Stein Mortgage

05/27/2022

Now that home prices have started to fall from their February peak, the federal government is reportedly planning to introduce limits on its First-Time Home Buyer Incentive program to cover its downside risk.

04/22/2022

In its first Annual Risk Outlook, OSFI identified several potential issues in the housing market and outlined plann

03/19/2022

Canada’s economy has a bad w**d growing in it. It’s called inflation, and our central bank hasn’t pulled it fast enough.

02/08/2022

The Greater Toronto Area has just become the most expensive real estate market in the country.

11/16/2021

November 2021: Canadian Housing Affordability Update

In Canada, housing affordability has deteriorated for the third straight quarter despite stable interest rates and decent income growth.

The latest Housing Affordability Monitor indicates it now takes 46.5% of income to service a mortgage in this country. By the measures used in the report affordability declined by nearly 2 points in the third quarter, following a 3.2 point deterioration in Q2.

Almost all of that is the result of higher home prices. Numbers from the Canadian Real Estate Association show a 4.6% jump in the third quarter, with a 19% increase year-over-year.

Looking forward, the report does not see any improvement for the foreseeable future. It points to fixed mortgage rates that have increased by nearly 25 basis points this month and it speculates about on-going rate increases in the coming quarters.

The Bank of Canada has been clear that it is prepared to start increasing rates in the “middle quarters” of 2022. The report hypothesizes that a 100 basis-point increase in interest rates would result in a 12% decrease in buying power.

Looming interest rate increases appear to have triggered a surge in the fear-of-missing-out among house hunters. As a result, there has been a spike in the number of buyers who are looking for pre-approvals and rate-holds.

Given the increase in the 5-year fixed rate between October and November, the average homebuyer is looking at about $112 added to their monthly payment. Over five years, that adds up to more than $10,500.

10/25/2021

October 25, 2021 Market Commentary

With growing expectations that the Bank of Canada is going to move ahead with interest rate increases in the second half of next year, concerns are building about affordability, debt and the standard of living in Canada.

The household debt-to-income ratio has been a serious economic concern in this country for several years. The latest “Affordability Index” produced by debt services firm BDO Debt Solutions suggests the pandemic may be contributing to that problem.

The survey indicates 43% of the people who took part – and who have debt – increased that debt due to the pandemic, up 4% from last year. It also shows that 26% of respondents incurred at least one new type of debt. For more than a quarter of them, it was credit card debt.

Of all the respondents with a new type of debt, 70% say it has caused their standard of living to decrease. Just 10% of that group feel confident they will be able to get back to their pre-pandemic standard of living.

House prices have jumped sharply during the pandemic. Despite hectic sales, the survey suggests 45% of Canadians are facing affordability barriers to home ownership, a 7% increase year-over-year.

Three-quarters of the respondents aged 35 to 54, who do not own a home, say they are unlikely to buy in the next three years. Nearly half of the respondents – of all age groups – who say they are unlikely to own a home in the next three years indicate they are unable to save enough for a down payment.

10/21/2021

October 21, 2021 Market Commentary

The latest numbers from the Canadian Real Estate Association suggest some heat may be returning to Canada’s housing market.

CREA’s September report shows sales increased almost 1.0% compared to August, following about six months of declines. Compared to the record setting September a year ago, sales for the month are down more than 17%.

Prices continued their upward march, pushed by unrelenting demand and unrequited supply. New listings fell 1.6% from August to September. The sales-to-new listings ratio is now at 75.1%.

The National Average price topped $686,000 in September, up 14% from a year earlier. That number is, as always, heavily skewed by Toronto and Vancouver. When the biggest and busiest markets in the country are taken out of the calculation the average price dips by nearly $150,000.

Toronto and Vancouver are among the six cities named as “Bubbles” in the annual Global Real Estate Bubble Index prepared by Swiss bank, UBS. The bank defines a bubble as “a substantial and sustained mispricing of an asset, the existence of which cannot be proved unless it bursts.”

Toronto has moved up one spot from last year to second place, behind Frankfurt, Germany. Vancouver is in 6th spot, behind Hong Kong, Munich and Zurich.

The bank says prices have become detached from the fundamentals, rising 8% between mid-2020 and mid-2021 in Toronto. Vancouver has seen an 11% increase over the same period, effectively erasing the decline in prices experienced through 2018-2019.

10/12/2021

October 12, 2021 Market Commentary

Canada’s latest employment and inflation numbers have triggered new expectations about the next steps by the Bank of Canada and the arrival of interest rate increases.

BoC Governor Tiff Macklem continues to offer soothing words about inflation, which is current running at 4.1%. That is an 18 year high and more than double the central bank’s 2.0% target.

Macklem has repeatedly said high inflation is temporary; the result of low prices during the pandemic lock-downs, and supply chain problems that have cropped-up as the economy reopens.

Macklem points out that a key factor in long term inflation – wage growth – has not materialized. That is despite Canada returning to pre-pandemic employment levels with the addition of 157,000 jobs in September. It should be noted that the growth of Canada’s labour force during the pandemic means the country is still 276,000 jobs short of full employment. Last week however, Macklem did concede that this temporary inflation may linger for longer than initially expected.

Several prominent economists have weighed-in. Benjamin Tal cautions that inflation is a lagging economic indicator. He says the risks for long-term inflation are present and the Bank of Canada would be better to start raising rates earlier to help mitigate those risks. Doug Porter says there is a growing chance rate increases will come earlier. He expects they will happen quarterly rather than every six months. And, Derek Holt would like to see a rate hike by the end of the year, given that emergency levels of stimulus are in place while inflation is well above target.

10/03/2021

Despite higher home prices and larger mortgages, monthly housing costs are currently lower for homeowners—on average—compared to renters.

09/29/2021

https://www.canadianmortgagetrends.com/2021/09/bond-yields-are-rising-are-fixed-mortgage-rates-next/

Some of Canada's Big 6 banks made headlines last week by lowering fixed mortgage rates, but might they soon have to pull a U-turn?

09/10/2021

https://www.canadianmortgagetrends.com/2021/09/bocs-macklem-lays-out-plan-to-wind-down-bond-buying/

Since the start of the pandemic, the Bank of Canada has been buying up billions of dollars worth of bonds each week, which has helped keep borrowing costs, including fixed mortgage rates, low.

07/27/2021

Rising inflation here in Canada and in the United States is heightening speculation central banks will be looking at interest rate hikes sooner than forecast.

The last report from Statistics Canada put inflation at an annualized rate of 3.6% in May, well above the Bank of Canada’s 2% target. In the U.S. core inflation surged by 4.5%, year-over-year in June – the biggest jump since September of 1991. However, both the BoC and the Federal Reserve forecast the increases are “transitory” and the result of the economy getting itself back on track as we push back the pandemic.

The Bank of Canada bases its statement on, what it calls, the “normalization” of prices that plunged at the start of the pandemic (such as the price of gasoline) and temporary constraints on production and transportation that have prevented supply from keeping up with demand. None the less many market watchers are predicting the Bank will have to raise rates to cool inflation.

In its last report, though, the Bank stuck to its forecast that there will be no increase until the second half of 2022. A key element in that forecast is the central bank’s expectation that Canada’s recovery will benefit more and more as the U.S. recovers and exports to the States grow. But an increase in interest rates would likely drive up the value of the Canadian dollar. In turn, that would make those exports less attractive unless there are corresponding rate hikes by the Federal Reserve. The Fed has said it does not foresee any increases until 2023 or even the first quarter of 2024.

For now both central banks seem content to let inflation run hot, while the rest of the economy rights itself.