Time for your weekly cheat sheet on this week’s most important stories.
Canadian Real Estate
Understanding How The Credit Cycle Impacts Canadian Real Estate Prices
There’s a lot of debate about the influence of local factors on housing, but they’re all trumped by the credit cycle. We take a quick dive through the credit cycle, which post-Keynesian economists believe drive the business the cycle. For those that don’t know, the business cycle and the housing cycle are very closely linked. You know, since you have to have a job to buy a house. Don’t worry, we explain it in plain English, and it’s not nearly as dry as most other explanations.
Canadian Real Estate Owners That Tapped A HELOC Owe An Average Of Over $97k
Canada Mortgage and Housing Corporation (CMHC) numbers show how Canadians have been using HELOC debt. Over 66.3% of HELOCs issued been drawn at an average of $64,534. That amount can grow very quickly, as the average HELOC borrower had a limit of $167,867. Sky high HELOC debt can go way higher from here.
RBC: Canadian Real Estate Is The Least Affordable Since 1990
RBC Economics is warning that home prices are the least affordable since 1990. Rising interest rates worked their magic to make carrying a mortgage less affordable. “Virtually the entire” 2.6 point increase on the index were due to rising rates. A median household now requires 53.9% of their pre-tax income to service a mortgage across Canada. That’s a level we haven’t seen since the 1990 real estate bubble.
Canadian Mortgage Credit Sees Worst August Since 1995
The growth rate for mortgage credit fell to the worst level we’ve seen decades. The balance of mortgage credit at large lenders reached $1.526 trillion, up 3.6% from the same month last year. The growth rate is nearly 38% lower than we saw last year, and is the slowest pace of growth since 2001. It’s particularly bad for August, being the slowest one since 1995.
Toronto Real Estate
Toronto Real Estate Sales Pop In The 905, Drop In The City, And Inventory Rises In Both
Toronto real estate prices are up from last year, but sales aren’t rising nearly as fast as inventory. The benchmark price of a home across TREB is now $765,400 in September, up 2.02% from the same month last year. There were 6,455 sales, up 1.91% from last year. Inventory reached 20,089 active listings, up 5.61% from last year. The rise in inventory relative to sales continues to lower price gains.
Vancouver Real Estate
Vancouver Real Estate Just Had The Worst September In 27 Years
Vancouver real estate is seeing price growth grind to a halt as sales plummet and inventory soars. The price of a typical home in Vancouver reached $1,070,600 in September, up 2.2% from last year. Meanwhile sales fell 43.5% to 1,595 homes, and inventory increased 38.2% to 13,084 active listings. Price gains have have declined for seven months in a row, with no sign of slowing down soon.
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If a young couple want to buy a house in Toronto they need about $1,000,000. Say they have been able to save $150,000 after tax cash for a downpayment. That’s an ungodly sum for a young couple to save by the way, especially after tax. Their mortgage is $850,000 at 4.25% over 25 years is $4800 per month. That’s 30% of $16,000 a month, after taxxxxxxxx. So they are making about $30,000 a month or $360,000 a year. People who earn $360,000 annually don’t like $1,000,000 houses in Toronto. They prefer $2,000,000 houses. People who actually like $1,000,000 houses in Toronto make about $150,000 a year. House prices make no sense and they are not sustainable, they are certainly not going up. My bet is that house prices are going to drop 60% from todays already significantly reduced prices. Maybe even BOGO?