So far, this summer has been pretty lovely.
The real estate market has well and truly ground to a halt
So far, this summer has been pretty lovely.
Maybe it’s that the previous two went by in such an all-consuming blur, me just doing my best to keep my head above water as pandemic real estate boomed, and my kids happy and fed, toothbrush’d and sunscreen’d. I barely remember much, to be honest.
This summer, however, we are back in what feels like uncharted territory.
The real estate market has well and truly ground to a halt. Prospective buyers are on the sidelines, sellers are having to come to grips with the upper hand no longer being theirs, and those fortunate enough not to have to actively engage with the real estate market are likely still unable to escape talk of interest rates, mortgage trigger points, and declining property values.
Depending on who you feel like engaging with, you will likely hear that we are in one of three scenarios: the throes of a catastrophic market collapse, a return to a healthy balanced market, or feeling the pinch of (temporary!) interest rate hikes as a means of driving down inflation.
The reality, of course, is that anyone speaking at all definitively or authoritatively about any of this likely hasn’t a clue what they are talking about. At best it’s an educated guess, at worst it’s a narrative being sold.
There are so many variables at play with few, if any, true points of comparison. Yes, there have been market shifts and slowdowns before, but none to date have been precipitated by such an all-in-one type situation.
We have had a run up of historic proportions with Canadian property values rising by close to 50% over the past two year. Inflation is raging. There’s a war in Europe that has destabilized world markets. Household debt is at record highs. And all of this coming on the heels of a once-in-a-lifetime health and economic event that resulted in unprecedented levels of both job interruptions and of stimulus money flooding our economy.
Now that recession looms (or has it already started? It’s hard to keep up) and tinkering with interest rates is quite literally the only tool left to cool things down, what this is going to look like is anyone’s guess.
Will the Bank of Canada jack up the rates to trigger a recession only to quickly pivot and bring them back down again? Some certainly think so. I hear lots of agents and mortgage brokers stating this as fact in their glass-half-full market takes.
Do I believe for one minute that the Bank of Canada hasn’t clearly indicated their position that the risk of rampant inflation is far greater than a recession and the collateral damage to our housing market as they reel it back in? Nope. To me, they seem pretty forceful and committed all of a sudden. But that’s just my take. And there are people with lofty credentials who would likely disagree with me on that one.
But have we learned nothing over the past two and a half years?
When the pandemic first hit and banks released economic outlooks predicting a disastrous fall to real estate values it sounded completely reasonable. Did it come to pass? Well, no.
When Tiff Macklem, in a clear effort to keep the economy humming right along, flat-out promised that rates would stay low well into 2023 buyers believed it. How’s that going?
Talking heads on the evening news predicting rate hikes of 25 basis points only to have the Bank of Canada come out with a full 100.
And to be clear, among the deluge of hot takes there are smart, successful people making calls that turn out to miss the mark entirely.
So when you read about buyer confidence being at all-time lows, it’s not simply because the media has fearmongered them into submission. It’s because in almost all scenarios at this present moment, the sidelines is the wisest place to be. If you are standing on a ship that may be sinking, you’re not a sheep for hopping into a lifeboat as you wait for more information.
Will more information come this fall? Well, the next announcement from the Bank of Canada should be pretty telling.
Until then, enjoy the summer. Winter is coming.
As U.S. home prices show signs of cooling and the Fed continues its aggressive rate hike campaign, one of America’s largest real estate groups is signaling market affordability will continue to put pressure on homebuyers this year.
“Affordability has certainly been a hot topic,” RE/MAX President and CEO Nick Bailey said in an exclusive interview on “The Claman Countdown” Tuesday. “If people are going to have a chance at better affordability, we need more product out there, and we’re not going to see that any time soon with new construction.”
Even though U.S. home prices fell for the seventh month in a row by 0.6% from December to January, mortgage rates have dampened consumer demand. The Federal Reserve has remained focused on its inflation reduction goals, lifting the benchmark federal funds rate nine consecutive times.
Interest and mortgage rates are likely to continue “bouncing up and down” as the Fed tries to tame decades-high inflation, Bailey noted.
“We always have to keep in mind that mortgage rates are based on the 10-year Treasury, and that can fluctuate at a different rate than the short term. So what it means to buyers is, rates are going to bounce around, we believe. They have been over the last couple of quarters and we believe they will continue as the year progresses,” the CEO explained.
Bailey detailed other affordability solutions for homebuyers, such as considering a 15-year fixed mortgage or lower down payment and loan opportunities.
“The average homeowner in the U.S. lives in their home eight years and the median is 12.3,” he pointed out. “So in many cases, people are choosing this long-term, three-decade mortgage, but they may not need it. They can have an option at a lower rate.”
“Ninety percent of homeowners out there have an interest rate less than 5%. And of that, 50% of them are under 3.5% percent,” he continued to note. “And so until a life event like getting married, having another child, really has a forcing function on a different property, it’s going to be first-time homebuyers that stay at the forefront of these lower interest rate, more affordable-type products.”
