Canadian historical interest rates 1980-2018


I always find it insightful to look at where we have been. This graph illustrates the interest rate landscape of the past, nearly, 40 years. (as represented by the prime lending rate, mortgage rates have indeed been higher & lower)

right click on image to open larger format in new window.

Free markets & the Politician


Recent times have shown the inadvisability of politicians getting involved in changing markets.

In fact, I would suggest politicians should stay away from free markets, or those with heretofore limited regulation, if we want them to remain as such.

Measures taken (never timely) simply add layers of distortion. Dismantled with great difficulty at some future date when unintended consequences mount or the inflation of previous action becomes too much to bear.

The real estate market in Vancouver was naturally correcting going into the summer of 2016. Meanwhile the BC Liberals, in their infinite wisdom decide to implement a punitive 15% tax on homes purchased in the Greater Vancouver area by foreign nationals. Largely a knee jerk reaction to popular outcry. Globally, this tax was viewed as an assault on wealthy foreign nationals, not as an effective measure against rising house prices.

Managing to tax an already cooling market is one thing… alienating and offending an entire segment of the population is another. I would think it’s unwise. We will never know what the natural peak for housing prices was going to be in the Great Vancouver Area, but had it occurred, the effects would have sent an appropriate signal to investors and a cooling phase would gain strength from organic feedback.

Now we have a new & opposite form of distortion in the market; the government will step in and provide interest free loans (*be sure to read the fine print) up to $37,500 for folks that cannot afford a healthy downpayment. Does this not compound the housing affordability issue? Instead of letting the market ebb and flow, rise and fall of its own weight, we prop up and cajole.

Don’t get me wrong, I love to see my homes’ value rise, but millions of consumers’ maturation patterns are being impeded by a single and fundamental aspect of life – shelter. Contrary to popular belief, the political meddling needs to stop. Let the market take it’s course.

Debt is debt. This lovely gift from the Liberals is more debt. Plain and simple. Once again, the onus will be on the borrower, inflated by the government and backstopped by you, the tax-payer. The 6 big banks of Canada’s lending monopoly won’t hurt equitably when this unravels. Sure their dividends will decrease but they will repossess, repackage and write off. Meanwhile, an entire generation of freshly leveraged up, tired-of-going-nowhere-millennials, will feel the sting for the next decade with their underwater mortgages, foreclosures & bankruptcies.

Market cycles have a cleansing effect over time, separating the weak from the strong. When the fundamentals are stunted or encouraged you create incalculable & amplified crisis. Meddling with the natural process eliminates the chance for rebirth, for healthy growth and true long term stability. We want ebb & flow… we don’t want crisis.

— Stability does not equal the absence of volatility, volatility is necessary —

We need politicians with backbones strong enough to tell the public, you reap what you sow. Politicians strong enough to see their powerful & aging friends, lose money. Politicians with enough patience to not distort markets for votes, when the wave of consequence is sure to last decades. With enough presence of mind to see that the average citizen can find their own way into crippling debt without government encouragement.

If we can’t achieve this, we can rest assured that the next crisis will be larger than the last.

 

 

 

Buyers have a serious advantage in the winter months! If you’re into that sort of thing…


It might seem counter-intuitive, but moving in the winter—from house-hunting to getting all your worldly belongings from point A to point B—can actually be easier, cheaper and more convenient than any other time of the year. Here’s why it pays to move during the colder months.

Canada vs. US home price comparisons


The price of homes in Canada’s largest cities varies significantly less than south of the border, where Americans face an average anywhere from $86,000 to $3.3 million, new data suggests.

The data was released Thursday by RentSeeker.ca, one of Canada’s largest real estate websites, and was created with information released by the Canada Mortgage and Housing Corporation and the Canadian Real Estate Association.

Unsurprisingly, the average cost of a home in Canada this year was highest in Metro Vancouver, at $864,556. To afford a home in that range, Canadian families must bring home an annual salary of approximately $140,000.

  • Based on the latest census, the median family income in Canada is $78,870. The infographic suggests that those earning the median income can afford a house priced between $460,000 and $490,000 – slightly more than half of the cost of the average home price in Metro Vancouver.

Outside of Vancouver, the next most expensive Canadian market analyzed is in Kelowna ($785,415), followed by Toronto ($755,755). Abbotsford is fourth, and Victoria is Canada’s sixth-most expensive city based on average home price.

