General

Download My Mortgage Toolbox!

8 Sep

Latest in Mortgage News: Canadians Say Low Interest Rates to Blame for High Home Prices

General

Posted by: Kyra Park

Are ultralow interest rates to blame?

 

More than three-quarters of Canadians (77%) believe home prices in suburban and rural areas have risen to unsustainable levels, and most feel that ultra-low interest rates are to blame.

A full 8 out of 10 people say low borrowing costs are to blame for the recent run-up in home prices, according to a survey from Zoocasa.

The findings reveal disagreement about the impact of low interest rates, with 47% saying they believe it has increased affordability, while 34% disagree with that statement.

The survey also found that more than a third (38%) agree that low interest rates have impacted their desire to buy a property.

With the average home price in Canada as of July at more than $661,000, according to the Canadian Real Estate Association, buyers are needing ever higher incomes in order to afford their purchase. The Zoocasa survey found that half of buyers (50%) have a household income of over $100,000, while 32% reported a household income of under $100,000 and another 20% reporting a household income of over $160,000.

In terms of demographics, the largest cohort of first-time buyers identified as Millennials (born between 1981 and 1996). The next largest segment was Gen X (1965-`1980) at 23% and Baby Boomers (1946-1964) at 6%. Just 3% of Gen Z (1997-2012) self-identified as first-time homebuyers.

Online home sale auctions are now a thing

An Ottawa-based start-up has brought the concept of online auctions to Canadian real estate sales.

Unreserved, which is aiming to reinvent how homes are bought and sold, recently launched its auction platform.

“Our plan is to run a real-time transparent process and it starts by rolling out the red carpet for buyers,” CEO Michael Ryan O’Connor said in the company’s promotional material. “Our goal is to increase buyer confidence by providing full transparency in every step of the process…Also, by removing 4-5% commissions paid by sellers this essentially allows buyers to pay less and for sellers to keep more.”

O’Connor added that by using its platform, buyers can see the other bids, meaning they’re not over-paying by tens of thousands of dollars in a blind-bid process.

“We looked at the current environment, the blind bidding, the pre-emptive bully offers, zero home inspections, and we said ‘its time to bring transparency into the entire process,’” O’Connor noted.

The company is piloting its platform in Ottawa but plans to expand to other cities going forward.

National Bank invests $103 million in Flinks

National Bank of Canada announced that it has invested $103 million in Flinks, a Montreal-based fintech company that enables businesses to connect to their clients’ financial accounts.

Flink recently launched in the U.S., and this investment will allow it to continue its growth to serve “asset managers, credit unions and banks with tools that enable innovation with financial data in North America,” the company said.

“Leveraging financial data still today requires technical know-how,” said Yves-Gabriel Leboeuf, CEO of Flinks. “We want to empower service providers of all sizes to drive positive outcomes for their customers, using financial data.”

Updates from FSRA

The Financial Services Regulatory Authority of Ontario (FSRA) said it is seeking feedback on its proposed licensing exemption for certain businesses engaging in mortgage transactions.

The exemption would apply to select businesses that do not deal with individual consumers. The move is part of the agency’s work—in collaboration with industry partners and the Ministry of Finance—to implement proposed recommendations to the Mortgage Brokerages, Lenders and Administrators Act, 2006, based on a 2019 government review.

To review the proposed guidance and submit your feedback by October 8, 2021, visit FSRA’s website.

FSRA also recently unveiled a new process for criminal background checks as part of its mortgage broker licence applications.

FSRA will have to outsource criminal reference checks to remain compliant with the Police Record Checks Reform Act (PRCRA). Among other things, this process will involve a fee of $40 and require the applicant to initiate a Canada Police Information Centre (CPIC) check through an approved third-party criminal record check provider. To learn more, click here.

published by Steve Huebl

27 Aug

14 Things to Do Now to Prepare for Back to School

General

Posted by: Kyra Park

The Transition from Summer Vacation to Back to School can be a tough one for all of us!

These tips will make the back to school transition easier for you and your child.

1 / 14

teenager buying different products in stationery shopJACKF/GETTY IMAGES

Back to School Shopping

Get your kids involved in back to school shopping and it won’t seem like such a chore. Set spending limits for items such as clothing, shoes and backpacks and allow them to pick out what they like best, whether online or in a store. By doing this early, you’ll avoid long lines at stores and anxiety at home in the days before classes commence.

