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April 13, 2018 | Scary

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

On Friday, as expected, the real estate cartel screwed up its courage and released the latest market report. No matter how the pro-property press spins things, this sucked. Here are the highlights:

  • Actual sales across Canada fell by almost 23% from last March, even though they edged up a bit from February (to be expected).
  • Sales in the first 90 days of this year were the worst since the opening three months of 2014, and are running 7% below the 10-year average.
  • The number of buyers shrank in 80% of all markets.
  • The average actual sale price fell by 10.4% (but the realtor Frankenumber® increased 4.6% – a graphic example of how real estate boards try to mask current trends).
  • CREA also officially confirmed what this pathetic blog has told you. Bone-headed government moves have backfired, forcing demand into condos and leaving detacheds languishing. As a result, real estate is scarcely more affordable despite the big drop in sales and the erosion in average prices.

“Recent changes to mortgage regulations are fueling demand for lower priced homes while shrinking the pool of qualified buyers for higher-priced homes,” says Gregory Klump, CREA’s Chief Economist. “Given their limited supply, the shift of demand into lower price segments is causing those sale prices to climb. As a result, ‘affordably priced’ homes are becoming less affordable while mortgage financing for higher priced homes remains out of reach of many aspiring move-up homebuyers.”

See, kids, current politicians are kneejerk, ideological and clueless, completely unaware of the consequences of their actions. And in BC it’s about to get even worse. Next time you vote for the dude who is ‘none of the above’ be careful. The rhetoric about bringing house prices down so middle-class families can afford dirt – then using a phalanx of new taxes to makes real estate more distorted and expensive – is gibberish. Now newbie buyers face soaring condo prices and higher rents while detached houses remain out of reach and mortgage credit has shrunk. For all that, you can thank people like John Horgan, Kathleen Wynn and the cute guy in Ottawa.

The realtors just confirmed that, too. The biggest price gains in Canada came with condo apartments – a whopping 17.8% surge from last year, ripping away at affordability for the demographic most likely to buy. In contrast, the market price of two-storey family homes fell by 2% and CREA says, “declines for single family home prices may persist over the first half of 2018.”

You betcha. This is typified by the 20-30% price plops in the northern GTA hoods that this blog bleated on about last week. What used to cost $1.9 million is now yours for $1.4 million. That’s sweet news for somebody who held off buying a year ago and can now ‘save’ half a million. But it does diddly to make real estate more affordable for average families.

Meanwhile Vancouver, as was eloquently described here recently, is pooched.

The realtor data shows while sales nationally struggled a bit higher from Feb to March, they tanked almost 9% m/m in YVR. That’s a big deal. It comes as the city’s nutso empty-houses tax came into effect, and after Comrade Premier Horgan’s new 20% anti-foreigner tax, the anti-Alberta speculation tax plus the luxury tax and now an anti-landlord task force. As you know, this is concurrent with the B20 stress test borrowers face plus creeping mortgage rates (they crept again Friday). It’s the perfect market-spanking storm, driving many buyers away, disqualifying others, diverting demand into the only cheap housing left, and shutting down the remainder of the marketplace.

It’s hard to see how Vancouver doesn’t suffer badly from this. In its real estate-driven economy, house prices couldn’t fall by 40% without peeling away jobs along with investor confidence. In such a scenario, there’s no way buyers would flood in to snap up family homes that have declined from the current average of $1.6 million to just $1 million. Human nature and macroeconomics tell us otherwise. And they confirm that the guys running the place are making it up as they go along. Yikes.

Finally, expect unsettling news in the days ahead. The president of the United States inches closer to blowing himself up and might start a war to divert attention. That would increase economic activity (wars are great for investors) and likely force the Fed to accelerate the pace of its interest rate hikes. It’s a sad day when we have to mix politics and pee. But there you go. Democracy’s scary.

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April 13th, 2018

Posted In: The Greater Fool

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