Bank for International Settlements has shown that national debt intensifies the drag on GDP growth.

Looking at debt multiples of disposable income, that measure will climb from 176 per cent in late 2019 to well over 200 per cent through 2021. Moreover, CMHC is now forecasting a decline in average house prices of 9 – 18 per cent in the coming 12 months. The resulting combination of higher mortgage debt, declining house prices and increased unemployment is cause for concern for Canada’s longer-term financial stability.

A team is at work within CMHC to help manage a growing debt “deferral cliff” that looms in the fall, when some unemployed people will need to start paying their mortgages again. As much as one fifth of all mortgages could be in arrears if our economy has not recovered sufficiently...

...Our support for homeownership cannot be unlimited. Homeownership is like blood pressure: you can have too much of it. Housing demand is far easier to stimulate than supply and the result, as we’ve seen, is Economics 101: ever-increasing prices...

[GRG55]

Re: The "Forever" Canadian Housing Bubble

Sales volumes are plummeting now. B.C. and Ontario are two of the harder hit Provinces with COVID-19. Besides, who wants strangers wandering through looking at their house with the virus at large. So listings will probably be pulled and that might tighten the market for a while I suppose?

I expect April sales volume numbers to be awful. I would think that will eventually show up in declining prices as distressed sellers return to the market in due course. But what do I know. The Vancouver market, in particular, continues to surprise me...for ten long years now.

[GRG55]

Re: The "Forever" Canadian Housing Bubble

do you know anything about sales volumes? usually at tops sales volume goes way down as sellers don't want to adjust to the new reality. otoh, maybe it was the lifting of restrictions in china, eh?

Sales volumes are plummeting now. B.C. and Ontario are two of the harder hit Provinces with COVID-19. Besides, who wants strangers wandering through looking at their house with the virus at large. So listings will probably be pulled and that might tighten the market for a while I suppose?

I expect April sales volume numbers to be awful. I would think that will eventually show up in declining prices as distressed sellers return to the market in due course. But what do I know. The Vancouver market, in particular, continues to surprise me...for ten long years now.

[jk]

Re: The "Forever" Canadian Housing Bubble

do you know anything about sales volumes? usually at tops sales volume goes way down as sellers don't want to adjust to the new reality. otoh, maybe it was the lifting of restrictions in china, eh?

[GRG55]

Re: The "Forever" Canadian Housing Bubble

Now here's a juxtaposition:

March unemployment in Canada increases by 1 million people. Another 2.1 million have their hours of work slashed. The national unemployment rate increases from 5.6% to 7.8% in one month. The youth unemployment rate is 16.8%. The Federal deficit, which was running about $19 Billion annually before C-19 showed up, is now forecasted to hit an eye-popping 184 Billion this fiscal year.

And Vancouver and Toronto housing both posted an increase in average prices in March.

[Fiat Currency]

Re: The "Forever" Canadian Housing Bubble

... There’s a lot more room to move in Canada.

I plan to buy my daughter her first house with a palmful of gold sometime in the next 18 months.

$CAD @ $0.69 and looking pretty weak.

[GRG55]

Re: The "Forever" Canadian Housing Bubble

GREATER VANCOUVER HOME SALES DOWN 22.1% IN JANUARY FROM PRIOR MONTH

all the buyers are in quarantine.

Apparently THAT didn't last long, LOL.

Bloomberg - March 19, 2020

(Bloomberg) -- A week into a pandemic that has forced a swath of Canada’s economy to shut down and wiped hundreds of billions of dollars off the nation’s stock market, a Vancouver mansion sold for $150,000 over the asking price.

As the coronavirus upends the real estate business, along with everything else, the country’s indefatigable buyers are taking some pause -- but, so far, not much.

John Pasalis’ firm was getting ready to list a $1.1 million home in Toronto’s trendy Leslieville district next week but was preempted by two “bully” offers -- those made ahead of the official selling date. A deal was struck before the property ever hit the market...

...Re/Max, one of the nation’s biggest brokerages, on Tuesday urged its 18,000 brokers across the country to cancel all open houses. In Vancouver, developers are closing sales centers and construction sites will be impacted as building activity is interrupted, according to Anne McMullin, president of the Urban Development Institute, an industry group.

But underpinning the market is the fastest pace population growth in 30 years, driven in large part by immigration, and the appeal of Canadian real estate to those with cash to deploy at uncertain times, including foreign buyers.

In Montreal, a New-York based buyer just made an offer on a property listed at more than $2 million after a virtual visit, said Debby Doktorczyk, owner of Engel & Volkers Montreal, which counts 175 brokers.

Momentum helps. The housing market entered the spring selling season on a high, with sales across the country up 25% from February 2019. Toronto and Vancouver home resales surged about 44% from the same month a year ago, while Montreal’s were up about 23%.

The market was extremely strong -- if not a bit “crazy” -- before the pandemic, says Doktorczyck. Now, “instead of getting 15 offers for a property, we’re getting five,” she said, adding virtual visits are likely to become more common.

Even in Vancouver, which was only just emerging from its worst year in decades before the coronavirus, Royal LePage broker Adil Dinani says his shop is still doing 90% of the deals expected.

Dinani was up past midnight negotiating the sale of a C$2.3 million, six-bedroom home in an affluent suburb just outside Vancouver. The open house on Sunday had drawn 40 groups -- some 85 eager buyers undeterred by the virus -- who waited to enter one group at a time. The property drew seven offers, including the winner -- an all-cash bid, almost C$150,000 above asking.

While open houses may be suspended, home buyers can still see homes by appointment, say agents. Meanwhile falling mortgage rates will act as a spur. Borrowers can now get a five-year variable mortgage at 2.1% and a three-year fixed at 1.99%, according to RateSpy.com.

“You know the saying -- oxygen for any real estate market is low interest rates,” said Dinani at Royal LePage in Vancouver. “Well interest rates just got lower. There’s a lot more room to move in Canada. That prime rate can come down more, unlike the U.S. and other nations that are pretty much operating near zero.”

[GRG55]

Re: The "Forever" Canadian Housing Bubble

GREATER VANCOUVER HOME SALES DOWN 22.1% IN JANUARY FROM PRIOR MONTH

all the buyers are in quarantine.

[jk]

Re: The "Forever" Canadian Housing Bubble

GREATER VANCOUVER HOME SALES DOWN 22.1% IN JANUARY FROM PRIOR MONTH

all the buyers are in quarantine.