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Canadian Real Estate In A “Melt Up,” and Little Chance of Stopping It By Spring: BMO – Better Dwelling

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Canadian real estate is in a “melt up,” says one of the country’s largest banks. BMO senior economist Robert Kavcic sent a brief research note literally titled “Melt Up,” with his take on the latest real estate numbers. The term is typically used to describe rapid, and unsustainable price growth for an asset. It’s also more commonly known as the final stage of a bubble. The economist sees little stopping it, as the market gears up for the busy Spring season.

Canadian Real Estate Is In A “Melt Up”

The bank’s senior economist is calling attention to price growth acceleration going vertical. “The 1-month change is faster than the 3-month; which is faster than the 6-month; which is faster than the 12-month,” he describes the trend. Further adding, “In all cases but the 12-month (and that won’t be long either), price growth has accelerated through the rates seen in 2017, when policy makers were working on multiple fronts to tame the market”

Canadian Real Estate Price Growth

Price growth for CREA’s benchmark home across Canada. The 3 and 1 month trends are expressed as the annualized rate of growth. Source: CREA, Better Dwelling.

Kavcic also doesn’t see any near-term way to stop the mania. During the 2017 foreign buyer “mini-bubble,” governments were openly engaged in cooling measures. This time, there’s little discussion occurring at any level of government.

Since governments need public feedback on measures, there’s usually public discussion. At this point, it would be too late to bring in any cooling measures, going into the Spring. “Spring is in the air and there’s little at the moment to get this momentum in check…” his report finishes. 

What The Heck Is A Melt Up? 

I know, it sounds delicious — how can it be bad for you? Kavcic’s brief note doesn’t get into the meaning of a melt up, but the choice of words is an interesting one. A melt-up, by definition, is an unexpected and sharp rise in the price of an asset (or whole class).

Melt ups are FOMO driven purchases, with no fundamental basis on price movement. Buyers bid based solely on the fact they think the pain of buying later will be greater than today. The only risk they see is paying more later, and not capturing those sweet, epic gains.

Melt ups are great for trading, but long-term investors are cautious of participation. The stampede of investors means future buyers are squeezing into a smaller window. While this creates bidding wars to drive prices higher, it also pulls forward demand.

Sellers benefit from the demand pulled forward today, but future sellers won’t. Since future demand was borrowed, it tends to leave a smaller pool for those that didn’t sell into the melt up. The lack of liquidity can lead to lower prices, especially if there’s a pent-up supply side. The length of a melt up varies, but it’s almost always the final stage of a bubble.

The current melt up isn’t just confined to Canadian housing, it’s a global phenomenon. Jeremy Grantham, founder of GMO, told the Financial Times, global markets are seeing a melt up that now rivals the two biggest bubbles in history. “There is as much craziness now as there was in late 1999 or 1929,” said the billionaire and legendary investor. The 1929 market was considered the textbook example of a melt up, though we might get a better example soon.  

Cheap money doesn’t work the way governments want it to, because households use it the way they know how. It’s hard to convince someone to use cheap credit to start a business, when houses and stocks are making more than they ever could. Are the returns in real estate great right now? Of course, and you’d have a hard time explaining risks to anyone that made $44,000 in a month just by owning a home. Are the returns in everything great right now? Absolutely, and that’s the problem. No one sees the risk of leverage right now, they see the risk of being left behind.

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Canadian home sales, prices surge to new record in March

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OTTAWA (Reuters) – Canadian home sales rose 5.2% in March from February, setting a new all-time record amid strong demand in markets across the country, the Canadian Real Estate Association said on Thursday.

The industry group said actual sales, not seasonally adjusted, rose 76.2% from a year earlier, while the group’s Home Price Index was up 20.1% from last March and up 3.1% from February.

The actual national average selling price hit a new record at C$716,828 ($572,821) in March, up 31.6% from a year earlier and rising 5.7% from February.

($1 = 1.2514 Canadian dollars)

 

(Reporting by Julie Gordon in Ottawa)

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Hot real estate market sparks warnings to potential buyers as complaints to regulator double

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As home sales in the province continue on a dizzying trajectory, the province’s real estate watchdog and regulator are warning buyers to be wary of what they may be getting into.

The Real Estate Council of B.C. (RECBC) and the Office of the Superintendent of Real Estate said that in the first three months of 2021, they have seen an increase in inquiries and complaints.

Calls to the regulator were up 42 per cent over the previous year, while complaints, such as how offers were made and accepted, were double the number received in the same period in 2020.

“Buying a home is one of life’s biggest financial decisions. There are potential risks at the best of times, but with the added pressure and stress of the current market conditions, those risks are amplified,” Micheal Noseworthy, superintendent of real estate, said in a statement.