While the prices seem high, a move to some cities south of the border would cost homeowners even more. For sake of comparison, the below prices are listed in Canadian dollars (see note below for more information on conversion).

Just south of Vancouver, the average home price in Seattle is approximately $977,000.

The most expensive city in the U.S. that RentSeeker looked at is Saratoga, Calif., where the median home price is $3,305,158.

Recent statistics from the U.S. list the average annual household income as approximately $72,000. A family bringing in the median annual income could afford a home between $398,000 and $440,000.

The top five most expensive Canadian and American markets are as follows:

  1. Vancouver – $864,556; Saratoga, Calif. – $3,305,158
  2. Kelowna, B.C. – $785,415; San Francisco, Calif. – $2,252,319
  3. Toronto – $755,755; San Jose, Calif. – $1,362,990
  4. Abbotsford, B.C. – $753,939; Brooklyn, N.Y. – $1,074,474
  5. Mississauga, Ont. – $640,108; Seattle, Wash. – $978,136

But heading south could also save Canadians some money, depending on where they chose to live. In some cities, like Detroit, the median home price is as low as $86,356.

The average home price in the Las Vegas area is only $377,934 Canadian.

The least expensive medians of the cities looked at are as follows:

  1. Fredericton – $159,370; Detroit, Mich. – $86,356
  2. Moncton, N.B. – $235,961; Memphis, Tenn. – $213,219
  3. Trois-Rivieres, Que. – $248,503; Columbus, Ohio – $246,127
  4. Sherbrooke, Que. – $251,387; Oklahoma City, Okla. – $263,562
  5. Winnipeg – $284,799; Indianapolis, Ind. – $273,096

RentSeeker looked at a sample of cities across Canada and the U.S. based on highest populations but did not list costs in the Canadian territories because the information was not readily available through the CMHC.

Canadian prices in the infographic are in Canadian dollars, and American prices are listed in U.S. dollars. For the sake of comparison, all U.S. prices have been converted to Canadian dollars in the article above, based on an exchange rate of US$0.74 per C$1 as of Thursday afternoon. Prices have not been converted in the infographic below.

The above story has been edited to reflect that the Vancouver housing price is an average of all types of homes across the Metro Vancouver area. A previous version of this article stated incorrectly that the price was the median for detached homes only.

Affordability in Canada


This report, provided by the Conference Board of Canada & described as, “A new vision for housing in Canada” gets to the point of housing affordability. It’s worth the read, even a glance.

 

South Okanagan historical sales volume


The best way to figure out where we are headed sometimes is to look in the review mirror. Where have we been? This is a look at the total volume of transactions back to 1980. As you can see, the peak year for the number of transactions have been 2007, 2015 and beaten again in 2016. Since the 2007 peak we had a massive decline in both the number of transactions & naturally, the overall sales $ volume. It had been a similar period of correction to the 1980 decline, with the number of transactions cut by 50%. Although following a different path to decline, what took 3 years to bottom from 1980, took us 6 years this time around.

As can be seen from the trend line, we are now above the trending number of sales per year. This indicates a robust market and one that is ‘operating on all cylinders’. This effective and efficient market has not always been the case and we are bound to fluctuations.

Previous times of below trend activity such as the 1998-2001 slowdown & even further back to 1986 (which was more of a recovery period) shows insightful periods of contraction!

We have hit a period of pent up demand where both the number of transaction & sales $ volume increase substantially. As of October 2016 we continue to experience a mismatch; buyers without the appropriate product to sell them.

It’s currently a healthy and stable market right now, a great time to be selling & for that matter, buying if you know what you’re after. Given demand, the overall supply of homes for people to view is narrow! (right click graph below & open in new window for full image)

sales volume

South Okanagan historical real estate prices


Here are historical real estate prices for the South Okanagan dating back to 1980. It gives perspective to how out of control things got leading up to 2008 & what has ensued since!

Also included in the graph is the M2 money supply of Canada, which is the broadest measurement of money circulating in Canada & a good indicator of inflation. I believe, this tends to correlate well with backstopping real estate prices, as can be seen in the graph. We have advanced significantly from 2013 (up 25% to Oct 2016) and I feel we have burnt up much of the price acceleration for now. I believe a significant moderation is still a years time away for our region.

I hope you find this informative! (For larger image, right click and select open in new window)

Historical Prices

Canadian home sales post third consecutive decline in July


Ottawa, ON, August 15, 2016 – According to statistics released today by The Canadian Real Estate Association (CREA), national home sales declined for a third consecutive month in July 2016.

