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Canada’s uncertain economy has not dampened home ownership optimism among millennials and the young, first-time buyer cohort. In fact, the current coronavirus disruption is seen as a driver of the desire for home ownership among the 18 to 34 year-old demographic. A recent survey by one of the big banks suggests the pandemic and its restrictions have nearly 20% of 18 to 34 year-olds accelerating their plans to purchase a home or investment property.  The thinking is, rules which have confined people to their homes have sparked a realization that they need a bigger, more functional living space. Historically low interest rates continue to have an outsized influence on homebuying optimism.  The Bank of Canada has clearly stated that its rates will remain low until [...]

After six months in COVID quarantine Canada Mortgage and Housing Corporation is, once again, releasing its quarterly Housing Market Assessments. The most recent HMA covers up to the end of June so the very busy period through July and August does not figure into the report. Overall, the federal housing agency ranks the vulnerabilities to Canada’s housing market as moderate, the same as its last report in February.  Overvaluation continues to show moderate risk while the other three factors – overheating, price acceleration and overbuilding – are ranked as low risk.   No individual markets remain in the high risk category. CMHC cites “the evidence of rising imbalances in some local housing markets coupled with the general weakening of housing market fundamentals” as the reason for [...]

Canada’s housing market has yet to take its summer vacation.  August numbers from the Canadian Real Estate Association show sales rose 33.5% compared to a year ago and were up more than 6% from July’s record setting pace. Nearly 59,000 properties changed hands last month, making it the busiest August ever. Prices took a hike in August as well.  The national average rose 18.5% year-over-year to $586,000.  As usual, Toronto and Vancouver had an outsized influence on the number.  When those two markets are factored out the national average price drops to $464,000, up 18% year-over-year. CREA’s Home Price Index, which compensates for anomalies like Vancouver and Toronto, posted a 9.4% y-o-y increase. The sales-to-new-listings ratio improved slightly in August, easing to 69% from more [...]

One of the biggest vulnerabilities in the Canadian economy got a bit smaller in the second quarter. Statistics Canada reports that the amount of debt-to-household-income dipped to 158.2%, from 175.4% in the first quarter.  So, for the peak months of the COVID-19 shutdown, Canadian households owed $1.58 for every dollar of disposable (i.e., after tax) income.  Under normal circumstances that would be good news.  But the StatsCan report also shows that the actual, total amount of debt did not change very much. Overall, credit market debt totaled $2.33 trillion at the end of Q2, with $1.55 trillion in mortgage debt and $779 billion in consumer credit and non-mortgage loans. On the other side of the ratio, incomes did increase slightly but that was chiefly because [...]

A strong rebound in the housing market has helped push Canadian consumer debt to nearly $2-trillion. Credit monitoring firm Equifax says consumer debt rose 2.8% in the second quarter, compared to the same period in 2019.  Equifax says slower mortgage paydowns, refinancing, deferrals, better sales and high prices have propped-up mortgage debt levels. At the same time consumer, non-mortgage, debt has dropped.  Not surprisingly, consumers reduced their use of credit cards, lines of credit and auto loans during the economic slowdown caused by the coronavirus pandemic. Also, not surprisingly, the use of credit support mechanisms, like mortgage deferrals, have been wide spread during the pandemic.  Equifax says more than three million consumers are using, or have used, some form of payment accommodation since February. Consumers [...]

The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent. The Bank is also continuing its quantitative easing (QE) program, with large-scale asset purchases of at least $5 billion per week of Government of Canada bonds. Both the global and Canadian economies are evolving broadly in line with the scenario in the July Monetary Policy Report (MPR), with activity bouncing back as countries lift containment measures. The Bank continues to expect this strong reopening phase to be followed by a protracted and uneven recuperation phase, which will be heavily reliant on policy support. The pace of the recovery remains highly dependent on the path of the [...]

The Canadian economy took a record setting hit in the second quarter. Gross Domestic Product for April, May and June shrank by nearly 40%, on an annualized basis. The plunge was not a surprise for analysts. Forecasts had Q2 being the worst for the pandemic lockdown economy, and the projections were for an even bigger decline. Taking a look at the actual numbers (not the annualized extrapolation) softens the blow a bit. The second quarter saw GDP contract by 11.5%. Statistics Canada had forecast a 12% contraction. StatsCan is calling for a return to growth in the third quarter, and we saw some signs of that in June. Compared to May, June GDP recovered by 6.5% – the biggest monthly bounce-back on record. The trend [...]

Canada's real estate market made a remarkable recovery in July and there are expectations it will continue for another couple of months. Back in the spring real estate was heading into one of the tightest markets in the past 20 years.  Then the coronavirus pandemic was declared, governments imposed lockdowns and the economy ground to a halt, hobbling home sales.  April saw some of the lowest numbers ever recorded.  But it roared back to life in July. "Things may have gone quiet for a few months, but ultimately the market we’re seeing right now is mostly the same one we were heading into back in March," says Shaun Cathcart, CREA's Senior Economist. July sales shot up more than 30% compared to a year ago and [...]

Buyers, brokers and lenders can be forgiven if they see the federal government’s attitude toward mortgages heading in two different directions at once.  The federal housing agency is calling for one thing while the Bank of Canada appears to be clearing the way for the opposite. Earlier this month the CEO of Canada Mortgage and Housing Corporation, Evan Siddall, sent a letter to banks, mortgage lenders and private mortgage insurers calling on them to tighten their requirements for borrowers.  He asked lenders to stop offering higher-risk mortgages to over-leveraged first-time buyers in the name of Canada’s future economic health and for the sake of CMHC itself. “We are approaching a level of minimum market share that we require to be able to protect the mortgage [...]

Mortgage Professionals Canada has launched a series of new surveys designed to gauge the sentiment of Canadians toward home ownership during the COVID-19 pandemic. The survey will be run four times over 24 weeks.  It examines four main aspects of home ownership and home buying sentiment in Canada: -       How Covid-19 has affected employment and incomes -       Impacts on expectations about buying homes -       Attitudes and expectations on topics related to housing markets and mortgages -       Opinions about the mortgage deferral program. The first results were released last week.  They suggest that more than half of current home owners (57%) do not feel that their employment situation has been severely impacted by COVID-19.  Many others expect any changes or impacts will be short-term.  The report [...]