Top Stories

This Week’s Top Stories: Canadian Real Estate Sales and Prices Make Big Drops, While Developer Debt Hits An All-Time High

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

Canadian Real Estate

Canadian Real Estate Sales Print Worst February Since Before The Great Recession
Canadian real estate sales are slowing dramatically from last year. CREA reported 29,974 sales in February, up 25% from the month before. This represents a 4.41% decline compared to the same month last year. Both the monthly and annual rates raised interesting flags. A monthly increase is expected, but this is the smallest jump from January since at least 2007. The annual decline makes it the fewest sales for a February since at least 12 years.
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Canadian Mortgage Holders Are Paying Over 27% More Interest Than Principal
Canadians with are suddenly paying a lot more to interest than principal. Households paid $9.88 billion in principal in Q4 2018, 1.07% higher than last year. Mortgage interest payments hit $12.6 billion in Q4 2018, an increase of 11.12% from the year before. What does that mean? Interest payment growth is over 10x greater than principal payments. Still not clear? People are paying banks $1.25 for every $1 they pay down real estate debt.
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Canadian Real Estate Makes Largest February Price Decline Outside Of Recession
The Teranet-National Bank HPI (TNB HPI) show Canadian real estate prices made an abrupt decline in February. Analysts from the firm noted that price made a monthly decline of 0.4% last month. The decline brought annual gains to just 1.87%, with prices now down 1.43% from the September 2018 peak. National Bank noted this is the largest February decline in the history of the index. The YOY increase is also the smallest increase outside of a significant recession.
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Flip Or Flop: Canadian Real Estate Renovation Loans Down Over 40% From Peak
Canadians are borrowing less for residential real estate renovations. Renovation debt fell to $2.97 billion in Q4 2018, down 2.14% from last year. The quarter is down 17.79% from the recent peak of $3.61 billion in Q2 2016. This is seventh quarter of negative growth, compared to the same month last year.
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Canadian Real Estate Developer Debt Hits An All-Time High
Canadian real estate developers are incurring a record amount of debt to finance projects in Q4 2018. The balance of loans for residential development hit $16.68 billion in Q4, up 20.28% from last year. That also sets a new all-time record for loans for real estate development. Remember, that’s only chartered banks. Developers have been increasingly looking towards private loans.
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  • straw walker 8 months ago

    High personal debt always leads to higher personal bankruptcy.
    Banks have been advertising “mortgage free” for a long time, but now instead of a mortgage the home owner has an operating loan, that carries higher interest rates, often calculated interest differently, (monthly instead of semi annual) , and the major point is these loans always go higher and never get paid off.
    Heloc loans are also demand loans. All these loans were financed by rising house prices.
    Now home owners with highly leveraged loans and flippers that are running out of money to fiance there lifestyles, all have to sell at the same time, or face foreclosure..
    Most lifestyle flipper have to sell every 3 years. so those that bought in 2016, are now facing a depressed housing market.
    Within the next 3 to 6 months Vancouver is going to see the real market price of housing.

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