Highlights:

  • National home sales fell 1.3% from June to July.
  • Actual (not seasonally adjusted) activity came in 2.9% below July 2015.
  • The number of newly listed homes rose 1.2% from June to July.
  • The MLS® Home Price Index (HPI) rose 14.3% year-over-year in July.
  • The national average sale price climbed 9.9% in July from one year ago; net of the Greater Toronto Area (GTA) and Greater Vancouver, it advanced 7% year-over-year.

The number of homes trading hands via Canadian MLS® Systems fell by 1.3 percent month-over-month in July 2016. With similar monthly declines having been posted in May and June, national sales activity in July came in 3.9 percent below the record set in April 2016.

Sales activity was down from the previous month in slightly more than half of all markets in July, led by Greater Vancouver and the Fraser Valley. Transactions in these two markets peaked in February of this year, and have since then dropped by 21.5 and 28.8 percent respectively. Accordingly, much of the national sales decline in recent months reflects slowing activity in B.C.’s Lower Mainland.

“National sales and price trends continue to be heavily influenced by a handful of places in Ontario and British Columbia and mask significant variations in local housing market trends and conditions across Canada,” said CREA President Cliff Iverson. “All real estate is local, and REALTORS® remain your best source for information about sales, listing and price trends where you live or might like to in the future.”

“Home sales continued to trend lower while price gains further accelerated in the Lower Mainland of British Columbia,” said Gregory Klump, CREA’s Chief Economist. “This suggests that sales are being reined in by a lack of inventory and a further deterioration in affordability. The new 15 per cent property transfer tax on Metro Vancouver home purchases by foreign buyers took effect on August 2nd, so it will take some time before the effect of the new tax on sales and prices can be observed. That said, the new tax will do little in the short term to increase the supply of homes.”

Actual (not seasonally adjusted) sales activity was down 2.9 percent year-over-year (y-o-y) in July 2016, marking the first y-o-y decline since January 2015 and the largest since April 2013. In line with softening activity in the Lower Mainland, y-o-y increases have been losing momentum since February 2016. Sales were down from levels one year earlier in about 60 percent of all Canadian markets, led by Greater Vancouver, the Fraser Valley, Calgary and Edmonton.

The number of newly listed homes rose by 1.2 percent in July 2016 compared to June. While new supply climbed in fewer than half of all local markets, increases in Greater Vancouver and the Fraser Valley, Greater Toronto, Calgary and Edmonton outweighed declines in smaller markets.

With sales down and new listings up, the national sales-to-new listings ratio eased to 61.6 percent in July 2016 – its second monthly decline following its peak of 65.3 percent in May. A sales-to-new listings ratio between 40 and 60 percent is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers’ and sellers’ markets respectively.

The ratio was above 60 percent in about half of all local housing markets in July, virtually all of which continue to be located in British Columbia, in and around the Greater Toronto Area and across Southwestern Ontario.

The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.

There were 4.6 months of inventory on a national basis at the end of July 2016. This is unchanged from readings in each of the previous two months and continues to indicate a tight balance between supply and demand for homes.

The number of months of inventory has trended lower since early 2015, reflecting increasingly tighter housing markets in B.C. and Ontario. It currently sits near or below two months in a number of local markets in British Columbia and in and around the GTA. Indeed, some regions in the GTA are down to just a couple of weeks of inventory.

The Aggregate Composite MLS® HPI rose by 14.3 percent y-o-y in July 2016, the biggest gain since November 2006.

For the sixth consecutive month, y-o-y price growth accelerated for all Benchmark property types tracked by the index.

Two-storey single family home prices continued to post the biggest y-o-y gain (+15.9 percent), followed by townhouse/row units (+15.3 percent), one-storey single family homes (+14.3 percent), and apartment units (+11.1 percent).

While prices in 9 of the 11 markets tracked by the MLS® HPI posted y-o-y gains in July, increases continue to vary widely among housing markets.

Greater Vancouver (+32.6 percent) and the Fraser Valley (+37.6 percent) posted the largest y-o-y gains by a wide margin, followed by Greater Toronto (+16.7 percent), Victoria (+17.5 percent) and Vancouver Island (+11.6 percent). By contrast, prices were down -4.2 percent and -1.5 percent y-o-y in Calgary and Saskatoon respectively.

