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This Week’s Top Stories: Canadian Mortgage Deferrals Soar, As Government Warns Young Homebuyers

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

Canadian Real Estate

CMHC Warns Canadians: “Support For Homeownership Cannot Be Unlimited”
The CMHC, Canada’s national housing agency, had a warning for young homebuyers: Be realistic about your debt. As a cautionary tale, the agency’s CEO walked the federal government through a scenario where a buyer leaving a 5% downpayment, sees their home price drop by 5%. After all fees, this works out to a massive 300% loss, which the homeowner would be on the hook for. Why the warning over falling prices now? The organization expects home prices to drop 9 to 18 percent over the next 12 months. They also don’t expect home prices to recover to 2019 values until 2022 – at the earliest.
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One In Five Of Canada’s Insured Mortgage Deferrals Are In Ontario
CMHC estimates 12% of insured mortgages are in payment deferral. As high as that number is, it’s projected to rise to 20% as soon as September. In terms of deferrals, Quebec and Alberta lead in volume. However, in terms of dollar value (IIF), Ontario and Quebec come out on top – reflecting over half of all IIF together.
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Bank Of Canada Data Shows Why Household Debt Is The Biggest Vulnerability
The Bank of Canada highlighted how fast household debt grew over the past few years. In 2000, household debt was just 58% of GDP, but jumped to 100% by the end of 2019 Q4. To contrast, government debt was 81% of GDP in 2000, and jumped to only 83% over the same period. If you think the government has been spending beyond its means, your mind will be blown when you realize what households have been doing.
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Canadian Real Estate Faces A New Problem: Deflation
Canada got a taste of something it hasn’t seen in a long time – deflation. The CPI index fell 0.2% unadjusted in April, and 0.7% when seasonally adjusted. Falling consumer prices may sound great, but generally mean lower productivity. This tends to lead to higher unemployment, and an increase in the real value of debt. The latter point typically accompanies a scenario more people aren’t planning for – potentially higher interest charges on debt.
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National Bank Of Canada: Real Estate Prices Rise, But Could Change With The Recession
The Teranet-National Bank of Canada house price index pushed to a new high. Prices increased 1.35% in April from the month before, bringing them 5.27% higher than last year. Despite the lofty moves, National Bank economists warned the direction could change soon. Recent developments in the economy that have led to high unemployment levels mean homeowners may be “unable to meet mortgage payments.” This could spark a flood of inventory, which would apply downward pressure on prices.
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Canadian Real Estate Sales See Worst April Since 1984, Montreal And Toronto Lead Lower
Canadian real estate sales came in at one of the worst levels in history. There were 16,612 seasonally adjusted sales in April, down 56.8% from the month before. Unadjusted, that works out to 20,630 sales for April, down 57.6% from last year. April sales volumes have been sliding for a few years, peaking in 2016. However, the pandemic drove this past April to the lowest level since 1984.
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6 Comments

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  • Hgbvv 1 month ago

    Trying to protect housing bubble is basically preserving boomer paper wealth while sucking the blood of young people dry.

    Maybe this is GOD’s way of telling theae greedy people to stop.

  • WTF 1 month ago

    Hgbvv

    Hmm perhaps. Another way of thinking about it is :

    Many buyers of all demographics who were scrambling to buy overpriced product because easy money, 0 critical thinking, and the illusion that prices never go down, coupled with highly questionable RE “data”, compliant media, governments addicted to transaction revenue and encouraging marginal purchasers. also contributed to the problem? Over the past decade there have been warnings from Canada Central Bank Governor, Some Bank CEO;s Economist Magazine, Garth Turner, Hilliard Macbeth, Marc Cohodes, Ben Rabidoux, Steve Saretsky……..many more.

    No Boomers arent the problem. eager non critical purchasers only have themselves to blame. Many Boomers are part of this demographic. Its going to be a complete debacle while this gasbag deflates, should have happened 10 yrs ago, now many will be crushed financially and it didnt need to happen.

  • Honest Canadian 1 month ago

    Government and Real Estate Agents are all hand in glove to keep the artificial hype in real estate. They will continue to sell Canada to China and suck the blood out of tax payers. It is people responsibility to understand how much debt they can handle. Bankers are here to make money.

    • Miron 1 month ago

      .Agree with the Honest Canadian!
      RE agents and the Banks sucked
      the blood of the tax payers and hard working people who live from paycheck to paycheck!
      Multiple offers should have been prohibited long ago!
      Maybe it’s time to vote next time for NDP or any party who
      will prohibit multi offers and apply a huge purchase tax on the foreign investors.

  • Snarky 1 month ago

    When the difference between owning and paying rent is marginal and foreigners are buying properties for 200k over asking what choice do you have? They are controlling the sale price and the rental price. For them the prices here are peanuts for us it’s living paycheck to paycheck. But the leaders don’t care, the banks don’t ask questions and they don’t appraise the properties for actual value. Everyone is making money. I’m an immigrant but I think there have to be some rules in place in terms of ownership eg ownership is for full time citizens of the country. Huge problem when you have a full time job considered to pay reasonably and most of your money is tied up in paying a mortgage or rent.

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