 

 

The Real Estate Board of Greater Vancouver says sales in the region have continued at a record-setting pace.

Residential home sales covered by the board totalled 5,708 in March 2021, up 126.1 per cent from March 2020, when the COVID-19 pandemic hit, and up 53.2 per cent from February of this year.

Rural and suburban areas have experienced the biggest spikes.

For the past two weeks, Jay Park has been in the middle of the buying frenzy.

He and his partner are trying to upgrade from their one-bedroom apartment to a two-bedroom condo or townhouse in Vancouver.

“I wish we had done this a month or two ago,” he said.

 

A condo tower under construction is pictured in downtown Vancouver in February 2020. (THE CANADIAN PRESS/Darryl Dyck)

 

Park put an offer on a $1-million condo, $4,000 above asking price.

“To entice the [seller], we put in a subject-free offer, but it wasn’t successful,” he said. “They accepted $110,000 over asking price that was also subject-free.”

The hot market has led to bidding wars. Some would-be buyers have even lined up outside for days to try to get a jump on a property.

Erin Seeley, the CEO of the council, is warning buyers to do their research and be aware of risks before making an offer.

“It’s really important that buyers have engaged with their lender before they’re making offers so they know how to stay within a reasonable budget,” she said.

Seeley said some of the complaints the council has heard from buyers is that they weren’t aware the seller has a right to take an early offer.

“And the seller was really in the driver’s seat about setting the pricing,” she said.

 

Demand continues to outstrip supply for housing in cities like Vancouver. (Rafferty Baker/CBC)

 

Aaron Jasper, a Vancouver realtor, advises clients to avoid cash offers and to include finance clauses even if it may mean they lose a deal.

“There’s a lot of frustration among buyers, feeling pressure to take some risk,” he said.

“You’re better to be delayed perhaps a year getting into the market as opposed to being completely financially ruined.”

Jasper also says realtors are limited in the advice they can give to clients on legal matters, home inspections, potential deficiencies with homes, and financing.

‘Caught up in the craziness’

Other tips from the council include seeking professional advice before making a subject-free offer or proceeding without a home inspection, and speaking to a professional to determine how market conditions may be affecting prices.

Meantime, people like Jay Park say they are still keen to buy. Park has more viewings scheduled and is optimistic.

“It’s a very exciting time for us, but I also don’t want to get caught up in the craziness and make a purchase that’s above our means.”

Source: – CBC.ca

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Black Press Media introduces one of Western Canada’s best real estate platforms helping home buyers Find. Love. Live. that new home

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Need an agent who knows the community?

Or, is it time to look for a new place to live, but you don’t know what’s on the market?

Whatever the real estate need is for residents in the communities of British Columbia, Yukon & Alberta, there’s a new way to do that one-stop shopping – by visiting Today’s Home.

The slogan for the site is “Find. Love. Live.”

“We want people to find their dream home, love it, and live in it,” said group publisher Lisa Farquharson.

Building on the success of Black Press Media’s niche digital platforms – Today’s Home brings the same wealth of knowledge and local expertise to the search for a home, be it buying, selling, or even just daydreaming about what changes you can make in the future.

Search hundreds of listings that local real estate agents have available.

The listings cover properties around the region, from a one-bedroom, one-bath condo for $339,900 to million-dollar acreages throughout the province of BC, Yukon, Central Alberta and beyond.

Click on a listing, and see not only the realtor handling the property sale, but links to his or her other listings and social media feeds. With the click of a mouse, take a virtual tour of the property, find the property’s walking score, and learn about nearby amenities.

There are links available to schedule a showing, or send the agent a comment or question.

Want to share a listing? When you click on the share button, you’ll actually send an attractive digital flyer of the prospective property, not just a link.

There’s even a button to help determine how much you have to spend, courtesy of the convenient mortgage calculator.

Plus, scroll down the page on Today’s Home and find a list of expert local real estate professionals who can answer questions or help with that home sale, Farquharson explained.

Today’s Home offers the advantage of the massive reach that Black Press Media has built throughout Western Canada with its network of community newspapers and online products. That allows the public to tailor real estate searches based on location, price, and other key factors while allowing real estate professionals to gain unprecedented audience reach with their listings.

Today’s Home will dovetail into the media company’s existing print real estate publications.

“Black Press Media has real estate solutions in print and now we can add in the digital component,” Farquharson said.

Watch for expansion of the Today’s Home platform in the near future, she added. That will come as Black Press Media adds a new component – the development community. Developers will be able to reach a huge audience when their projects are ready for presentation.

For information on Today’s Home, contact group publisher Lisa Farquharson at 604-994-1020 or via email.

Happy house hunting!

Source: – Aldergrove Star

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