Home prices rose modestly in Regina (+2.7 percent y-o-y), Greater Montreal (+1.8 percent y-o-y) and Ottawa (+1.1 percent y-o-y). Greater Moncton recorded its largest y-o-y home price increase (+8.4 percent) among an unbroken string of gains posted every month over the past year.

The MLS® Home Price Index (MLS® HPI) provides a the best way of gauging price trends because average price trends are prone to being distorted by changes in the mix of sales activity from one month to the next.

The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remain two of Canada’s tightest, most active and expensive housing markets. The actual (not seasonally adjusted) national average price for homes sold in July 2016 was $480,743, up 9.9 percent y-o-y.

If these two housing markets are excluded from calculations, the average price is a more modest $365,033 and the gain is trimmed to 7.0 percent y-o-y.

Even then, this reflects a tug of war between strong average price gains in housing markets around the GTA and in British Columbia versus flat or declining average prices elsewhere in Canada. The average price for Canada net of sales in British Columbia and Ontario in July 2016 edged down 0.2 percent y-o-y to $310,905. The year-over-year percentage change in the national average price excluding B.C. and Ontario sales has now been in negative territory for 20 consecutive months.

– 30 –

PLEASE NOTE: The information contained in this news release combines both major market and national sales information from MLS® Systems from the previous month.

CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.

MLS® Systems are co-operative marketing systems used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 115,000 REALTORS® working through some 90 real estate Boards and Associations.

Further information can be found at http://www.crea.ca/statistics.

For more information, please contact:
Pierre Leduc, Media Relations
The Canadian Real Estate Association
Tel.: 613-237-7111 or 613-884-1460
E-mail: pleduc@crea.ca

Canadian home sales decline further in June


Ottawa, ON, July 15, 2016 – According to statistics released today by The Canadian Real Estate Association (CREA), national home sales declined further in June 2016.

Highlights:

  • National home sales fell 0.9% from May to June.
  • Actual (not seasonally adjusted) activity came in 5.2% above June 2015.
  • The number of newly listed homes rose 2.2% from May to June.
  • The MLS® Home Price Index (HPI) rose 13.6% year-over-year in June.
  • The national average sale price climbed 11.2% in June from one year ago; net of Greater Toronto and Greater Vancouver, it advanced 8.4% year-over-year.

The number of homes trading hands via Canadian MLS® Systems fell by 0.9 percent month-over-month in June 2016. Monthly declines in each of the past two months have left sales activity 2.6 percent below the record set in April 2016.

Sales activity was down from the previous month in about half of all markets in June, with declines in Greater Vancouver, the Fraser Valley and Greater Toronto having eclipsed gains in comparatively less active housing markets.

“While national sales activity remains strong, there are still significant differences in housing market trends across Canada,” said CREA President Cliff Iverson. “While home sales activity and price growth are running strong in B.C. and Ontario, they remain subdued in other markets where homebuyers are cautious and uncertain about the outlook for their local economy,” he added. “All real estate is local, and REALTORS® remain your best source for information about sales and listings where you live or might like to in the future.”

“June sales extended trends observed the previous month,” said Gregory Klump, CREA’s Chief Economist. “As was the case in May, the monthly decline in national sales activity was led by the Lower Mainland of British Columbia and markets in or around the GTA. In keeping with the law of supply and demand, exceptionally low inventory combined with high demand continues to translate into strong price growth in these housing markets, where year-over-year price gains have been running in double-digit territory since late last year.”

Actual (not seasonally adjusted) sales activity was up 5.2 percent year-over-year (y-o-y) in June 2016. Year-over-year increases have been steadily losing momentum since February 2016.

The number of newly listed homes rose by 2.2 percent in June 2016 compared to May. New supply climbed among a broad majority of all local markets, led by Greater Toronto, Oakville-Milton, Montreal, Quebec City, and B.C.’s Fraser Valley. The return of activity in Fort McMurray following its evacuation in May also contributed to the national increase in new listings.

With sales down and new listings up, the national sales-to-new listings ratio eased to 63.3 percent in June 2016, compared to 65.3 percent in May. A sales-to-new listings ratio between 40 and 60 percent is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers’ and sellers’ markets respectively.

The ratio was above 60 percent in about half of all local housing markets in June, virtually all of which are located in British Columbia, in and around Toronto and across Southwestern Ontario.

The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.