If your child must wear a uniform, make sure they have what they need before the first day. And don’t forget to set up a comfortable home study space if they will be distance learning. To make room for those new clothes, follow these tips to decluttering the closet.

2 / 14
Chalkboard And CorkboardVIA AMAZON.COM

Create a Message Center

Life can be chaotic during the school year with all those online class meetings, sports practices and rehearsals. Create a message center so everyone in the family can keep track of schedules and appointments. You can build a home message center or purchase one that is ready to go.

3 / 14

Father and daughter buying school supplies preparing to go back to school, on shouldersMAXRIESGO/GETTY IMAGES

Stock up on Supplies

Whether you homeschool your child or send them off to a private or public school, there’s a good chance they’ll need some supplies. Many schools provide a list of everything your child will need. Stock up on pencils, erasers, markers and rulers now so they are ready to go on day one. And keep your school supplies organized so you can find everything when you need them.

4 / 14
Dry Erase magnetic CalendarVIA AMAZON.COM

Magnetic Calendar

You’ll be a pro at back-to-school organization with this magnetic calendar. Place it where you can easily add appointments, practices schedules and concert dates to stay on track. Keep it near your message center to make all notes and plans easy to find.

Shop Now

5 / 14
pipe desk finished-how-to-build-a-deskFAMILY HANDYMAN

Create a Homework Station

Prepare for distance learning and homework by creating a comfortable environment where your student can focus on the tasks at hand. Create a space they can do their work with little to no distractions. You can build this sleek pipe desk in just a couple of hours.

6 / 14
folding Lap DeskVIA AMAZON.COM

Get a lap desk

This folding lap desk is perfect for doing school assignments on the go. It can function as a laptop stand, travel desk, breakfast table, kids study desk and much more. There’s also extra storage space under the desktop. And the legs fold in flat, making these trays easy to store and portable. It’s the perfect accessory for your school technology.

7 / 14

Mother putting son to sleep at homeFG TRADE/GETTY IMAGES

Prepare for Mornings

Now’s the time to prepare for those hectic early mornings. Get in the habit now of making lunches the night before. About two weeks before school starts, have your children go to bed a little earlier each night and wake up to an alarm clock so they’re ready for the first day.

8 / 14

Insulated Lunch BoxVIA AMAZON.COM

Insulated Lunch Box

Back to school also means packing your child’s lunch each morning. This insulated lunch box will keep everything cool (or warm) until they’re ready to eat. Use this DIY ice pack tip to keep your lunch cool.

Shop Now

9 / 14

Make Sure Work is Completed

Was your child assigned school work to complete over the summer? Make sure they’ve done their reading and any summer homework packets.

10 / 14

Backpack Organizer stationVIA AMAZON.COM

Create a Backpack Station

Set up a backpack and coat station. This can be installed in an entryway or mudroom as a designated spot for kids to hang their belongings when they come home each day. It can also help cut down on clutter.

Shop Now

11 / 14

Man holding mop and plastic bucket with brushes, gloves and detergents in the kitchenSEKSAN MONGKHONKHAMSAO/GETTY IMAGES

Wipe Out Germs

Back to school time often means germ season. Make sure to stock up on cleaning supplies (or make your own) to keep surfaces clean and stop the spread of germs.

12 / 14
light up alarm clockVIA AMAZON.COM

Make Mornings Easier with this Alarm Clock

No one will be late for class with this smart alarm clock. Sunrise simulation wakes you up gradually. It also works as a bedside light.

Shop Now

13 / 14
girl choosing outfits for schoolKZENON/SHUTTERSTOCK

Choose Outfits

Get your kids in the habit of choosing clothes for the week on Sunday. Have your child lay out his or her clothes that they plan to wear the night before. Not only will this make mornings less chaotic, but it may even help cut down on your laundry throughout the week.

14 / 14
bag organizerVIA AMAZON.COM

Bag Organizer

Keep your kid’s school bag or backpack organized with this clever insert. It features pockets for a cell phone and tablet, planner, pens and even snacks. And keep your mudroom organized with these DIY lockers.

By Rachel Brougham, full article here: https://www.familyhandyman.com/list/prepare-for-back-to-school/

 

26 Aug

What Does High Inflation Mean for Mortgage Rates?

General

Posted by: Kyra Park

Canada’s inflation rate came in above expectations last week, rising to its highest level in more than a decade.

If above-target inflation persists, it could have ramifications for homeowners in the form of shifting rate-hike expectations.

