Home » Posts tagged 'canadian housing'

Tag Archives: canadian housing

The magnificent house price bubble wheezes.

With 2017 mortgage pre-approvals having now expired, the first wave of buyers facing OSFI’s ground breaking mortgage regulations are being put to the test. The regulations, also known as B-20, require all borrowers to pass a stress test at an interest rate 2% higher than the qualifying rate.

Early symptoms appear rather obvious. National home sales slid for the month of March, falling 23% year over year, and pushing the average sales price down 10%. Overall, it was a bearish quarter for Canadian housing, first quarter sales fell 16% year over year.

Much of the declines were felt in the single family housing market in Vancouver & Toronto, with many buyers unable to qualify at the recently inflated prices. The average sales price of a single family home in Greater Vancouver now sits at C$1.6 million and C$1 million in the Greater Toronto Area (GTA).

Chief economist of the Canadian Real Estate Association, Gregory Klump, noted the squeeze as “tighter mortgage lending rules, which make it harder for home buyers to qualify for uninsured mortgages, are also shrinking the pool of qualified buyers for higher-priced homes.”

To little surprise this reflected in the national home prices across Canada. The Q1 2018 average sales price declined by 6.27% from Q1 2017. It was the first year-over-year percentage decline since Q1 2009.

The impact of the mortgage stress could become more apparent moving forward, particularly if borrowing rates continue to rise. As of today, a homebuyer hoping to purchase the typical home in Greater Vancouver (as per the MLS benchmark price of C$1.084M) would require a minimum down-payment of C$216,800 and a verified income of C$175,000, assuming a 5-year mortgage at a generous 2.99% interest rate.

…click on the above link to read the rest of the article…

Canadian Housing Affordability Hits 27 Year Low

December 22, 2017

Canadian Housing Affordability Hits 27 Year Low

Real Estate Hasn’t Been this Unaffordable Since 1990 per RBC

Nothing says Merry Christmas like a 27 year low for Canadian housing affordability. That’s right, real estate across Canada has not been this un affordable since the year 1990 per RBC. Spoiler alert house prices tumbled shortly thereafter.

RBC Bank released their updated Q3 numbers for housing affordability. To no surprise, Vancouver leads the nation in the most unaffordable market to buy a home. Followed by Toronto and then Victoria.

“The deterioration in the latest two quarters, in fact, put Vancouver buyers in the worst affordability position ever recorded in Canada.”

Vancouver Un affordability Sets New High In Canada

“The area experienced the sharpest affordability drop among Canada’s major markets between the second and third quarters. RBC’s aggregate measure surged by 5.3 percentage points to 87.5%. This represents a new record high for any market in Canada. We see further downside to Vancouver’s home ownership rate in the period ahead. The rate fell from 65.5% in 2011 to 63.7% in 2016.”

Source: RBC – Vancouver housing affordability Q3 2017

High Un affordability Tends to Lead to Recessions

What RBC didn’t mention in their report is the correlation between elevated house prices that cause affordability issues and recessions. When too much household money is spent servicing mortgage payments it eventually becomes a drag on consumer spending and ultimately triggers a recession.

Canadian house prices and recessions — Source: Better Dwelling

This is not to suggest a recession is imminent. But when the percent of income the median family would have to use to service debt pushes above 50% in Toronto and Vancouver, a recession typically follows in Canada. Currently Toronto is at 71.7%, and Vancouver is at 79.87%.

…click on the above link to read the rest of the article…

Canadian Homeowners Take Out HELOCs to Fund Subprime Buyers Unable to get a Mortgage

December 14, 2017

Canadian Homeowners Take Out HELOCs to Fund Subprime Buyers Unable to get a Mortgage

The Housing & Debt Bubble ascends to the next level of risk.

By Steve Saretsky, Vancouver, Canada, Vancity Condo Guide:

The HELOC (Home Equity Line of Credit) has been a blessing and a curse for Canadian households. While it has helped spur house prices and simultaneously provided consumers the ability to tap into their new found equity, it has also crippled many Canadian households into a debt trap that seems insurmountable.

Between 2000 and 2010, HELOC balances soared from $35 billion to $186 billion, according to the Financial Consumer Agency of Canada, an average annual growth rate of 20%. As of 2016, HELOC balances sit at $211 billion, a 500% increase since the year 2000. While also pushing Canadian household debt to incomes to record highs of 168%.

