Real Estate Market Moderating Following CMHC & RBC Reports
Real Estate Market Moderating Following CMHC & RBC Reports
by Steve Saretsky, August 5, 2019
Happy Monday Morning!
Real Estate Markets were given the all clear following multiple reports published this past week from CMHC and RBC Economics suggesting the national housing market is moderating, and risks are receding. Per CMHC, “Imbalances between house prices and housing market fundamentals have narrowed with prices continuing to adjust and fundamentals catching up. In the first quarter of 2019, the inflation-adjusted MLS® average price dropped by 5.6% from the same period in 2018, marking the fifth consecutive decline on a year-over year basis.”
Despite a significant decline in Greater Vancouver home prices in July, which reported a 9.4% drop in the home price index year-over-year, the RBC Economics team downplayed any concerns for a potential spillover of falling home prices, adding “Demand-supply conditions are balanced overall. The odds of an imminent nation-wide price collapse are very low.”
Indeed any concerns over falling home prices have been brushed aside by markets. Just two years after troubled lender Home Capital Group, which sparked contagion in the alternative banking space, ultimately having to be bailed out by Warren Buffett, continued its recovery, as share prices climbed to their highest levels in more than two years. Further, Canada’s second largest alternative lender, Equitable Group, notched record earnings this past week, pushing the stock price to all time record highs. President & CEO of Equitable Group had the new stricter mortgage rules to thank which are pushing borrowers to the fringes of the lending space. “We certainly have seen our client portfolio quality improve over the last couple of years,” Moor said in an interview with BNN Bloomberg. “The general risk of a house-price correction gets reduced as these rules now get embedded in the system. It’s a structural permanent shift and we will continue to see higher credit quality than we’ve ever had.”
In other news, consumer spending, which accounts for about 60 per cent of the Canadian economy remains sluggish. Inflation-adjusted retail sales are on course to barely grow this year after rising 1 per cent in 2018, the slowest pace since the global financial crisis. Households spent their largest share of disposable income servicing debt since Statistics Canada began collecting the data in 1990.
Three Things I’m Watching:
1. Decade high levels of immigration offering support for Canadian home prices in Real Estate Market.
2. Housing under construction remains at elevated levels across Canada.
3. Greater Vancouver condo prices slide 8.8% year-over-year in July.