Canada’s inflation rate came in burning hot at 3.7% for July, according to data released by Statistics Canada. That’s the third consecutive monthly inflation reading that has come in above the Bank of Canada’s neutral range of 1.75% to 2.75%, which is the range needed to support the economy at full employment/maximum output while keeping inflation under control.

But the Bank of Canada continues to believe that elevated consumer prices will prove temporary and are largely the result of an economy recovering from the pandemic-induced slump.

“…inflation is likely to remain above 3% through the second half of this year and ease back toward 2% in 2022, as short-run imbalances diminish and the considerable overall slack in the economy pulls inflation lower,” the Bank said following last month’s interest rate decision. “The factors pushing up inflation are transitory, but their persistence and magnitude are uncertain and will be monitored closely.”

More recently, Bank of Canada Governor Tiff Macklem reaffirmed the messaging that everything is under control in a July 29 Financial Post column. “The Bank of Canada remains firmly committed to keeping inflation low, stable and predictable,” he wrote. “Even with the gyrations caused by the pandemic, inflation has averaged pretty close to target through the past few years to today. You can be confident that we will keep the cost of living under control as the economy reopens.”

But the central bank can only allow high inflation to persist for so long before a policy response is required.

“The Bank of Canada may be willing to tolerate higher inflation while the economy is still re-opening and recovering from the health shock, but it will respond to more lasting price pressures by reducing monetary accommodation,” wrote TD Bank senior economist James Marple in a recent post. “In the near-term, asset purchases are likely to continue to be pared back, with rate hikes likely to follow late next year.”

At the Bank’s last rate decision meeting in July, it announced that it was reducing its bond-buying program to $2 billion per week from $3 billion.

At the height of the pandemic, the BoC embarked on a quantitative easing program in which it purchased at least $5 billion worth of bonds each week to flood the market with liquidity, in turn keeping 5-year bond yields—and by extension, 5-year fixed mortgage rates—lower than they otherwise would be.

Average mortgage rates remain slightly above their all-time lows reached in December. But the question is, for how much longer?

The Timing of Future Rate Hikes

Those concerned about imminent rate hikes can take solace in the Bank of Canada’s repeated forecast that rates won’t increase until the second half of next year.

We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2% inflation target is sustainably achieved. In the Bank’s July projection, this happens sometime in the second half of 2022,” read the BoC’s statement from its July rate meeting.

The bond market’s read on future rate hikes is that consumers can expect one quarter-point rate hike over the next year, which would take the BoC’s overnight lending rate from its current record low of 0.25% to 0.50%.

And despite the latest high inflation figures, the bond market is actually forecasting one less rate hike over the next two years compared to a couple of months ago—it now expects three 25-bps hikes over the next two years, down from four. Looking three years out, the Bank of Canada is expected to deliver five quarter-point rate hikes in total, bringing the overnight rate to 1.50%.

This would cause prime rate to increase, leading to higher monthly payments for many borrowers with variable-rate mortgages. For those with fixed-payment variable mortgages, the amount of their payment going towards paying down the principal will decline, and the amount going towards interest will increase.

If prime rate was to rise 125 basis points over the next three years, the average mortgage payment could increase by approximately $180 a month, or $2,172 a year, based on today’s average mortgage amount and the lowest variable rates available nationally.

Borrowers with fixed-rate mortgages would not be immediately impacted by rising rates until their mortgage comes up for renewal at the end of their term, or unless they choose to refinance.

“While we are not overly concerned of a payment shock for renewals, the increase in mortgage rates will certainly impact purchasing power for many,” economists from National Bank of Canada wrote in a recent note.

Published by Steve Huebl

24 Aug

Roll With It.

General

Posted by: Kyra Park

Roll With It.

Fitness trainer Mandy Gill makes the case for Summer Salad Rolls!

Call them spring rolls, summer rolls, salad rolls, fresh rolls—the common denominator is that we’re certain these are the only kind of rolls you’ll want this summer.

This easy-to-make recipe, bursting with flavour, can be served as a side dish at a sunny barbecue or enjoyed as a full meal on its own. The cost to make rolls at home is a fraction of what you’d pay in a restaurant or grocery store—plus you can add in whatever ingredients you’d like.

I choose to order nearly all the items below directly to my doorstep from Vitasave.ca, which has options for free shipping across Canada and a commitment to make healthy living easy and affordable for everyone. It’s also vegan, gluten-free and dairy-free.

