Time for your weekly cheat sheet on this week’s most important stories.
Canadian Real Estate
Canadians are facing higher payments on mortgages and HELOCs, especially in Vancouver and Toronto. The average monthly mortgage payment in Vancouver reached $1,794 in Q1 2018, up 6.5% from the previous quarter. Toronto’s average payment reached $1,662, up 6.4% from the previous quarter. To contrast Montreal saw the average mortgage payment reach $1,060, up 2.51% from the previous quarter. Montreal’s increase is huge, but Toronto and Vancouver are next level.
Home equity lines of credit (HELOC) payments are growing even faster. Vancouver’s average monthly HELOC payment reached $594 in Q1 2018, up 10.82% from the previous quarter. Toronto’s average monthly payment reached $518, up 12.85% from the previous quarter. Montreal’s average payment reached $582, up a slightly more conservative 5.82%. For a consumer loan secured by home equity, the pace of growth here is concerning.
Mortgage delinquencies are a misunderstood market indicator. People don’t go delinquent on their mortgage when they run out of cash. They go delinquent when they run out of cash, and can’t sell their home fast enough. That’s why delinquencies are a better sign of market liquidity than consumer health. That makes it more important to note when these numbers stall, rather than when they climb. The stalling is likely a sign of peak liquidity, with a reversal around the corner.
In Toronto and Vancouver, delinquencies are stalled for mortgages over $400,000. Toronto’s delinquencies for mortgages over $400,000 is now at 0.08%, just off of the all-time low. It’s been within the range of 0.07% and 0.08% for the past six quarters – the longest its been “flat” in recent time. Vancouver mortgages in this range have sat at 0.09% since Q2 2017. The flatlining of delinquencies likely means that we’ve reached maximum liquidity. Failing no stimulus for home buying, these numbers can only go up from here.
The measure of the most liquid form of cash shows an economic slowdown is brewing across Canada. The BoC measured the annual growth of M1+ at 4.2% in June, up from 4% the previous month. The 4% growth rate was actually the slowest pace since 2003. In 2003, which required huge cuts to interest rates to stimulate the economy. The uptick in June is encouraging, but the 3-month annualized rate falling to 2.3% pours water on that. The 3-month rate most likely means we’ll see the annual rate continue to slow in the near term.
Toronto Real Estate
The typical detached home across Toronto is still seeing prices fall in July. The detached benchmark for TREB reached $923,800, down 4.15% from last year. In the City of Toronto the benchmark fell to $1,112,800, down 2.91% from last year. The typical price is now close to 10% lower than they were from peak. That level of decline pushes these home prices into a technical correction.
Vancouver Real Estate
Greater Vancouver real estate is seeing price growth slow, as sales hit a near two decade low. The benchmark price of a composite home reached $1,087,500 in July, up 6.7% from last year. The increase is still massive, but is the slowest pace of growth since February 2015. The slowing growth is likely due to falling demand. The market only saw 2,070 sales in July, making it the slowest July since 2000.
Greater Vancouver’s detached market just saw detached prices go negative. The price of a typical detached across the REBGV fell to $1,588,400, down nearly $10,000 from the month before. This represents an annual decline of 1.5%, the first time negative print since October 2013. We know, a tinfoil hat wearing bear said Vancouver’s market has been “crashing” for years. Some neighborhoods may have seen lower detached prices, but this across the board.
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