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While market factors play an important role in housing affordability, Bailey again put the onus on new home construction. According to the Census Bureau, housing starts in February 2023 were down 18.4% year-over-year.
National Association of Home Builders CEO Jerry Howard affirmed this trend, telling FOX Business’ Neil Cavuto on Thursday that construction companies aren’t seeing the “uptick in demand” that the industry was expecting this spring.
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“What we’re really seeing right now, I think, is a very cautious housing market because no one knows what’s going on in the banking sector,” Howard said. “And until that gets clarified, I think you’re going to see builders being a little bit leery about going forward.”
“New construction can’t come out of the ground fast enough. We have less than a million homes on the market, and so it really comes down to supply,” the RE/MAX CEO said. “And because of the move up, buyers being comfortable with their rates, inventory is going to continue to be tight and affordability is going to continue to be an issue this year.”
A pair of real estate agents in London, Ont., who were fired from a realty firm for taking their advertising campaign, “You could do worse,” to billboards and social media have doubled down on their mantra.
Tristan Squire-Smith, 42, and Johnny Hewerdine, 43, were fired in December from a real estate business they don’t want to publicly name, but were quickly snapped up by the Realty Firm. CBC News has seen a copy of their termination letter, which cites “professional differences.”
We might not be for everybody, but the people who like us, really love us.– Tristan Squire-Smith, real estate agent
“They fired us for excessively using the phrase, ‘You could do worse,'” said Hewerdine, a Realty Firm broker who previously worked as an electrician. ‘We just stuck with it and actually doubled down on it, and now it’s just completely taken off.”
The mantra is polarizing, Hewerdine admitted.
But the two say they’re working to humanize the industry.
“It’s a great sort of self-deprecating phrase that means you’re actually not doing too bad,” said Squire-Smith, a registered nurse who retrained as a real estate agent during the pandemic and still works part time in long-term care.
“We might not be for everybody, but the people who like us really love us,” he said.
Randy Pawlowski, past president of the London St. Thomas Association of Realtors, wouldn’t comment directly on the billboard or the slogan, but told CBC that he stands for professionalism in the industry.
The latest billboard by Squire-Smith and Hewerdine is up on Wharncliffe Road, a busy thoroughfare in London, and features photographs of them as teenagers. Squire-Smith has long curly blond hair and Hewerdine is wearing his graduation robes from his Grade 8 portrait. Another one of their billboards proudly proclaims, “Zero awards won! (No fine print required).”
The two men met two decades ago and were on the varsity swim team together at Western University.
“These photos are taken at our most awkward moment of our lives,” said Hewerdine. “I’m a 13-year-old Grade 8 graduate in this photo and I believe Tristan is 15 years old.”
Both say they’re trying to humanize the industry.
“We’re just really focusing on the consumer, opposed to us standing up on a billboard with arms crossed, trying to make us look perfect,” said Hewerdine.
“They’re total professionals,” said Pete Greenwood, who hired Hewerdine to sell his condo earlier this month. It was listed for $389,900 and sold for $400,000 in five days.
“He’s just a good guy to work with, and so’s Tristan,” said Greenwood. “They did a 30-second video of my house and turns out we’re all big Seinfeld fans, so we actually did a Seinfeld-themed video of my house.
“I never laughed so hard in my life,” he said.
London Morning7:11What’s behind the billboard with the slogan ‘you could do worse’?
For more than seven decades, housing availability in the mountain town of Jasper, Alta., has been a challenge.
Although the total number of dwellings is slowly growing, in the past 10 years, the rental units in the primary market – units built specifically as rental – has declined as some units have transitioned into condo ownership. The shortfall in the number of dwellings needed to meet demand in Jasper has gone from 235 units in 2002 to roughly 700 in 2022.
“In Jasper, housing has always been in short supply,” says the town’s mayor, Richard Ireland. “Over the years, efforts have been made to correct that, but the problem seems to just continue regardless of all the steps that have been taken.”
These steps have consisted in asking Parks Canada to release land for the construction of both market and non-market, or subsidized and co-op housing.
Located on a national park, Jasper’s town boundary is constrained by Parks Canada’s regulations to limit the townsite’s physical expansion and protect the environment.
To ensure the town’s population remains in balance with the 118,222 square metres of developable land allocated to Jasper, Parks Canada requires that only those who work or run a business are eligible to live there – and releases parcels as needed.
“We’ve been able to get housing that’s more affordable and stays that way,” Mr. Ireland says. “But even with all the units that have been built, the pressure continues.”
In the face of skyrocketing visitor numbers, the need for more staff in Jasper is growing, and the availability of well-maintained, affordable housing for workers in Canada’s second most popular national park seems to be reaching a breaking point.
Since 2014, vacancy rates in Jasper’s primary rental market have remained close to zero, driving rents up by 30 per cent over the same period.
