Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canadian Real Estate Prices To Fall Lower, Worst Case Is A Return To 2014 Values: Oxford Econ
Canadian real estate prices will fall further, according to a prominent firm’s forecast. Oxford Economics (OxEcon) still sees a drop of 30% from peak to trough, and we’re less than halfway to the bottom. However, that’s the base case—if the economy is weaker than expected, prices can drop 40%, back to 2014-levels.
Canadians Are Still Using Their Homes As ATMs, Just Not With HELOCs
Canadian HELOC debt is slowing but using homes as ATMs hasn’t—the type of loan did. HELOC debt remained virtually flat at $171.6 billion in November, and 2.9% higher than a year before. Home equity loans surged 8.6% to $309.2 billion over the same period, rising even faster than GDP. Use of a traditional HELOC has declined, but loans secured by home equity are still soaring.
Weak Canadian Home Sales Are Dragging Future Building Intentions
Canadian builder intentions are weakening, but remain higher than pre-pandemic levels. The seasonally adjusted value of permits fell 7.3% to $10.3 billion in December, driven by slow housing. Both residential permits (-8.4%), and non-residential (-5.3%) fell, as higher rates and steep prices slow demand. Despite the drop, intentions remain 25% higher than pre-pandemic.
Canada’s GDP Growth Is Slowing, Failing To Keep Up With Population Boom
Canada’s economy is slowing, especially when adjusted for its population boom. GDP fell 0.1% in November, with annualized growth dropping to 1.6% for Q4 2022. It’s slightly higher than the Bank of Canada (BoC) forecast, with two banks expressing significant concerns. BMO warned the growth appears tepid when contrasted with population growth. RBC expressed concerns that inflation and interest rates will catch up to consumers.
Toronto Real Estate
Toronto Real Estate Prices Rise Despite Weakest January Sales Since 2009
Toronto real estate prices climbed despite falling demand and rising inventory. Greater Toronto prices fell 0.2% (-$2,500) to $1,078,900 in January. However, in the City of Toronto home prices increased 0.5% (+$5,100) to hit $1,067,000. One month doesn’t make a trend, but prices firmed despite the fewest January sales since 2009, and surging inventory. This can be a big problem for the BoC, which is trying to tame expectations.
Toronto Condo Sales Are Unusually Weak, Investors Capture A Larger Share
Greater Toronto condo prices are holding up well, relative to other segments. The average price fell 1.3% (-$9,600) to $710,500 in Q4 2022, and remains flat from a year before. The board attributes the resilience to balanced demand, though it’s unclear if it’s real or still speculative. Prior to the pandemic, the condo apartment segment was flooded by investors.
US Real Estate
US Home Prices Fell In Every Major Market As Growth Slows
US existing-home prices are slipping from all-time highs, and growth is rapidly decelerating. The S&P CoreLogic Case-Shiller Indices show that national prices fell 0.6% in November. This reduced annual growth to 7.7%, shaving off roughly two points. The hardest hit markets were also the fastest growing since 2020. They are a long way from returning to pre-pandemic levels though.