This Week’s Top Stories: Canadian Banks Forecast Falling Real Estate Prices, and Mortgage Defaults Rise

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

Canadian Real Estate

RBC’s “Worst Case” For Canadian Real Estate Is A Price Drop Of Nearly 30%

Canada’s largest bank’s risk scenarios show a larger downside than upside for real estate. RBC’s best cast scenario shows Canadian real estate prices rising 6.1% over the next 12 months. In a worst case scenario, the bank’s risk model shows a decline of 29.6% over the next 12 months. Earlier this month, the chief’s risk officer said they expect prices to fall about 7% over the next year. This may imply the bank believes things will be worse than expected, but not as bad as things can get.

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National Bank Of Canada Tells Investors They’re Preparing For Real Estate Price Drops

Speaking of risk scenarios, another Big Six bank shared one for real estate prices. National Bank sees home prices falling 5.2% over the next 12 months in their base case. In an upside, they still see prices falling, but just 1.5%. In a worst case, they see prices falling 9.9% over the next 12 months. The upside is more bearish than the RBC forecast, but the downside is much smaller.

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Canadian Home Equity Borrowing Is On The Rise Once Again

Canadians are drawing on their home equity once again. The balance of loans secured by home equity reached $307.11 billion in September, up 1.05% from last year. The rate is still relatively small, but it’s no longer negative.

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Canadian Mortgage Debt Is Growing At The Fastest Rate Since 2018

Canadians are borrowing mortgage credit at the fastest pace in years, in the pandemic. The balance of mortgage credit reached $1.71 trillion in September, up 5.67% from the year before. This is both a record high, and the highest 12-month growth since 2018. Part of the acceleration is due to lower mortgage rates, but the trend is also recovering from unusually low growth.

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A Canadian Bank Already Sees Expired Mortgage Payment Deferrals Turn Delinquent

RBC filings show the  majority of people on mortgage payment deferrals resumed payment. The filings also show a significant number did not. Mortgage and HELOCs worth $45.7 billion have seen their payment deferrals expire. Of those, 1.8% of the balance of deferrals have become delinquent. This isn’t all due to the pandemic though. The bank also disclosed almost a third of the delinquent mortgages, were delinquent before deferrals were given.

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StatCan: Millennials Make More Than Previous Generations, But Spend It On Necessities

Statistics Canada has crunched the numbers, and found Millennials make more than previous generations. At the median age of 31, the average Millennial household took home an average of $90,047 per year. This is 18.27% higher than Gen X at the same age, after adjusting for inflation. Unfortunately they spend a whole lot more on taxes and shelter, more than wiping out the gain. Despite the fact that things are suppose to be getting better, they’re getting worse.

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Canadian Mortgage Arrears Hit Highest Level Since 2017, Even With Pandemic Measures

Canadian banks are reporting a rise in arrears, despite payment deferral programs. National arrears reported by the CBA reached 0.26% in May, up 12.63% from the same month last year. This is the highest level since 2017, when the rate was falling – not heading the other direction. Both the level of arrears and the growth rate are unusually high at anytime. However, it’s extremely odd with so many bank and government programs to help.

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Canada’s Big Six Banks Have 69,000 Mortgages Left On Payment Deferral

Canada’s Big Six banks have seen the majority of mortgage payment deferrals expire. There were just 69,900 mortgages on payment deferrals on October 31, 2020. It’s still quite a few, but down 86.3% from the previous quarter. The remainder are scheduled to expire by March at the latest.

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Vancouver Real Estate

Vancouver Real Estate Prices Diverge, As Detached Homes Soar While Condos Plummet

Greater Vancouver real estate prices are split – with detached homes rising, and condos falling. The benchmark price for a detached home reached $1,538,900 in November, up 1.0% from the month before. The condo apartment benchmark reached $676,500, down 1.0% from the month before. It’s a little unusual for detached prices to rise at the same rate condo apartments are falling.

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