Christine Reyes (whose name has been changed to protect her identity) and her boyfriend share a one-bedroom apartment in Cavell Apartments, the town’s first purpose-built rental complex developed to provide staff accommodation in the 1970s.
Originally from the Philippines, Ms. Reyes moved to Cavell Apartments in the fall of 2021. Since then, the couple’s rent has gone up by 20 per cent – from $1,075 to $1,270 – and further increases are expected in 2023.
“What we’re paying now is just enough for us to make [ends meet],” Ms. Reyes says, noting she pays an additional $185 a month in parking, storage and pet fees. “I have family back home that I’m sending money to. I don’t think I could send money if rent [goes] up.”
In February, some tenants of Cavell Apartments received a letter from property management, informing them rents would be rising by about 40 per cent this year. The notice cites inflation, interest rates, as well as supply and demand as the drivers of such an increase.
While the proposed hike for existing tenants has been reconsidered, a bachelor suite in the complex was listed in March for a monthly rent of $1,604.50 – a rate akin to downtown Vancouver’s average rent for the same type of unit.
The property management company did not respond to requests for comment.
In a town where a significant share of renters are employed in the tourism industry, and whose hourly wage averages $18.36 (roughly $1.80 less than in B.C.), spending more than $900 a month in rent isn’t a viable option.
For local businesses, this challenge means they have to step in and absorb some of the cost of housing on behalf of their staff.
To ensure she can hire full-time staff year-round, Lynn Wannop, owner of Coco’s Café, has rented a two-bedroom unit in Cavell Apartments for nearly a decade. “That apartment makes it so that I can hold on to staff in the winter, when it’s really slow,” she explains.
Currently, she pays $1,225 a month in rent for the unit, and charges her staff $500 to live there. But in the face of the proposed increases, she wouldn’t have a choice but to continue to pay whatever rate the landlords ask. “As a business owner I have to suck it up and pay,” Ms. Wannop says. “I can’t operate my business without it.”
But spending more in staff housing costs means Ms. Wannop can’t raise wages either.
“I want my staff to be able to afford to live,” she says. “But I can’t afford to pay them any more.”
Moreover, Jasper’s housing shortfall doesn’t only drive rents up – it also creates challenges for tenants who end up living in sub-par accommodations for a lack of alternatives within their budget.
Since November, Max Martin and four friends have shared a five-bedroom, two-bathroom bungalow in the middle of town. While the group pay what they consider a reasonable amount in rent, the condition of the home is precarious.
“We have mould that [the landlords] have refused to come help fix,” Mr. Martin says, adding that “we went without heating for almost seven weeks.”
According to recent inspection reports from Alberta Health Services and the Jasper Fire Department, the dwelling presents critical safety issues, including windows that don’t open, exterior doors that can’t be locked for a lack of keys, faulty heating, and no smoke alarms.
In Mr. Martin’s view, Jasper’s tight rental market allows landlords to take advantage of young workers who, like him, come from overseas attracted by the natural beauty of the Rocky Mountains.
“People should be held accountable for their actions and the choices they make,” Mr. Martin says. “Especially when it comes to other people’s lives. As a landlord you’re in a privileged position where you can have a house that provides you passive income to let live and do what you want.”
But more supply is on the way.
Last December, a new purpose-built rental complex finally received a development permit, six years after the project was first announced. However, a building permit application is yet to be received by Parks Canada (the developer has until Dec. 13 to apply for this permit).
Featuring 144,822 square feet of apartments spread between two buildings, this development is expected to make a dent on Jasper’s housing gap when completed – but it’s unlikely that new market units can support the affordability levels required by tourism and hospitality staff.
Because market housing is subject to speculation and financialization, providing rental housing at rates commensurate to the wages of workers isn’t always possible, as returns for shareholders take priority.
“This model prays on power imbalances and problems that were already in place,” says Laura Murphy, research coordinator at the University of Alberta’s Affordable Housing Solutions Lab. “Especially in Alberta, where tenants are really dependent on landlords … because we don’t have lot of protections for tenants.”
In Alberta there are no limits to how much landlords can hike rents, as long as these increase only once a year.
To address this, Ms. Murphy suggests governments invest in non-market housing, as this “has proven to work time and time and again.”
Currently, there are about 155 non-market units in Jasper, but only 21 of them are rentals – and the landlord’s agreement with the municipality to provide housing at below market rates in the latter ends in 2029.
Like anywhere else in Canada, to boost the supply of suitable housing that remains affordable in perpetuity, Jasper requires support from senior levels of government.
“[In] 2023, council has budgeted a $5-million debenture to assist housing, but we will need some other partners to do that,” Mr. Ireland says. “We now need matching funds from either the province or the feds. We’ve gone to the province and made that application, so we will see what comes of that.”
On March 22, the municipality announced it would receive $6.5-million from the provincial and federal governments.
Combined with private investment, this new funding is expected to create 40 affordable units.
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