Eric Yung Mortgage Consultant

03/17/2021

In case you missed it, Vancouver housing is on Fyre 🔥🔥🔥 !

We know this price movement is mainly due to low supply. More buyers than sellers. With record high household savings and relatively low interest rate, this trend may last a while.

Housing Continued to Surge in February Today the Canadian Real Estate Association (CREA) released statistics showing national home sales hit another all-time high in February 2021. Canadian home sales increased a whopping 6.6% month-on-month (m-o-m), building on the largest winter housing boom in hi...

12/10/2020

Keeping up with the printing press, BoC continue its commitment to keep lending/mortgage rates low. Lower rates means... higher hard asset prices, and the rich gets richer. (because the richer you are, the higher likelihood you are holding onto hard assets)

Many were expecting a drop in real estate prices this coming Winter into Spring, and so far, many are still just waiting. This only translates to "there is quite a bit of pent-up-demand" for the Vancouver market. Back to my Aug 28th post, there is an artificial price floor for Vancouver Real Estate due to the artificial low rate. As long as the Government prints, rents will be pay, mortgages will not default, home prices wouldn't crash.

To put it simply, with the pandemic going on in the world, would you lend your best friend money at 2% interest rate to buy a house? How about 1%? BoC is lending to the big banks at 0.25% to make sure you get your mortgage. Learning from past recessions, they've became the lender of last resort.

Bank of Canada Confirms Commitment To Low Interest Rates Despite the good news on the vaccine front since the Governing Council’s last meeting in late October, the Bank of Canada reasserted its commitment to provide extraordinary monetary policy support for many months to come. The statement relea...

09/16/2020

An interesting insight of the outstanding mortgages in Canada 2019.

A comparison to the US Sub-prime crisis in 2007, where delinquency rate was as high as 14% in certain states.

09/15/2020

Another Record-Setting Month For Canadian Housing!

CMHC forecasted back in May that the national average sales prices will fall 9%-to-18% in 2020 and not return to yearend-2019 levels until as late as 2022. Instead, the national average sales price as of August has posted a 18.5% gain.

Housing strength is largely attributable to pent-up demand by households that have maintained their level of income during the pandemic. The hardest-hit households are low-wage earners in the accommodation, food services, and travel sectors. These are the folks that can least afford it and typically are not homeowners.

The good news is that the housing market is contributing to the recovery in economic activity.

Canadian Housing Market Sets Record Highs in August Today’s release of August housing data by the Canadian Real Estate Association (CREA) showed a blockbuster August with both sales and new listings hitting their highest levels in 40 years of data–exceeding the record July activity levels. This ...

09/11/2020

Steady as she goes, mate! Bank of Canada holds rates at 0.25%. Mortgage rates are likely to stay low until 2021. With the world economy on shakey grounds, central banks around the world needs to maintain a low lending rate in order to stabilize the asset prices.

With mortgage rates now hovering around south of 2%, many are taking advantage of the low rates by buying, switching or refinancing their home. This should increase the supply of money, making people feel wealthier, and stimulating demand/consumption.

What will happen from here? Governments around the world are trying to minimize the impact of COVID by providing financial support for businesses and their citizens. At the end, it will depend on what people do with their money, in aggregate.

If they fear another downturn = save up and don't spend = deflationary = real estate goes down
If they are optimistic about the economy = spend money and invest = inflationary = real estate goes up

Looking at Vancouver at least, it seems like the latter is happening. Maybe the 2nd wave will change that when it happens, or... if it happens. 🤔 Only time will tell. 😘

Bank of Canada Relies on Quantitative Easing As promised, the Bank held its target overnight rate at the effective lower bound of 25 basis points with the clear notion that negative policy rates are not in the cards. Instead, the central bank will rely on large-scale asset purchases–quantitative e...

08/29/2020

Canadian Economy Took a Record Nosedive in Q2

However, it doesn't matter where we have been, but where we are heading. Looking ahead, while road to recovery may looks questionable, continuing financial aid and interventions (lower rates) will provide a floor for the housing market. Too many voices have said they are waiting for the drop, this only means there are still a lot of demand waiting. If a drop were to come, it may not be what you think.

Canadian Economy Took a Record Nosedive in Q2 Canadian real GDP plunged 11.5% in the second quarter, or -38.7% at an annualized rate, the worst quarterly decline on record (see chart below). This followed an 8.2% plunge in Q1. The worst of the contraction occurred early in the quarter as the lockdow...

04/13/2020

With Record breaking job losses, stock market rallies 27% from its lows on March 23, gas is 85 cents per litre, you maybe asking yourself.... What the Heck is going on in this world?