Summer Salad Rolls

Serving: 8-10 rolls

Total Time: 30 min

  • 1 package spring roll rice paper wrappers (found in the Asian section of your local grocery store; go for the option with little to no added sodium)
  • 1 head romaine lettuce (finely chopped)
  • 4-5 large rainbow carrots (peeled into thin ribbons)
  • ¼ cup chia seeds
  • ¼ cup hemp seeds
  • ½ cup fresh mint (this completes the flavour)
  • » ½ cup Thai basil (sub cilantro if needed)

Instructions:

  1. Take a rice paper and dip it into warm water. Immediately pull it out of the water, letting it drip off for a second before placing it onto a clean surface with a bit of grip (a cutting board works well).
  2. Lay carrots side by side in the center of the rice paper. This is where the colour will come from.
  3. Layer lettuce, mint, Thai basil, hemp and chia seeds on top.
  4. Pull up the bottom of the rice paper wrapper like you would to wrap a burrito, tucking the sides, and meeting at the top edge.
    1. *Tip: use the first roll as an experiment (and the one you eat), seeing as it likely won’t be your prettiest!
  5. Cut in half with a sharp knife and serve with the Lemon Garlic Tahini sauce.

Lemon Garlic Tahini

Serving: 2/3 cup

  • ½ cup tahini (from raw or roasted sesame seeds)
  • ¼ cup warm water, plus more as needed
  • 1 tbsp avocado oil
  • 1 tbsp Flavorgod, lemon & garlic
  • Squeeze of lemon, salt & pepper to taste

Instructions:

  1. Add tahini, avocado oil, Flavorgod lemon & garlic, and a squeeze of lemon into a small mixing bowl. Combine together.
  2. Add water a little at a time, continuing to whisk, until you have a creamy sauce. Taste and adjust seasonings as needed.
  3. If you have any leftover sauce, it can be kept in the fridge for 1-2 weeks. It’s delicious on salads, falafel, veggie burgers, and much more!

 

Published by the DLC Marketing Team

23 Aug

Home Upgrades and Improvements That Really Pay Off

General

Posted by: Kyra Park

These around-the-house upgrades and improvements make great investments.

The timing for a home upgrade or major house improvement project may never be ideal, but now—when you’re at home most of the time and able to receive deliveries, keep an eye on progress, and do some DIY work when you have a few hours—is as good a time as any to tackle major improvements to your home. You may not be interest in moving now, but that doesn’t mean you should put off that kitchen redo or landscaping job.

“Any changes you make on your house now should increase your home value later,” says Kermit Baker, project director for the Remodeling Futures program at Harvard University. But which projects will increase your home value? (Those home remodeling costs aren’t cheap.)

Take a look at this list, starting with the upgrades most likely to recoup your investment, and get ready to appreciate your space more than ever. One note: No home upgrade is going to completely pay for itself. (If it does, you’re one lucky home seller.) With that in mind, make sure you’re picking home improvement projects that will increase your enjoyment of your space; see the opportunity to increase the value of your home as just a bonus.

1. Painting

Why it pays off: Paint provides dramatic results with little investment; the cost to paint a room is much less than that of other home upgrades, and it’s an easy home improvement. If you decide to hire a professional to do the work, expect to pay $3,600 to $6,000 for the interior of an average American house (about 2,400 square feet). An exterior paint job will run $5,000 or more.

Can’t decide on a color? Gerri Willis, former anchor of Open House on CNN and the author of Home Rich, says that pale yellow homes tend to sell faster and for more money. Barbara Richardson, the director of color marketing for Glidden and a noted color trend forecaster, says, “Yellow is optimistic and inspirational. It gives people joy and the sense that brighter times are ahead.”

2. Adding siding or a fresh veneer

Why it pays off: According to the 2020 Cost vs. Value Report, a study conducted by Remodeling magazine, fiber-cement siding (which is made of sand, cement, and cellulose fibers and costs an average of $17,008) is estimated to recoup about 78 percent (or $13,195) of a home owner’s initial investment. While vinyl can crack, split, and warp and aluminum tends to dent and fade, easy-care fiber cement holds up well against the elements and is resistant to fire, rotting, and termites.

If you prefer the look of masonry, you’re in luck: The addition of a manufactured stone veneer is even more valuable. The average cost of the upgrade is $9,357, with an average added sale value of $8,943—nearly a 96 percent return on investment, the highest in the 2020 Cost vs. Value Report.

