27 Oct

CMHC Sees Problematic Housing Conditions in Canada By: Dr. Sherry Cooper

General

Posted by: Cory Kline

 

The Canadian Mortgage and Housing Corporation (CMHC) issued its quarterly housing market assessment and outlook yesterday, suggesting that, for the first time ever, there are “problematic conditions” in housing markets at the national level in Canada. As well, CMHC expects national housing starts and MLS sales to decline slightly in 2017 before stabilizing in 2018, which is pretty much the consensus view. What I find strange about the hype surrounding this report is that there is nothing new here. Moreover, the details seem encompass lagged data, before the sales decline and price slowdown in Vancouver–a slowdown that began before the August implementation of a 15% tax on non-resident buyers in Vancouver.

 

 

 

 
4 Oct

Mortgage Rules are changing effective October 17,2016

General

Posted by: Cory Kline

Morneau Takes Out the Big Guns to Slow Housing
By: Dr. Sherry Cooper

Yesterday, Ottawa unveiled major initiatives to slow housing activity both by potentially discouraging foreign home purchases and, more importantly, by making it more difficult for Canadians to get mortgages. As well, the Finance Minister is limiting the degree to which mortgage lenders can buy portfolio insurance on mortgages with downpayments of 20% or more. Ottawa has clearly taken out the big guns to slow housing activity, which is widely considered to be too strong in Vancouver and Toronto. Ironically, home sales have already slowed precipitously in Vancouver in recent months and the BC government introduced a new 15% land transfer tax on foreign purchases of homes effective August 6, the effects of which are yet to be fully determined.

 

9 Sep

Canadian Jobs Seesaw Upward

General

Posted by: Cory Kline

The August jobs report was stronger than expected as payrolls bounced back from a significant July decline. Canada’s economy added 26,000 jobs last month (a 0.1% gain), thanks to large gains in the public sector and increased payrolls in Quebec. The rebound followed a disappointing July report where the economy shed 31,200 positions, with big losses in full-time employment. The unemployment rate rose a tenth of a percentage point to 7.0%, as more people entered the labour force.

Over the past year, employment increased by 77,000 (0.4%), but reflecting the weakness in the economy, especially in the oil sector, all of the gains in the past twelve months were in part-time work. Over the same period, the total number of hours worked fell by 0.4%.

Another troubling sign was that employment was down in August among the primary workforce, people aged 25 to 54, although job gains were posted for younger and older workers. Nevertheless, the jobless rate for younger workers remained high at 13.2%, as more youths entered the labour force. For older workers, aged 55 and older, employment rose by 29,000 last month with gains for both men and women, but the unemployment rate was stable at 6.0%.

The “lost men” phenomenon is showing up in Canada, as it is prevalent in the US where the number of men aged 25 to 54 in the labour force has declined precipitously–estimated at about 7-to-10 million men in the US who are not working or seeking work. This has led to an unprecedented decline in the labour force participation rate of men. In Canada, employment among people aged 25 to 54 decreased by 25,000 in August, virtually all of which was among men, as their jobless rate increased 0.3 percentage points to 6.6%. 

There are many theories about why this is happening. For one, the weaker sectors of the economy–goods production (especially oil) and construction (weaker in the US than in Canada)–are dominated by male employment. Many of these lost workers are less educated.

The labour force participation rate in Canada (adjusted to US concepts) was 65.4% in August, compared with 62.8% in the United States. The participation rate in Canada declined 0.4 percentage points over the past 12 months, while it increased slightly in the United States (+0.2 percentage points).

According to Stats Canada, “Adjusted to the concepts used in the United States, the unemployment rate in Canada was 5.9% in August compared with 4.9% in the United States. On a year-over-year basis, the unemployment rate was essentially unchanged in Canada, while it declined slightly in the United States (-0.2 percentage points).”

On a geographical basis, employment rose in Quebec and Newfoundland, while it declined in New Brunswick. For all of the other provinces, there was little change in payrolls.

Public sector jobs increased in August, while self-employment fell and the number of private sector employees was roughly unchanged. Job declines were posted in professional, scientific and technical services.

Bottom Line: Canada’s economy has been pummeled by the decline in the oil sector and the modest growth in manufacturing and service employment. While we are optimistic about a substantial growth rebound in the second half of this year continuing into 2017, lingering pain is evident. The brightest spot in the economy has been housing in Vancouver and Toronto, but that has boosted household imbalances and over-extended many first-time homebuyers, leaving us vulnerable to financial instability in the future. Preliminary evidence suggests that housing may now be slowing markedly in Vancouver. 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

9 Sep

Life Happens, Let Your Home Help

General

Posted by: Cory Kline

Sometimes “life happens”, and when it does, your home can be your savior if you have accrued some equity in it. Maybe you’ve been out of work, run up your credit cards and driven your credit rating into the ground. Perhaps, you’ve decided to leave the job you hate and venture out into the world of owning your own business. Whatever it may be, the equity in your home can help.

I recently helped a client who had maxed out her high interest credit cards due to not being able to work for a couple of years, and the credit card debt had lowered her credit score substantially. She was now back to work as a self employed consultant earning a good income, but the $1,000 monthly interest payments she was paying was seriously eating at her cash flow and not reducing the principal she owed. Dead money!!

7 Sep

Mortgage Residential Market Commentary

General

Posted by: Cory Kline

 

British Columbia’s effort to cool the effect of foreign money on the hot Vancouver housing market may be getting some help from Quebec.  That province’s government is reported to be tightening the conditions of its Immigrant Investor Program.

Quebec wants to stop immigrants from using the program to gain access, only to move elsewhere.  B.C. and Ontario are favourite locations.  The stricter criteria mean immigrants who have property in another province, or who have children attending school in another province are being denied entry.