The coronavirus is putting the economy into a standstill. Fundamentally breaking the system, a system that's fuel by debt. With government printing fiat money to re-inflate the prices, buying up assets such as treasuries, bonds, mortgage back securities, their "all in" approach to give people confidence back into the system. And it's WORKING, for now!

What does this mean in the Canadian real estate market? Short term, we will experience downward pressure from the force selling (airbnb that's making no money, bankruptcies, foreclosures). Until the pandemic is control, price movement will be down. In the long term, the massive printed confetti, I mean money, will create an upward pressure on hard assets such as gold and real estate.

It's a good time to keep an eye on the market. Talk to your realtor and look for distressed sales. Don't over-leverage, make sure your income isn't affected and you are able to sustain the mortgage payments. Depends on your time horizon, this could be one of the buying opportunities you've been looking for.

This is all only my own opinion. Please take it with a grain of salt. I don't think the sky is falling, and I DO think our government will not let the system collapse, or the housing prices for this matter. They will ensure they print enough money to keep this system in order... because there is no alternative.

Canada Loses Over a Million Jobs in March Employment in Canada collapsed in March, with over one million jobs lost, wiping away over three years of job creation in a single month and highlighting the economic pain the coronavirus pandemic has swiftly delivered. The decline in jobs in Canada, on a pr...

03/30/2020

WHY ARE MORTGAGE RATES RISING?

- Cost of funds for banks are increasing
- Mortgage bonds earn only 1%, cash is king
- Bond yield needs to increase to attract new investment, which are used to fund mortgages

To understand why rates went up, above are some of the factors. Will we see further increase in mortgage rates? Certainly. Will the higher rates be sustain, probably not. We will see.

Why Are Mortgage Rates Rising? Over the past month, the Bank of Canada has lowered its overnight rate by a whopping 1.5 percentage points to a mere 0.25%. Many people expected mortgage rates to fall equivalently. The banks have reduced prime rates by the full 150 basis points (bps). But, since the s...

03/27/2020

BOC just cut rates from 0.75% to 0.25%! Think about it, we were just at 1.75% a little more than a month ago! BOC and US FED are not dumb, they didn't cut rates so you can save money. They needed to PUMP more money into the system by lowering rates.

BUT WHY are Mortgage rates are going UP! Simple, Liquidity! Mortgage back securities (from the documentary: THE BIG SHORT) is getting sold left and right because banks needed to raise cash. As people cashout their investments, banks are experiencing a liquidity squeeze!

Low liquidity doesn't mean no liquidity. Banks are still willing to lend, but no longer at the 2.19% that we saw just a couple of weeks back. PRIME rate is most likely not going anywhere anytime soon, so people who had variable discount rate > prime - 0.5% are in a really good place right now. Rates maybe as low as 1.45% right now for some of these folks. We will see.

I am glad some of my clients took the deep discount variable rate last 2 months. Until liquidity normalizes (stock market stabilizes), rates will continue this way for the next little while. Fixed rates going up, variable rate premium increases.

Good thing is... when we see the light at the end of this tunnel, real assets should go up, as our currency will be devalued from all that money pump. Real asset = gold, silver, real estate.

  Bank of Canada Moves to Restore “Financial Market Functionality” The Bank of Canada today lowered its target for the overnight rate by 50 basis points to ¼ percent. This unscheduled rate decision brings the policy rate to its effective lower bound and is intended to provide support to the Ca...

03/16/2020

Stocks are free falling and there is little FED's can do. They threw the kitchen sink at it Sunday by lowering FED's rate to ZERO, but the market reacted negatively, falling another 10%. From it's PEAK, stock market is now -29% from it's high's back in February.

Is Wall Street = Main Street? If US falls into recession, it will influence global market, negatively.

Negative rates will pump up mortgage lending. Times are uncertain for sure.

  Fed Cuts Overnight Rate One Percentage Point But Markets Plummet In an unprecedented Sunday afternoon meeting, the US Federal Reserve cut their key policy rate by 100 basis points (bps) to a level of 0%-to-0.25% (see chart below). Also, the Committee announced increased access to the discount win...

03/14/2020

BOC CUTS AGAIN, OSFI EASES, MORE COMING

Extraordinary Coordinated Policy Actions To Ease the Economic Impact of Pandemic In Canada Prime Minister Justin Trudeau said Canada would introduce a “significant” fiscal stimulus package, as part of a coordinated effort with other Group of Seven countries to counter the virus-driven global eco...

03/06/2020

SOLID JOBS REPORT IN CANADA AND US AHEAD OF VIRUS SPREAD

Steady February Job Market Ahead of Virus Scare Job growth in Canada remained robust last month with net employment gains of 30,300 – all of which were in private-sector full-time jobs. The unemployment rate rose a tick to 5.6%, but that is still down from a year ago and around multi-decade lows. ...