3. Building a deck

Why it pays off: A deck will provide you with more than a place to flip burgers and soak up the sun. “Buyers see a deck as offering a seamless transition from inside to out,” says Jerry Levine, president of the Levine Group, an architectural and construction firm in Silver Spring, Md.

Experts suggest using natural, rustic wood. In 2020, wooden decks (as opposed to composite ones) reaped an impressive return on investment: Home owners who spent an average of $14,360 on lumber and labor could expect to recoup $10,355, or 72 percent of their costs.

4. Updating the kitchen

Why it pays off: It’s hard to go wrong with remodeling your kitchen, which can net up to 77 percent of the cost. If you’re upgrading with resale in mind, though, just avoid making overly personal decisions with the decor to make your kitchen more sellable; the features of your dream kitchen may populate someone else’s nightmares.

“People know that renovating can be a nightmare, and potential buyers will appreciate that you did the dirty work for them,” says Vern Yip, a designer and former host of HGTV’s Deserving Design. “But stick with high-quality fixtures, like stainless-steel appliances and granite counters, and don’t pair them with a cheaper material, like laminate.”

A word of caution: If your house is a tiny two-bedroom bungalow, don’t bother splurging on, say, a high-end stove. “You’ll never get your money back by installing fancy appliances in a smaller home,” says Leslie Sellers, vice president of the Appraisal Institute, an association of real estate–appraisal professionals in Chicago.

And if an appliance overhaul isn’t in the cards, “you can easily make cosmetic updates on a kitchen that’s in decent shape,” says Steven D. Bullock, a designer in New York City and a certified member of the National Kitchen & Bath Association, in Hackettstown, N.J. For example, if your existing appliances are in good working order, coat them with electrostatic paint to give them a metallic or enamel-type finish. And you don’t have to rip out your cabinets, either: The 2020 Cost vs. Value Report found that minor kitchen remodels have a higher return on investment than major ones.

5. Replacing the windows

Why it pays off: If you’re experiencing cool and blustery weather in your living room, it’s time to buy new panes, pronto. Not only are you losing precious heat but your utility bill could also be skyrocketing. “Energy-efficient windows eliminate drafts, so your home feels warmer,” says Sellers. Home owners who spent $17,641 on vinyl window replacements got a 72 percent ($12,761) return; the return is lower for wood windows, at 69 percent.

6. Modifying a bathroom

Why it pays off: Bathroom upgrades, like updated countertops and new fixtures, provide solid returns―anywhere from 57 to 64 percent. But “avoid anything too trendy,” says designer Vern Yip. “Choose classic features, like off-white subway tiles, that will appeal to people with both traditional and contemporary tastes.”

There’s no need to splurge on fancy fixtures, either. “A tub is a tub. A Jacuzzi will never make or break a sale,” says designer Steven D. Bullock. For quick touch-ups on existing sinks, toilets, and tubs, consider hiring a surface-restoration company that recoats ceramic, porcelain, and fiberglass fixtures so they look like shiny new porcelain.

7. Landscaping

Why it pays off: The front of your house is the first thing people see (hello, curb appeal), so it makes sense that any improvements―from planting petunias to surrounding your home with a hedge―will be worth your while.

“Don’t be afraid to spend money on perennials, which come back year after year,” says Yip. As for big-ticket investments, like trees, they aren’t just nice to look at; they also stave off erosion, block storm-water runoff, reduce carbon dioxide emissions, and filter groundwater pollutants. They might make your home sell for more money, too. The Arbor Day Foundation estimates a six- to eight-foot Colorado blue spruce or live oak (both are commonly found all around the United States) may grow one to two feet a year. And properties with gorgeous, established trees are even more attractive to potential home buyers down the road.

When determining which areas of your yard to attend to first, try approaching the house from the curb to the front door. “Buyers make their decisions in exactly eight seconds,” says Barbara Corcoran, founder of the Corcoran Group, a Manhattan real estate firm. “After that, they’ve either fallen in love or are just honoring an appointment.”

8. Installing central air-conditioning

Why it pays off: Adding central air to an average 2,400-square-foot house could cost upward of $10,000 and boost your home’s value by 10 to 20 percent, says appraiser Leslie Sellers. And central air-conditioning is energy-efficient, too. Centralized units have an average energy-efficiency rating (EER) of 11.5, compared with an 8.5 EER in single-window models, making them less expensive to run. What’s more, central air won’t block the view the way a window unit does.