Scott Terrio, a debt consultant, says the situation is a full blown “extend and pretend,” meaning borrowers are just continuously refinancing or taking on more and more debt in order to sustain their lifestyle. Canadians can extend their debt repayment terms and pretend to live a lifestyle they can’t otherwise obtain.

What the HELOC has also been able to do is help spur the private lending space which has ultimately supported rising house prices. Seth Daniels of JKD Capital, one of the most astute Canada-Watchers, says there’s a growing trend where “a homeowner acts as a sub-prime lender by drawing a HELOC at 3% interest only, and lends it to a subprime borrower at 8-12% for one year (interest only).”

This is something I’ve been hearing on an ongoing basis from mortgage brokers and lawyers who help facilitate these deals. Especially since mortgage lending conditions tightened, starting with OSFI’s first mortgage stress test back in November, 2016. The financial regulator required “high-ratio” borrowers (those with less than 20% down payment) to qualify for a mortgage at the borrowing rate plus 2%. So basically you’re getting qualified on what you can borrow at 5% even though you’re borrowing at 3%.

…click on the above link to read the rest of the article…

Teranet: Canadian Real Estate Prices Drop Most In 7 Years, Led By Toronto

October 25, 2017

Teranet: Canadian Real Estate Prices Drop Most In 7 Years, Led By Toronto

Teranet Shows Canadian Real Estate Drops Most In 7 Years, Led By Toronto

Canadian real estate prices may be softening. Numbers from Teranet show that home prices generally declined across the country in September. This decline is led by a drop in prices around the Greater Toronto Area, extending through the Greater Golden Horseshoe. Although not all markets saw decline. Vancouver is once again leading the 11 city composite index in monthly price gains.

Who The F**K Is Teranet, And Why Should I Care?

Teranet is a land registry behemoth that operates, amongst other things, the land registries in Ontario and Manitoba. They build a Home Price Index with National Bank of Canada, that uses land registry data to compare how prices on the exact same house evolve over time. That is, they only use homes that have been sold more than once. This is known as a “sales pair” analysis, and is the kind of the stuff common in the US.

One of the the things they produce is an index for 11 cities, which they combine in an urban index. It’s debatable if it’s more or less accurate than CREA’s urban index. However, if you’re into national housing stats – you should be checking out both.

Canadian Real Estate Prices See Largest Drop Since September 2010

The Teranet National Composite House Price Index fell in September. The index experienced a 0.8% drop when compared to the month before. National Bank of Canada analysts noted this is the largest drop since September 2010. This is also the first time the 11 city composite has dropped since January 2016. While a single drop isn’t a huge concern, the first after a long trend should be noted.

…click on the above link to read the rest of the article…

All Heck Breaks Loose in Toronto’s House Price Bubble

May 26, 2017

All Heck Breaks Loose in Toronto’s House Price Bubble

“It’s fear.”

During the first two weeks in May, according to preliminary data from Toronto Real Estate Board, home listings surged 47% from the same period last year even as sales plunged 16%. The average selling price dropped 3.3% from April – and this, after a 33% year-over-year spike in home prices in March and a 25% surge in April. Something is happening to Toronto’s blistering house price bubble.

Canada’s largest alternative mortgage lender, Home Capital Group, which focuses on new immigrants and subprime borrowers turned down by the banks, is melting down after a run on its deposits that crushed its funding sources. The industry is worried about contagion.

At the same time, the provincial government of Ontario announced a slew of drastic measures, including a 15% tax on purchases by non-resident foreign investors to tamp down on the housing market insanity that left many locals unable to buy even a modest home.

It comes after Bank of Canada Governor Stephen Poloz warned in April that home prices are in “an unsustainable zone,” that the market “has divorced itself from any fundamentals that we can identify,” that there was “no fundamental story that we could tell to justify that kind of inflation rate in housing prices,” and that “It’s time we remind folks that prices of houses can go down as well as up. People need to ask themselves very carefully, ‘Why am I buying this house?”’

A few days ago, Moody’s Investors Service downgraded Canada’s six largest banks on concerns over their exposure to the housing bubble and household indebtedness that ranks among the highest in the world.

Now even the relentlessly optimistic industry begins to fret:

…click on the above link to read the rest of the article…

Tag Archives: canadian housing

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

By Steve Saretsky, Vancouver, Canada, Vancity Condo Guide:

Now even the relentlessly optimistic industry begins to fret:

Latest Posts