Time for your cheat sheet on this week’s most important stories.
Canadian Real Estate
Here’s What Canada’s Mortgage Deferral Cliff Looks Like, And Why Experts Are Worried
Canadians suffering income losses had their mortgage payments deferred, but those deferrals are about to expire. During the pandemic, the government worked with banks to delay payments for up to 6 months for those impacted. In October, about ~500,000 of those deferrals expire, followed by another 221,000 in November. The delayed payments helped to prevent a short-term spike in issues related to mortgages. However, as those deferrals expire, it’s expected we will see arrears rates increase.
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Head Of Canada’s Housing Agency: “Vested Interests Are Strongest Right Before The Fall”
The head of Canada’s national housing agency compared today’s market to the US before the 2008 crash. Evan Siddall, the head of Canada’s state-owned CMHC, asked lenders to be more responsible with lending. In response, the industry attempted to paint him as anti-homeownership. The agency head described the situation as similar to right before the US housing crash, when organizations that were supposed to engage in prudent lending measures, decided it would be more lucrative to not. The agency has been warning first-time buyers that buying now may be more risky for the buyer than lender.
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Canadian Households Have Deferred Payments On Debt Worth $247 Billion
Canadians have deferred payments on credit worth over a quarter trillion dollars. Subprime borrowers represent $21 billion of the balance of accounts with payment deferrals. It’s “super prime” rated borrowers though, that represent the largest segment of payment deferrals – $78 billion. Despite the narrative that only people “bad” with money are impacted by cash flow issues, the bulk of debt deferred is from accounts rated better than prime.
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National Bank Of Canada: Canadian Real Estate Prices Fall, Small Increase When Adjusted
A big six bank noted Canadina real estate prices made an unusually small movement last month. The Teranet-National Bank House Price Index shows prices increased 0.34% in July, when seasonally adjusted. Unadjusted prices fell 0.3% compared to the month before. This is the smallest increase for July in the past 15 years.
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Canadian Household Debt Has Grown Over 49% Faster Than GDP Since 2005
Canadian household debt has been expanding much faster than GDP. The ratio of household debt to GDP hit 101.9% in Q1 2020, up 49.8% from Q1 2005. To contrast, US household GDP reached 77.2% in Q1 2020, down 12.6% from Q1 2005. While some countries deleverage households during the Great Recession, Canada doubled down.
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It Doesn’t Matter Where, Every Canadian Real Estate Market Is Seeing Big Price Growth
From Victoria to Saint John’s, virtually every major Canadian real estate market is seeing massive price growth. The price of a home across Canada reached $637,600 in July, up a massive 2.34% from just a month before. Considering prices are up just 7.56% from last year, almost a third of gains came in just the month. When there’s little to no regional variance in price movements, it’s usually due to credit expanding more rapidly than necessary, as opposed to fundamental driven growth.
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Canadian Real Estate Sales Hit The Highest Level Ever, Here’s Why It’s Not Surprising
Canadian real estate sales just reported the most sales ever last month, and it’s not all that surprising. There were 63,533 home sales reported in July, up 30.5% from the same month last year. Buyers delayed by the pandemic hit the market at the same time as the regular cohort of buyers. While this printed a large monthly increase, it’s likely a short-term event, unless the market can continue to pull in forward volume soon.
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