Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canadian Real Estate Prices To Fall 30%, Early Stages of Recession Are Here: Ox Econ
Macroeconomics firm Oxford Economics warned clients that Canada’s recession is here. They believe home prices will fall 30% from peak-to-trough by next year, wiping out most growth. Most stimulus would undermine the central bank’s attempt to curb high inflation, so don’t count on the money printer going brrr.
Canadian Mortgage Borrowers Took The Bait, Now Their Costs Are Ripping Higher
Canadian mortgage borrowers are opting for variable rate mortgages at an unusual rate. Nearly 2 in 5 (39.8%) of uninsured mortgage debt had a variable interest rate in September. It’s a big jump from just 19.1% in March 2020, as households and investors tried to get the cheapest rate possible. Now that’s proving to be a mistake, as their variable interest costs rise at one of the fastest rates ever.
Most of Canada’s Peak Home Buyers With A Minimum Downpayment Are Underwater
Many Canadian home buyers that bought at the peak of the bubble are now underwater. The price of a typical home fell to $735,400 in October, down 15.3% (-$132,900) from the peak reached in March 2022. A typical buyer in this scenario with the minimum downpayment would now be 9.7% ($71,100) underwater. That means not only is there downpayment gone, but they would have to top up to get to zero. Less of a concern for long-term owners, but investors with shorter timelines might feel different.
Canada Needs Lower Home Prices & Economic Stability Requires “Pain”: Bank of Canada
The Bank of Canada is warning that restoring financial stability won’t be pain-free. The central bank’s deputy governor warned this week, that aggressive action is needed. Interest rates will have to rise sharply to curb excess inflation. This will most certainly mean lower home prices, but it’s the least risky path to stability.
Canadian Mortgage Credit Grinds To A Halt, Slowest September In Two Decades
After nearly hitting the size of Canada’s GDP, mortgage debt is grinding to a halt. The outstanding balance reached $2.1 trillion in September, up 0.3% ($6.4 billion) in the month. The growth made it the slowest September in nearly a decade, as high rates eroded buying power. Now that it’s reached such a large size, it’s hard not to see it becoming a drag on the economy.
Do you understand what an economic cycle is?
Do you know what happens in the expansion stage of the economic cycle?
Do you really think housing market will collapse? How naive of you to make people feel that. Let’s revisit this in 2027.
You must be smoking boulders, I say go buy everything you can get your hands on in RE and we will come back to you in 2027 completely whipped out… NORMALCY BIAS
When there is no more qualifying buyers to buy X product – price reductions are required weather it be profitable or a write off. The only reason the Federal Canadian Goverment is importing 2 million more perminanat residents is to create such demand to keep the property market up.
Housing is pushed to the limits of local incomes.
Unless private companies are willing to shell out the 200% salary increases to support such a housing market, prices must come down.
We’re in for a decade of multi-family housing situations similar to the 1990s. I grew up in a house where four different families all rented out rooms in a downtown neightbourhood.
History repeats until incomes catch up to the fundamentals – whatever they’ll be in five years.
Is that what you think this is an economic cycle. They’re ushering in a global reset. Do you have the slightest idea what that is. They’re planning on collapsing the monetary system. You think they give a hoot about the houses. Since when do raise interest rates when inflation is high.
The hindufication of canada due to massive immigration will continue. House prices will not fall.
@Ravi – You must be a realtor with little to no knowledge of economic cycles. If so, you guys are screwed.
If you look at the Canadian housing “bubble”, the music has stopped. Were you hoping that houses in Canada would keep appreciating to $2-4MIL? There is a shift happening in Canada at the moment & everyone is sitting on the rollercoaster.
Good Luck man!
A perfect storm for the Canadian economy. A nation with nearly “no” trade has skyrocketed home prices & rents that seem way inappropriate from an economics theory I studied at university. It is a disgrace for new immigrants to start their life under enormous debt, drug culture, failing health care, and social inequalities in this country. It is a very race-pocketed failed multicultural country.
I see Ravi there is putting the blinders on pretending all is well. I suspect he bought at the peak. Buckle up.