9. Fixing up the basement

Why it pays off: “There’s nothing worse than that unmistakable damp-basement smell,” says Corcoran. “A dry basement is far more important than worrying about the right lighting or furnishings.”

If your basement is prone to flooding, leaks, or excess moisture, call in a pro. If you do want to finish your basement by adding drywall, insulation, laminate flooring, or even a bathroom, “be sure it’s proportional in quality to other areas of your home,” says Lonny Rutherford, a chairman of the National Association of Home Builders Remodelers, in Washington, D.C. According to Sellers, “basement remodels gain back anywhere from 50 to 100 percent, depending on the quality of the materials.”

10. Putting in a swimming pool

Why it pays off: When you’re deciding whether to install a pool, it’s important to consider the part of the country where you live; the value of homes with pools varies widely. In places where it can get unforgivingly hot, such as California and Florida, an in-ground pool may boost a home’s value by as much as $95,000, according to a 2019 analysis by real estate brokerage Redfin.

In more temperate areas, a pool can be a big turnoff, as prospective buyers imagine all the work they’ll have to do to maintain it, not to mention safety issues and higher insurance rates. But if you plan to enjoy a pool for a few years and it improves your quality of life, “then go for it,” says Tom Kraeutler, a cohost of The Money Pit, a home-improvement radio show, and a coauthor of My Home, My Money Pit. “You can’t put a number on that.”

 

Published By Allegra Muzzillo and Lauren Phillips for Real Simple

 

 

20 Aug

Mortgage Borrowing Grew at its Fastest Monthly Pace Ever in June

General

Posted by: Kyra Park

Mortgage Debt still on the rise.

Mortgage debt in Canada soared above $1.7 trillion in June, growing at a monthly pace never before seen, according to Statistics Canada.

The new figures show mortgage debt grew 9.2% compared to the same time last year, a pace not seen since 2008, and jumped 1.37% since May, which StatCan noted is the largest monthly increase on record.

In the first half of 2021, households have added $81.6 billion in mortgage debt, compared with $108.6 billion over all 12 months of 2020.

Historically low interest rates have spurred demand for housing over the past year, despite record gains in home prices. StatCan added that the Office of the Superintendent of Financial Institutions’ (OSFI) stricter stress test qualification rules for uninsured mortgages came into effect on June 1, “which may have spurred additional borrowing prior to the deadline.”

“While the rise in mortgage debt accelerated, the volume of housing resale activity and the average resale price have been on a downward trend after reaching peaks in March of 2021,” the agency said, noting that there is typically a lag time between the sale of a home and the actual receipt of mortgage funds.

“However, borrowers may also be in the market for a new home, or otherwise be taking additional equity out of their home or consolidating debt when refinancing their existing mortgages,” it added.

Non-mortgage debt also grew in June, led by a 2.7% rise in personal loans and a 1.6% rise in credit card borrowing.

“Credit card debt increased for the fourth month in a row as pandemic-related restrictions eased,” Statistics Canada noted. “Lines of credit also rose by $1.7 billion, but this was fuelled by growth in home equity lines of credit.”

Mortgage borrowing from private non-financial corporations also ticked up in the month, rising 0.9%, or $2.9 billion, to $346.6 billion.

Published by Steve Huebl

19 Aug

Canadian inflation picked up sharply in July, rising to it’s highest level in 20 years.

General

Posted by: Kyra Park

Annual Inflation Hits 3.7% in Canada–A New Election Issue
This morning’s Stats Canada release showed that the July CPI surged to a 3.7% year-over-year pace, well above the 3.1% pace recorded in June. This is now the fourth consecutive month in which inflation is above the1% to 3% target band of the Bank of Canada. And given the flash election, opposition parties are already making hay. “The numbers released today make it clear that under Justin Trudeau, Canadians are experiencing a cost of living crisis,” Conservative Leader Erin O’Toole said in a statement. He went on to suggest that the Liberal government is stoking inflation with its debt-financed government spending programs.

While it is true that deficit spending has surged during the pandemic, the same is also true for nearly every country in the world. Moreover, accelerating inflation is a global phenomenon and most central banks believe it to be temporary. Certainly, Tiff Macklem is firmly of that view, as is the Fed Chair Jerome Powell.

