How renting affects retirement, and March home prices on the rise
Here are The Globe and Mail’s top housing and real estate stories this week, with the lowest mortgage rates available in Canada today, commentary from our mortgage expert and one home worth a look.
Does owning a home give you a retirement advantage over lifetime renters?
If you’re a millennial or member of Gen Z, the biggest financial non-event of the decade is the housing market correction. In his weekly column, Rob Carrick writes about what happens when young adults in this country cannot afford to buy and own homes.
In an expensive housing market, both owners and renters are going to have a hard time saving for retirement. Owners do have a retirement saving advantage in being able to access their equity by downsizing to a cheaper home, but many owners don’t want to. And while renters are running a high risk of accumulating debt, the debt burden on owners should not be underestimated either, writes Carrick.
Canadian home prices rise in March as new listings sit at 20-year low
The Canadian housing market started to show signs of a rebound in March, with demand increasing and monthly home prices rising for the first time since the Bank of Canada started raising interest rates, writes Rachelle Younglai. After declining for 12 consecutive months, the national home price index rose 0.2 per cent to $709,000 from February to March, and home sales rose slightly for the second straight month. The number of new listings fell 5.8 per cent in March to hit a 20-year low.
This week’s lowest mortgage rates in Canada
It was a sleepy week for mortgage rates, writes Robert McLister. The only changes among nationally advertised offers were a five basis point increase in the lowest variable and 10-year fixed rates. (One basis point is one-hundredth of a percentage point.)
What a housing shortage means for the future of work
A tight labour market means employers have to work much harder to attract and retain talent, writes Stacy Lee Kong. Some companies have been thinking about housing for years now, but most employers who are thinking about housing aren’t entering the real estate market – in addition to being expensive, there’s just not that much land available in the cities where housing needs are the highest. Instead, what some companies are doing is offering small grants or interest-free loans to help employees.
Home of the week: Sub-penthouse with Toronto views
33 Lombard St., unit 4304, Toronto
The 1,729-square-foot unit provides an open space for living and dining with bedrooms on either side. Outside, a 521-square-foot balcony wraps around the corner unit. There’s a gas barbecue, and spaces for dining and lounging.
The current owner, who often works early in the morning, enjoys coffee outside. “I’ve seen many a sunrise – my social media is often a photo of the sunrise,” he says.
The east view looks over the Cathedral Church of St. James below and extends as far as the Scarborough Bluffs. To the south, the unit offers a view of Lake Ontario and Toronto Islands. The financial district to the west provides skyline views at night.
What do you think is the asking price for this condo?
a. The asking price is $2,349,900.
Treasury Secretary Yellen warns of commercial real estate 'issues' that could strain banks – MarketWatch
Treasury Secretary Janet Yellen, in her first interview since the U.S. debt-ceiling was lifted last week by Congress, warned on Wednesday about the potential for banks to feel strain from their exposure to weakening commercial real estate valuations.
Yellen was asked by CNBC “Squawk Box” host Andrew Ross Sorkin about if she’s worried about the state of estimated $20.7 trillion commercial real-estate market, particularly the office, and if weakness in the sector could potentially spark more bank failures.
“Well, I do think that there will be issues with respect to commercial real estate,” Yellen said. “Certainly, the demand for office space since we’ve seen such a big change in attitudes and behavior toward remote work has changed and especially in an environment of higher interest rates.”
Major landlords from Blackstone Inc.
to Brookfield Corp.
have been bracing for a significant drop in office property values, as the Federal Reserve’s inflation fight puts an end to an era of abundant and cheap debt.
While the final word on wobbling property prices won’t be known for some time, PGIM Fixed Income, a key investor in commercial property debt, recently said they expect office values to fall 20%-50% from peak levels, while multifamily values could drop as much as 22.5%, in part because financing has become more expensive and scarce.
See: Commercial real estate’s debt machine is broken down
Office property woes and the ‘doom loop’
Researchers at the NYU Stern School of Business and Columbia Business School recently estimated there has been a $506.3 billion decline in office values from 2019 to 2022 nationally in the wake of the pandemic which could feed a “doom loop” in some big cities.
They estimate banks own 61% of U.S. commercial property debt. They also see potential for the value of New York City’s office stock to drop 44% from 2019 to 2029 due to stress in the sector from flexible work arrangements.
“I think banks are broadly preparing for some restructuring and difficulties going ahead,” Yellen said, adding that the overall level of liquidity at banks looks strong and that stress tests of the largest banks show they have adequate capital to withstand fallout from the commercial property market.
She also said banking supervisors will continue to closely monitor “a range of banks to make sure that they are adequately prepared to deal with it.”
Yellen also said that, “while there will be some pain associated with this, that banks should be able to handle the strain.”
Related: Blackstone wrote down its stake in this Chicago office building to $0. Now it’s talking with lenders on the debt coming due.
South Okanagan residential real estate market sales picking up speed – Penticton News – Castanet.net
Buyer activity and real estate listing activity are gaining momentum again in the South Okanagan, as residents have adjusted to the current late spring market.
“The market is doing really well,” Association of Interior Realtors Past President Lyndi Cruickshank said.
“I think a lot of people felt really shell shocked when the interest rates started to rise, understandably so, as we often feel that resistance when there’s a dramatic change in our lives. And is often the case, people settle into what our new reality is, and our interest rates are certainly significantly higher than they were. But people are finding ways to manage.”
There has been a bit of a decline in the average home price, which is helping buyers. And as more homes come on the market, it ultimately helps the consumers looking to purchase.
“I talked to so many people last year that really wanted to be able to sell their home, but there was such a fear as to where they were going to go. So now that we have seen the inventory start to open up quite a bit. It’s allowing them more choice.”
Home inventory has increased by 38 per cent in active listings.
In the South Okanagan, the benchmark price for a single-family dwelling dipped 6.6 per cent, to $772,200. Townhouses ($558,100) and condominiums ($427,700) also dropped in May compared to this same time period last year.
“We’re certainly more into a buyer’s market than we have been over the last year. Previously, we were very predominantly held by a sellers market. And we’re seeing a lot more strength on the buying side now,” Cruickshank said.
She added that this is typically the time of year that people start to look for homes and that people really traditionally look to put their homes on the market.
“That plays a big role, obviously, in that increase in activity that we’re experiencing right now.”
The more balanced market will give buyers more of an opportunity to do their due diligence before purchasing.
“We’ve got a long way to go. We came from such an extreme market this time last year. And then we had that real hit with interest rates and things really slowed down very dramatically. So it’s really nice to see things starting to just move forward in a more normalized way again.
Still, finding homes in the South Okanagan remains to be a challenge as vacancy rates remain low, even as developments continue to grow.
“It’s going to take years, years before we’re ever at a place where our inventory is going to meet demand unless we see something really dramatic. And that’s right across the country when we look at what the demand is, and the current supply. So I don’t see that changing.”
Advice for first-time home buyers remains the same: finding a realtor and figuring out what time to buy is best for you.
Real Estate Builder Backed by Ackman Says Lenders Rejecting New Apartment Deals – Bloomberg
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Real Estate Builder Backed by Ackman Says Lenders Rejecting New Apartment Deals Bloomberg
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