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In a year where pretty much all things economic and financial have been stood on their heads, here is another anomaly brought on by the coronavirus pandemic.  Household debt is on the rise again and a lot of it is mortgages. The latest tally by Statistics Canada shows that the Canadian Household Debt-to-Income ratio crept back up to 170.7% in the third quarter.  That is, on average, Canadian households owe $1.71 for every dollar of disposable (after tax) income.  That is a significant bump from $1.63 in the second quarter, but significantly less than the $1.81 at the start of the year. The drop in Q2 is largely attributed to government support payments, mortgage deferrals and other debt relief that saw Canadians spending much less, [...]

Fast moving, ever changing and, often, contradictory information is making it hard to predict what’s coming for the economy.  But, a couple of recent reports may be offering some hints about where residential real estate and mortgages are heading. A recent survey by the brokerage Properly seems to reinforce current notions that people – particularly millennials – are looking for more space both inside and outside their homes, as a result of being cooped-up by the COVID-19 pandemic and the desire to maintain the option to work from home. According to the Properly survey more than half of millennials are unhappy with their current homes.  Their preferences have shifted towards: - Detached housing, 45%             - ample square footage, 44% - Better home offices, 28%           [...]

It appears Canadians’ enthusiasm and optimism about their homes and the housing market remain very resilient. Part three of the “Rapidly Evolving Expectations in the Housing Market” report, being produced by Mortgage Professionals Canada, suggests 90% of homeowners are happy with their decision to buy, while just 2% regret their purchase decision. Non-homeowners have seen a significant increase in optimism.  The number who expect to buy in the near future has nearly tripled to 20%, from 7% at the beginning of the year. It should be noted that the survey samples used for the report are narrow, focusing on just two groups: mortgage holders, and non-homeowners who are looking to buy within the next three years.  Current conventional wisdom says purchases are being driven by [...]

Canadians’ confidence in the economy moved back to the optimistic side of the ledger in the third quarter. The Bank of Canada’s latest Canadian Survey of Consumer Expectations suggests the outlook has turned positive compared to the second quarter, but cautiously so. Among the key findings in the third quarter report is a return to expectations that home prices will continue to increase.  During the second quarter those expectations plunged to near zero, now they are back to just slightly below pre-pandemic levels. The survey also suggests a change in the type of housing preferred by buyers, with a shift to “less crowded and more remote environments.”  In other words, bigger homes away from urban centers.  Many market watchers attribute this directly to the pandemic [...]

Another report and another round of startling numbers from Canada’s housing market. The Canadian Real Estate Association is reporting its best September ever.  Sales rose nearly 46% compared to a year ago.  That is 20,000 units more than the previous September record. The average price for a home in Canada hit an ominous, record high as well, at $604,000 – a 17% increase y-o-y.  Toronto and Vancouver continue to have a heavy influence on the average price.  With those two markets factored out, the national average drops to $479,000, which is a 20% increase from a year ago. CREA’s Aggregate Composite Home Price Index – which is seen as a truer measure of home prices – showed a 10% increase y-o-y. The increases appear to be driven [...]

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 [...]