Supply disruptions and base effects have largely caused the rise in inflation. Semiconductor production, for example, slumped during the 2020 lockdowns, and then couldn’t be ramped up fast enough when demand for cars and electronics returned, leading the prices of new and used autos to rise at a record pace. Prices for airfares and hotel stays also jumped. Companies found themselves short of workers as they reopened, leading some to offer bonuses or boost wages and subsequently raise prices for consumers.

Central bankers believe that the price pressures are transitory, representing temporary shocks associated with the reopening of the economy.  Lumber prices, for example, spiked when demand for new homes returned and have since normalized (see the chart below). To be sure, above-target inflation has heightened uncertainty. The central banks do not want to choke off the economic recovery through misplaced inflation fears. Many Canadians remain out of work, and long-term unemployment is still very high. Moreover, the recent surge of the delta variant proves that the recovery is uncertain.

Governor Tiff Macklem, whose latest forecasts show inflation creeping up to 3.9% in the third quarter before easing at the end of the year, has warned against overreacting to the  “temporary” spike.

Shelter Prices Rising Fastest

Prices rose faster year over year in six of the eight major components of Canadian inflation in July, with shelter prices contributing the most to the all-items increase. Conversely, prices for clothing and footwear and alcoholic beverages, tobacco products and recreational cannabis slowed on a year-over-year basis in July compared with June.Year over year, gasoline prices rose less in July (+30.9%) than in June (+32.0%). A base-year effect continued to impact the gasoline index, as prices in July 2020 increased 4.4% on a month-over-month basis when many businesses and services reopened.

In July 2021, gasoline prices increased 3.5% month over month, as oil production by OPEC+ (countries from the Organization of Petroleum Exporting Countries Plus) remained below pre-pandemic levels though global demand increased.

The homeowners’ replacement cost index, which is related to the price of new homes, continued to trend upward, rising 13.8% year over year in July, the largest yearly increase since October 1987.

Similarly, the other owned accommodation expenses index, which includes commission fees on the sale of real estate, was up 13.4% year over year in July.

Year-over-year price growth for goods rose at a faster pace in July (+5.0%) than in June (+4.5%), with durable goods (+5.0%) accelerating the most. The purchase of passenger vehicles index contributed the most to the increase, rising 5.5% year over year in July. The gain was partially attributable to the global shortage of semiconductor chips.

Prices for upholstered furniture rose 13.4% year over year in July, largely due to lower supply and higher input costs.

Core MeasuresThe average of core inflation readings, a better gauge of underlying price pressures, rose to 2.47% in July, the highest since 2009.

Monthly, prices rose 0.6% versus a consensus estimate of 0.3%. Rising costs to own a home are one of the biggest contributors to the elevated inflation rate, following a surge in real-estate prices over the past year.

Bottom Line

Today’s inflation data likely did little to alter the Bank of Canada’s view that above-target inflation will be a transitory phenomenon. They are already ahead of most central banks in tapering the stimulus coming from quantitative easing. They do not expect to start increasing interest rates until the labour markets have returned to full employment, which they judge to occur in the second half of 2022. In the meantime, pent-up demand in Canada is huge as people tap into their involuntary savings during the lockdown to pay higher prices at restaurants, grocery stores and gas stations. Financial markets appear to be sanguine about the prospect for rate hikes, as bond yields have been trading in a very narrow range.

Published by Dr. Sherry Cooper

17 Aug

Canadian Home Sales Slow for Fourth Consecutive Month.

General

Posted by: Kyra Park

Canadian Housing Sales Continue to cool down in July.

Today the Canadian Real Estate Association (CREA) released statistics showing national existing home sales fell 3.5% nationally from June to July 2021–the fourth consecutive monthly decline. Over the same period, the number of newly listed properties dropped 8.8%, and the MLS Home Price Index rose 0.6% and was up 22.2% year-over-year.

While sales are now down a cumulative 28% from the March peak, Canadian housing markets are still historically quite active (see Chart below). In July, the decline in sales activity was not as widespread geographically as in prior months, although sales were down in roughly two-thirds of all local markets. Edmonton and Calgary led the slowdown, but these cities didn’t experience falling sales until recently. In Montreal, in contrast, where sales began to moderate at the start of the year, activity edged up in July.

The actual (not seasonally adjusted) number of transactions in July 2021 was down 15.2% on a year-over-year basis from the record for that month set last July. July 2021 sales nonetheless still marked the second-best month of July on record.