There were 4.6 months of inventory on a national basis at the end of June 2016, which is unchanged from May’s reading and the lowest level in more than six years. The number of months of inventory has been trending lower since early 2015, reflecting increasingly tighter housing markets in B.C. and Ontario. It currently sits near or below two months in a number of local markets in British Columbia, the GTA and environs and Southwestern Ontario.

The Aggregate Composite MLS® Benchmark price rose by 13.6 percent y-o-y to $564,700 in June 2016, the biggest gain since December 2006.

For the fifth consecutive month, y-o-y price growth accelerated for all Benchmark property types tracked by the index.

Two-storey single family home prices continued to post the biggest y-o-y gain (+15.5 percent), followed by one-storey single family homes (+14.0 percent), townhouse/row units (+13.6 percent), and apartment units (+9.8 percent).

While prices in 9 of the 11 markets tracked by the MLS® HPI posted y-o-y gains in June, price growth continues to vary widely among housing markets.

Greater Vancouver (+32.1 percent) and the Fraser Valley (+35.5 percent) posted the largest y-o-y gains, followed by Greater Toronto (+16.0 percent), Victoria (+15.7 percent), and Vancouver Island (+10.6 percent). By contrast, prices were down -4.1 percent and -1.4 percent y-o-y in Calgary and Saskatoon, respectively.

Home prices gained further traction in Regina (+3.6 percent y-o-y), Greater Montreal (+1.9 percent y-o-y), and Ottawa (+1.0 percent y-o-y). Home prices in Greater Moncton recorded their eleventh consecutive year-over-year gain, rising 7.9 percent.

The MLS® Home Price Index (MLS® HPI) provides the best way of gauging price trends because average price trends are prone to being distorted by changes in the mix of sales activity from one month to the next.

The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remain two of Canada’s tightest, most active and expensive housing markets. The actual (not seasonally adjusted) national average price for homes sold in June 2016 was $503,301, up 11.2 percent y-o-y.

If these two housing markets are excluded from calculations, the average price is a more modest $374,760 and the gain is trimmed to 8.4 percent y-o-y.

– 30 –

PLEASE NOTE: The information contained in this news release combines both major market and national sales information from MLS® Systems from the previous month.

CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.

MLS® Systems are co-operative marketing systems used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 115,000 REALTORS® working through some 90 real estate Boards and Associations.

Further information can be found at http://www.crea.ca/statistics.

For more information, please contact:

Pierre Leduc, Media Relations
The Canadian Real Estate Association
Tel.: 613-237-7111 or 613-884-1460
E-mail: pleduc@crea.ca

Bank of Canada again keeps interest rates on hold


The Bank of Canada announced on July 13th, 2016 that it was keeping its trend-setting target overnight lending rate at 0.5 per cent.

The announcement repeated many of the themes from its announcements and Monetary Policy Reports (MPRs) published in late 2015 and early 2016. Chief among these themes is how the Bank is still counting on the continuation of low interest rates and stronger U.S. economic growth to buoy Canadian exporters amid ongoing weakness in Canadian business investment.

However, the Bank again reduced its annual forecast for Canadian economic growth in light “a weaker outlook for business investment and a lower profile for exports reflecting a downward adjustment to US investment spending”. It also recognized how recent economic growth was reduced by the Alberta wildfires; however, it expects Canadian economic growth will pick up in the third quarter as oil production resumes.

The Bank also recognized that inflation has recently been running slightly higher than it previously expected but noted that inflation “is still in the lower half of the Bank’s inflation-control range”. It expects that the increase in inflation due to past weakness in the Canadian dollar will be temporary and will “dissipate in late 2016”.

While the Bank judges that “the risks to the profile for inflation are roughly balanced”, it expressed concerns about “the implications of the Brexit vote”, which it described as being “highly uncertain and difficult to forecast.” Its implications may ultimately result in the need to lower interest rates. However, lower interest rates would also likely further raise concerns the Bank has about Canadians’ “financial vulnerabilities [which] are elevated and rising, particularly in the greater Vancouver and Toronto areas.”

With all of these factors in mind, there is nothing in the Bank’s latest policy interest rate announcement to suggest that it will begin to raise interest rates until well into 2017 at the earliest.

As of July 13th, 2016, the advertised five-year lending rate stood at 4.74 per cent, up 0.1 from both the previous Bank rate announcement on May 25th and from one year ago.

The next interest rate announcement will be on September 7th, 2016, with the next update to the Monetary Policy Report to be released on October 19th, 2016.

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