As for B.C.’s efforts, the 15% tax on foreign buyers – implemented August 2nd – does appear to be having an effect.

Numbers from the Real Estate Board of Greater Vancouver show sales, which were already slowing, plunged nearly 23% compared to July and 26% compared to a year ago.  

Prices in the region covered by the tax dipped about 8% y/y in August.  But that is seen as a result of changes in the composition of sales.  In the area covered by the REBGV, prices were up more than 31% y/y, but just 0.3% from July.

 
Thank you First National for your insight.
7 Sep

Bank of Canada Hold Overnight Rate at 0.5%

General

Posted by: Cory Kline

The Bank of Canada’s decision to hold rates steady once again was very much as expected, even though first half growth was well below the forecast in the July Monetary Policy Report. US growth in the first half of this year was also disappointing, reflecting weakness in business and residential investment. US consumer spending was strong, held up by a buoyant labour market.

Rebounding US growth in the second half bodes well for a sustained rebound in Canadian exports. The recently released July trade report for Canada showed a major improvement in exports to the US, a long-awaited sign of a revival in Canadian growth.

Other recent indicators suggest that Canada’s economy entered the third quarter on a stronger footing following the wildfire-related slump in the second quarter. Q2 growth was also depressed by the larger-than-expected contraction in exports. The Bank expects a strong rebound in Q3 growth as oil production resumes and rebuilding in Alberta begins.

Fiscal stimulus will also play a role in the second half economic revival as consumer spending is boosted by the July 1 introduction of Canada Child Benefits payments. Federal infrastructure spending should also begin to impact growth by the final quarter of this year. Nevertheless, the Bank suggested that growth for the remainder of this year will remain below their July forecast. 

Inflation is in line with BoC expectations. Total CPI inflation is below the 2% target largely owing to the decline in consumer energy prices. “Measures of core inflation remain around 2%, reflecting offsetting effects of excess capacity and past exchange rate depreciation”.

As always, the final paragraph of the Bank’s statement assesses economic risks. The report suggests that the inflation profile has trended downward since July. As for elevated household debt levels, long a concern, the Bank alluded to the recent slowdown in the Vancouver housing market suggesting that while still early days, it might well be the start of a soft landing. Recent data for Toronto, however, suggest that housing activity remained as robust as ever in August. Clearly, household imbalances continue to rise and heighten financial vulnerabilities. 

Given the likely path of economic growth in Canada, I expect the Bank to maintain the current stance of monetary policy through 2017. This means that Canadian interest rates will remain well below rates in the US, as the Fed will likely hike the overnight rate once again either later this year or early next year. Mortgage rates will remain low for longer.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

 

23 Aug

Dr. Sherry Cooper: Housing still within reach for first-time buyers

General

Posted by: Cory Kline

Despite headline-grabbing stories about million-dollar houses pushing home ownership out of reach in Canada’s large cities, there’s still plenty of opportunity for first-time buyers in certain segments of the Canadian real estate market, says Dominion Lending Centres Chief Economist Sherry Cooper.

Single-family home prices have been surging in cities like Toronto and Vancouver, but that’s driven largely by a shortage of land: You practically need to knock down an older home in order to build a new one. It’s the supply-demand story, Cooper says. Land for single-family homes is in short supply while demand is strong, driving double-digit price increases.

But that’s not the case in the condo market, where prices have not been escalating as quickly. Condos, and housing in those parts of Canada where the land supply is not an issue, are still an affordable option.

 

10 Aug

Residential Mortgage Market Commentary

General

Posted by: Cory Kline

The two hottest housing markets in the country appear to be heading in opposite directions even though they are suffering from the same, fundamental problem – under supply.

July sales in Greater Vancouver dropped nearly 27% compared to June and were off 19% from a year ago. Prices, though, continued their unprecedented climb. MLS figures show a jump of nearly 33% from a year ago. The average price of a home (all forms) topped $930,000. New listings dropped nearly 11% from June but remain 2.5% higher than a year ago.

Toronto saw both prices and sales jump in July; 9,989 homes sold is a record for the month. The MLS price index showed a 16.6% jump in the average home price (all forms) to nearly $710,000. However, the number of new listings continues to decline.

Montreal registered a 3.0% sales increase last month compared to a year earlier along with a corresponding 3.0% increase in the median price, to $300,000.

Thank you First National for this Residential Market Commentary
Aug 10, 2016, 09:27 AM by Maria Broekhof

8 Aug

Understanding the Benefits of Getting Pre-Approved for a Mortgage

General

Posted by: Cory Kline

Pre-approvals are certainly beneficial. However, they can also be very disappointing if you are not prepared to know what they actually mean.

They DON’T mean…

They don’t mean that you have a mortgage. Until there is a Purchase Agreement (a written up contract to purchase a property) actually submitted to a bank and a commitment from the bank offered to the client, there is no mortgage. Your bank will often say, “You are pre-approved on a mortgage based on a specific rate that is being offered during this time.” Factors such as the amount of income you bring in, the amount of debt you have and even the property itself will determine whether or not the bank will actually give you a mortgage.

They don’t mean that the rate you are pre-approved for will be the rate you pay. Rate holds are temporary and depending on whether or not you qualify for the rate, you may not get what you initially bargained for.

 

Please note that a good preapproval will pull your credit to make sure there are no suprises. 

Preapprovals are not sent to CMHC. CMHC Insurance is required on mortgages with less than 20% down payment. CMHC cannot review your file until you have a purchase agreement. If you have any concerns please mention them to your mortgage broker/advisor so that they can be addressed before you have an offer.