Canada

This Week’s Top Stories: Canada’s Largest Bank Calls The Top For Real Estate Prices, As Non-Mortgage Credit Defaults Jump

Time for your cheat sheet on this week’s most important stories.

Canadian Real Estate

Canadian Real Estate Prices Peaked Says Canada’s Largest Bank, Revises Forecast Lower
RBC, Canada’s largest bank, thinks Canadian real estate prices may have peaked for the year. Economists from the bank note the relatively flat movement compared to April, and expect further broad-based weakening ahead. They see prices dropping across the country, but Canada’s largest markets may stall for a few months before seeing the drop.
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Four Of Canada’s Big Banks Note Real Estate Inventory Is Rising Faster Than Sales
Four of Canada’s Big Six banks weren’t impressed with sales, and expressed concern about inventory. In client research notes, four of the big six noted the bounce in sales isn’t all that impressive, and was still the lowest level in decades. They also called out the rise in inventory, which recovered faster than sales. Increasingly analysts have been calling higher inventory, and softer sales as the year carries on. This was the first data point confirming the call.
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TransUnion: Almost A Fifth Of Canada’s Millennials Are Delaying Their Home Purchase
TransUnion has been surveying households to see how their outlook has changed through the pandemic. This Big Three credit agency found 42% of respondents have now reached out to lenders, double a month ago. About 15% of consumers are already on some form of payment deferrals. This is having a major disruption on buying plans, for 21% of Gen Z and 16% of  Millenials.
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Canada’s Super Rich Actually Own A Bigger Share Of Wealth Than Previously Thought
The Government of Canada improved it’s wealth estimate models, and it turns out we’ve been underestimating how much wealth is held by the rich. The new HFD model shows the top 1% of households have 25.6% of Canada’s total wealth, up from the 13.7% estimated previously. The middle 40% of households saw their share drop from 30.5%, to just 25.3% under the new model. The bottom 40% of households, which represent just 2.3% of wealth, saw their share drop to 1.2%. By underestimating how much wealth Canadas’ one-percent had, the country was overestimating how much the bottom 80% of households held.
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TransUnion: Canadian Non-Mortgage Credit Delinquencies Soar To 2015 Levels
Non-mortgage credit delinquencies are starting to rise across Canada. TransUnion estimates 5.75% of non-mortgage credit accounts in Q1 2020 were delinquent, up 7.21% from last year. This is the highest number since at least 2015, but the rate of delinquencies were falling then. Typically households let non-mortgage credit accounts fall into delinquency before they let mortgage accounts default.
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Canada’s Largest Real Estate Markets See A Big Drop In New Permanent Residents
The pandemic is slowing immigration, at least in the near term. Canada admitted just 4,140 permanent residents in April, down 85% from last year. In the first four months of the year, just 73,920 permanent residents were admitted, down 20% from a year before. The sharp decline is almost entirely due to a drop in March and April numbers. The regions most impacted also happen to be Canada’s largest real estate markets.
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Canadian Home Sales Fall Over 39%, With Toronto Leading The Market Lower
Last month’s home sales weren’t as bad as the month before, but the industry is warning it wasn’t exactly good either. There were 33,051 home sales in May, down 39.8% compared to the same month last year. The decline is much smaller than the 57% year-over-year decline seen in April. However, CREA warned “May’s gain constituted a return of only a third of the activity lost between February and April.” It was still one of the worst months in decades, even with the smaller decline.
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