Homebuyers hope 'patience pays off' as prices drop, recession predictions loom | Canada News Media
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Homebuyers hope ‘patience pays off’ as prices drop, recession predictions loom

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TORONTO –

Andrew Hamilton and his wife bid farewell to their home in Toronto’s Junction neighbourhood roughly a year and a half ago, when housing prices were soaring, but finding a new abode proved tricky.

With no available homes meeting their needs or price range, the couple opted to temporarily use the equity they got from selling their house on a rental property in Etobicoke.

But they still have one eye on the market and are hoping the current cool-down will deepen enough for them to snag another home.

“Patience, I think, will pay off,” said Hamilton.

His sentiments are common throughout the sector, especially with prospective buyers, who have lamented the torrid pace Canada’s real estate market has moved at in recent years.

But many feel 2023 may be the year their luck changes. Prices have steadily declined since last spring, bidding wars are less frequent and economists foresee an end to the Bank of Canada’s quick succession of interest rate hikes that have added hundreds, if not thousands, of dollars to monthly mortgage payments.

“It just takes time,” said Despina Zanganas, a Toronto Realtor with PSR Brokerage.

She expects buyers who delayed purchases will feel more comfortable this year as the changed housing market sinks in.

“They’re getting used to it,” she said.

“People are saying that they don’t have to go into bidding wars and put in unconditional offers. Now they have the freedom to put in conditional offers, so that’s giving a lot of people a bit more confidence.”

But there’s at least one major change that could be on the horizon. Economists have been predicting 2023 will be the year Canada enters another recession, though it’s unclear how severe the downturn will be.

Douglas Porter sees a 25 to 30 per cent chance Canada’s economy nails a soft landing when inflation and interest rate hikes gently end, helping avoid a recession. There’s a 50 per cent chance of a shallow downturn and a 20 to 25 per cent chance of “something more serious.”

“All of those have implications for the housing market,” said the chief economist at BMO Capital Markets.

“Clearly, the less intense the hit to the economy, the better the news is for the housing market.”

Even in current conditions, he sees the housing market as one of the weakest parts of the economy — a phenomenon unseen in years, if not, decades.

His forecast predicts that by the time the current economic cycle is complete, home prices will have fallen by between 20 and 25 per cent from their peak, noting they have already dropped 10 per cent.

The Canadian Real Estate Association said last month that the actual national average home price was $632,802 in November, a 12 per cent decline from the same month last year.

As prices tick down, Porter said the market sits in “suspended animation” with sellers wary of listing their properties because they won’t fetch what neighbours did last year and buyers sitting on the sidelines waiting for better mortgage rates and more inventory.

“Certainly, you don’t want to jump in and buy when it looks as if prices can drop a whole lot more,” Porter said.

The decreases seen so far have been offset by a rapid string of hikes to the Bank of Canada’s key interest rate, which sits at 4.25 per cent — the highest it’s been since January 2008.

Allison Van Rooijen, vice-president of consumer credit at Meridian Credit Union, estimated the latest hike — half a percentage point in December — would bump payments on a $450,000 variable-rate mortgage on a 25-year amortization up another $130 or so every month. Since the beginning of 2022, rising rates have amounted to roughly $1,000 more per month for the same mortgage.

“To me the interest rates story is the biggest one this year that will have the biggest effect by far,” said Porter.

“The reality is the price correction we’ve seen so far really hasn’t even made up for the run up in interest rates. I would still assert that the market is still digesting the interest rate increase and we haven’t seen it fully reflected in prices yet.”

The Toronto Regional Real Estate Board said Thursday that the average price sat at $1,051,216 in December, a 9.2 per cent fall from a year ago.

A day earlier, the Real Estate Board of Greater Vancouver reported the composite benchmark price now sits at $1,114,300, a three per cent decrease from December 2021, and on Tuesday, the Calgary Real Estate Board revealed the average price was up four per cent to $495,231.

Porter expects the Prairies to be the most resilient market because it didn’t encounter as much of an overvaluation as other regions did in the first years of the COVID-19 pandemic.

He sees the Atlantic provinces and some parts of British Columbia in the middle of the pack because they didn’t have quite the boom that Ontario had but are now grappling with an increase in immigration.

He’ll be watching medium-sized cities in southwestern Ontario, like Hamilton, Kitchener, London and Windsor, most closely because they “absolutely took off” during the pandemic but have since slid into a “deep” correction.

Porter will be looking to see whether they are showing signs of stabilization, which could be an omen for the broader market.

But he warns the unprecedented nature of the pandemic makes the current housing market tough for anyone to predict.

“The housing market might hold up a bit better than what we’re anticipating just because it is such an unusual cycle,” he said.

“But I don’t think any of us can have a great deal of confidence in our forecasts these days because there’s so many unique aspects to this economy that we’re dealing with.”

This report by The Canadian Press was first published Jan. 8, 2023.

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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