Real eState

Canadian households have lost billions in real estate cool-down – CBC News

Published

2 years ago

September 16, 2022

Canada’s real estate market has suddenly and dramatically cooled. Sales have dropped 24 per cent since this time last year. The average price of a home in this country has fallen by $179,047 since the peak in February.

And yet, has much actually changed?

“I consider it like letting the air out of a balloon,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “You don’t want it necessarily to pop and burst, but in the near term prices needed to come down to something that was a little bit more sustainable.”

For anyone trying to get into the market, the prospect of a cool down was always presented as an opportunity. But even with a 20 per cent drop in prices, Canada’s average home price has fallen back to where it was in early 2021.

What has changed, however, is how house-poor the typical Canadian family is feeling lately. Statistics Canada says the drop in home prices has helped drive the largest decline of household wealth this country has ever seen.

Billions lost in household net worth

It may be easy to look at the decline in home prices and, if you’re not an owner trying to sell, say, “That doesn’t affect me.”

But the reality is: Much of Canadian household wealth is tied up in home prices, the sector itself remains one of the biggest contributors to Canadian GDP, and it just took a hit.

Statscan says the net worth of Canadian households — defined as the value of all assets minus all liabilities — fell by a staggering $990.1 billion in April, May and June.

“This decline was compounded by a $389.8-billion drop in the value of non-financial assets, as the streak of gains in real estate that began in late 2018 was halted by a housing market grappling with rapidly rising interest rates,” wrote the data agency in a release last week.

The rest of the drop in household wealth comes as stock markets tanked in the second quarter. (Statscan’s figures only covered the period ending in June. Stock markets have recovered somewhat since then, but the once red-hot housing market losses have accelerated through July and August.)

A pedestrian passes a “Help Wanted” sign in the door of a hardware store in Cambridge, Massachusetts, U.S., July 8, 2022. REUTERS/Brian Snyder (Brian Snyder/Reuters)

As home values fall, there’s a knock-on effect for the rest of the economy, “like spending on building materials, spending on furniture, all that kind of stuff,” said BMO’s senior economist Robert Kavcic.

“We have more depressed housing activity that’s going to drag on real economic growth and is going to drag on job growth.”

As home values skyrocketed over the past decades, Canadian homeowners felt richer. They borrowed more and spent more, using their ever-rising home values as a sort of ATM.

As values fall off and interest rates rise, homeowners are less likely to borrow and spend.

Those interest rates will also slow the economy in another way, says Kavcic.

“If your mortgage payment is gone up $500 a month, or $1000 a month, that is immediately biting into discretionary spending that you could otherwise be spending elsewhere in the economy,” he told CBC News.

Inflation is not over

Meanwhile, inflation is eating into our purchasing power and eroding wage growth.

Combined, consumers are looking for ways to scale back spending, and small decisions make big differences when scaled out over a population.

“If you’re not going out for lunch, well, that’s one fewer sale at the local lunch place and maybe at some point, a couple fewer jobs,” said Kavcic.

He expects there are difficult days ahead.

Falling gasoline prices are driving down headline inflation. But other the price of other goods and services continues to rise. (Robert Short/CBC )

Next week, Canada’s latest inflation numbers are set to be released. They’re forecast to show a deceleration in the main, headline number that in June reached a 39-year high of 8.1 per cent.

But economists are concerned that core inflation, which strips out volatile components like gasoline and food, is still rising. Cieszynski says the most recent inflation numbers from the U.S. show how tough it is to rein in rising prices.

“[Last week’s U.S.] numbers showed that inflation is sticky, it’s remaining high and it may or may not have peaked,” he said.

“Even if it does start to come down, it may come down much slower than [Wall Street] had anticipated.”

If inflation does persist even as higher interest rates bite into the economy, he says, central banks including the Bank of Canada would have to increase rates more than expected and remain high for longer than anticipated.

That would mean more turmoil for both stock markets and real estate markets. Which in turn would mean an even larger erosion of household wealth than we’ve already seen.

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Real eState

Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

Published

4 days ago

November 6, 2024

Anne Joseph

TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

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Homelessness: Tiny home village to open next week in Halifax suburb

Published

2 weeks ago

October 24, 2024

Anne Joseph

HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.

Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.

Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.

The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.

Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.

They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.

The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.

This report by The Canadian Press was first published Oct. 24, 2024.

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Here are some facts about British Columbia’s housing market

Published

3 weeks ago

October 17, 2024

Anne Joseph

Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

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