“While the moderation of sales activity continues to capture most of the headlines these days, it’s record-low inventories that should be our focus,” said Cliff Stevenson, Chair of CREA. Most markets are in sellers’ market territory.

New Listings

The number of newly listed homes dropped by 8.8% in July compared to June, with declines led by Canada’s largest cities – the GTA, Montreal, Vancouver and Calgary. Across the country, new supply was down in about three-quarters of all markets in July.

This was enough to noticeably tighten the sales-to-new listings ratio despite sales activity also slowing on the month. The national sales-to-new listings ratio was 74% in July 2021, up from 69.9% in June. The long-term average for the national sales-to-new listings ratio is 54.7%.

Based on a comparison of sales-to-new listings ratio with long-term averages, the tightening of market conditions in July tipped a small majority of local markets back into seller’s market territory, reversing the trend of more balanced markets seen in June.

Another piece of evidence that conditions may be starting to stabilize was the number of months of inventory. There were 2.3 months of inventory on a national basis at the end of July 2021, unchanged from June. This is extremely low – still indicative of a strong seller’s market at the national level and most local markets. The long-term average for this measure is twice where it stands today.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 0.6% month-over-month in July 2021, continuing the trend of decelerating month-over-month growth that began in March. That deceleration has yet to show up in any noticeable way on the East Coast, where property is relatively more affordable.

Additionally, a more recent point worth noting (and watching) just in the last month has seen prices for certain property types in certain Ontario markets look like they might be re-accelerating. This could be in line with a re-tightening of market conditions in some areas.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 22.2% on a year-over-year basis in July. While still a substantial gain, it was, as expected, down from the record 24.4% year-over-year increase in June. The reason the year-over-year comparison has started to fall is that we are now more than a year removed from when prices really took off last year, so last year’s price levels are now catching up with this year’s, even though prices are currently still rising from month to month.

Looking across the country, year-over-year price growth averages around 20% in B.C., though it is lower in Vancouver and higher in other parts of the province. Year-over-year price gains in the 10% range were recorded in Alberta and Saskatchewan, while gains are closer to 15% in Manitoba. Ontario sees an average year-over-year rate of price growth in the 30% range. However, as with B.C., gains are notably lower in the GTA and considerably higher in most other parts of the province. The opposite is true in Quebec, where Montreal is in the 25% range, and Quebec City is in the 15% range. Price growth is running a little above 30% in New Brunswick, while Newfoundland and Labrador is in the 10% range.

Bottom Line

Sales activity will continue to gradually cool over the next year, but it will take higher interest rates to soften the housing market in a meaningful way. Local housing markets are cooling off as prospective buyers contend with a dearth of houses for sale. Though increasing vaccination rates have begun to bring a return to normal life in Canada, that’s left the country to contend with one of the developed world’s most severe housing shortages and little prospect of much new supply becoming available soon.

Published by Dr. Sherry Cooper & DLC Marketing Team

5 Aug

Get the Scoop on Rental Properties

General

Posted by: Kyra Park

4 Aug

Residential Market Commentary – Property: Bet you can’t own just one

General

Posted by: Kyra Park

More Millennials Buying more than one Property

A new survey by realtor Royal Lepage suggests a significant number of Canadians own two or more properties.  It further suggests the majority of those people are renting them out, and Millennials are getting in on the action.

The company focused on homeowners in Canada’s three, biggest urban areas – Montreal, Toronto and Vancouver – and found more than 10% of the respondents have more than one property.

The survey also found that nearly two-thirds of those people in Greater Vancouver (65%) and Greater Toronto (64%) collect rental income at least some of the time.  In Montreal about one-third (35%) said they are collecting at least some rental income.

A further breakdown shows almost half (49%) of secondary property owners in the GTA have the property strictly for rental purposes. Fifteen percent say they use the property themselves and collect rent some of the time.  In Greater Vancouver just over half (51%) use their extra property for rental, with 13% charging rent some of the time.  In Montreal, one-quarter (25%) use the property as a full-time rental.  Nine percent collect rent some of the time.

The survey also revealed an interesting trend in a red hot market that is deemed to be shutting out younger buyers: the proportion of Millennials that own more than one property tends to outpace Boomers with more than one property.

In both Montreal and Toronto, the percentage of people under age 35 who own a second property exceeds the percentage of people over the age of 35.  In Montreal it is 16% compared to 11%.  In Toronto it is 18% compared to 11%.  In Vancouver it is an even split at 14% for each group.

Published by First National Financial