Time for your weekly cheat sheet on the most important stories of the week.
Canadian Real Estate
Canadians are (still) looking to extract equity from their homes at a record pace. The balance of loans secured in June hit $286.81 billion, up $1.966 billion from the month before. Most of the debt was from HELOCs, representing $258.97 billion, up $2.169 billion in June. Yes, HELOCs had greater dollar value growth than the total balance of loans, which is bad news. It means that small business loans are on the decline.
The number of new owners in Canada declined in 2017, but their budget expanded. There were 959,074 mortgages to new owners across Canada in 2017, a decline of 6.5% from the year before. Despite the decline, the size of the loans expanded by quite a bit – mostly in the suburbs.
The largest increases for new owners were in Oshawa, Kitchener, and Barrie – in that order. Oshawa saw the average loan to a new owner reach $364,989, up 16.59%. Kitchener-Waterloo reached an average of $310,153, up 15.69%. Barrie saw the average hit $321,194, up 13.97%. Yes, all of these markets are in Southern Ontario, and no – none of them are big cities.
Canadian real estate sales are cooling down in most major markets, while inventory rises. Toronto’s sales to new listings ratio (SNLR) reached 48.7 in July, down 20.16% compared to last year. Vancouver hit 54.4, down 14.06%. Montreal’s ratio reached 66.7, which is actually up 11.17% from last year. Generally speaking, a decline in the SNLR means markets are cooling. An increase means the market is heating up, the higher ratio the hotter the market.
The average homeowner in Canada’s largest cities are seeing improvements in credit scores. Toronto’s average homeowner Equifax risk score reached 775 in Q1 2018, up 10 points since 2013. Vancouver’s average score reached 776, up 6 points over the same period. Montreal reached 768, up 5 points. Each one of these markets have “excellent” credit scores, but declines are rare when real estate prices are rising.
Canadian real estate prices are functioning more like financial assets today. Consequently, market psychology and return expectations play a greater role in determining prices. What does this mean? The recent divergence of price movements from volumes may be an example of an exhaustion move. That is, first inventory is exhausted, prices capitulate higher, then buyers become exhausted. What typically follows isn’t usually pretty.
Toronto Real Estate
The Supreme Court of Canada has dismissed an appeal from the Toronto Real Estate Board (TREB). The appeal focused on “anti-competitive” restrictions of MLS data, from being published. TREB has been ordered to loosen restrictions on data use from members, and how they can use the data. Currently, they are reviewing the policies to determine a balance of privacy and compliance with the order. That’s code for they’re determining what they can hold back.
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