Time for your weekly cheat sheet on this week’s top stories.
Canadian Real Estate
Canadian mortgage delinquencies are flat, but it’s a little more interesting by city. At the national level, the rate of delinquency hit 0.3% in Q3, flat from the previous quarter. Toronto, which always has a much lower rate, saw the rate reach 0.12% in Q3, up 9.1% from the previous quarter. Vancouver also saw an uptick with the rate at 0.16%, up 6.7% from the previous quarter. Both Toronto and Vancouver are at the highest levels since 2016. Montreal on the other hand, has fallen to the lowest rate in half a decade.
Canadian real estate sales made a big jump in almost every market in the country. Unadjusted home sales reached 49,564 in November, up 32.1% from the same month last year. Notably, this trend wasn’t driven by traditionally “hot” markets like Toronto and Vancouver. Instead, all but two markets across the country made double digit gains. No market saw sales volumes fall. When sales rise against declining fundamentals, this is a sign of excessive credit stimulus. Not because the economy is booming in every single market across Canada.
One of Canada’s largest banks shared its real estate risk models, showing slow growth ahead. CIBC’s base case forecast showed home prices rising just 2.4% over the next 12 months, starting in October. At the end of the remaining forecast period, which is two years, they see prices rising 3.0%. Home prices are currently rising around 6 times faster than this rate, so it’s a large slow down. Especially considering the two year movement is less than a point off of the one year.
One of Canada’s largest real estate brokerages sees big price moves next year, but not where you might guess. Royal LePage is forecasting a typical home in Canada will cost $746,100 in 2021, up 5.5.% from 2020’s estimated finish. Toronto’s forecasted to reached $990,300, up just a slightly larger 5.75% over the same period. Vancouver though, is forecasted at $1,262,600, up a whopping 9.0% over the next year. The firm believes the pandemic accelerated people to move from large to secondary cities. This should slow growth in big cities, and push it to the suburbs. Vancouver being an obvious exception to this rule, apparently.
Canadian seniors have borrowed a substantial amount of home equity through reverse mortgages. The outstanding balance of the segment reached $4.42 billion in October, up 12.55% from last year. This is a small uptick for the acceleration of growth, but still below what’s been typical for the past 5 years. Even though it’s slower than usual, it’s still a very fast growing segment of credit.
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