Top Stories Toronto

This Week’s Top Stories: Canada’s Money Supply Is Flashing A Warning For Housing, While The Central Bank Gets Ready To Provide Mortgage Liquidity

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

Canadian Real Estate

Canada’s Money Supply Prints Another Ominous Signal For The Housing Cycle
The Canadian money supply is printing a warning sign. The growth rate of M2++, the broadest measure of Canadian money, fell to 5.1% – down 20.3% from last year. The number is now 29.16% lower than the median 5 year trend, and 25% below the 10 year trend.

The acceleration and deceleration of the M2++ helps us understand the economy. A sudden rise in growth correlates with a rapid expansion of business. A quick drop indicates that expansion is over, and a recession may be around the corner. The measure is a leading indicator, meaning we’ll see signs here before they’re felt by the public.
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Canada’s Central Bank Is Getting Ready To Provide Mortgage Liquidity
Speaking of money supply, the Bank of Canada (BoC) is making an unusual decision. The central bank will begin buying Canada Mortgage Bonds (CMBs) at the end of 2018, or early 2019. They explained the move is for “balance sheet purposes only,” but they didn’t mention what sort of impact that will have.

The BoC participating in the mortgage market will provide additional liquidity. Since CMBs are a low cost funding tool for mortgages, the liquidity will help prevent rate spikes if the market becomes illiquid. The question is why are they expanding their mandate to help a market that doesn’t need help? Our guess, they’re anticipating an issue they haven’t started to discuss in public.
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The Montreal Real Estate “Boom” Compared To Toronto And Vancouver
The Montreal real estate boom that “shifted” from Toronto and Vancouver may not actually be a boom. The price of a typical home in Montreal reached $350,000 in October. That means Toronto is 118% more expensive and Vancouver is 203% more expensive. For context, Montreal is denser than Toronto, but less so than Vancouver.

The annual pace of growth in Montreal peaked in June 2010 at 8.89%, and hasn’t breached that number in some time. To contrast, Toronto’s peak annual growth reached 31.43% in April 2017, and Vancouver reached 32.61% in July 2016. Montreal is likely playing catch up after an extended period of price stagnation.
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Canadian Reverse Mortgage Debt Tops $3.07 Billion
Reverse mortgage debt is soaring across Canada. The outstanding balance reached $3.07 billion in September, up 43.98% from last year. The annual pace of growth is higher than the month before, but down from the peak of 46.32% hit in February. The rate will likely drop to mid-20s in November or December, as growth rate stabilizes against the sudden rise last November. Don’t let the drop fool you, mid-20% growth is still wacky amounts of growth.
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Toronto Real Estate

Toronto New Condo Sales Drop Over 43%, Inventory Rises Nearly 18%
New condo sales are slowing in Toronto, and inventory is rising.  Greater Toronto saw 3,296 new home sales in October, down 39.85% compared to last year. The drop in sales helped to push inventory of new homes higher. There were 16,283 homes for sales in October, up 30% from the same time last year.
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Vancouver Real Estate

Greater Vancouver Pre-Sale Real Estate Sees An Unexpected Rise In Units For Sale
Greater Vancouver condo sales are a lot lower than last year. The region saw 2,418 new units hit market, up 31.55% compared to last year. Only 41% of those units were absorbed by same month sales, a drop of 45.33% from last year. Using the sales to new listings ratio (SNLR), the market is technically in “balanced” demand. Exercise some caution with the term “balance” however, since it has been trending lower.
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