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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

March 17, 2019 | The Lower Low

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.

Here’s the context for the nation as a whole (or hole). Four things to remember as you peruse the shocking data below. A single malt scotch would also help.

  • Real estate sales across Canada plummeted over 9% last month.
  • Houses just lost more than $30 billion in value. The first decline in a decade. That’s also thirty billion less in equity that 9.5 million homeowners possess. Work it out.
  • Economic growth in Canada has ground to a halt, and…
  • Family debt just hit another all-time, epic, record-breaking high.

With that in mind, let’s whisk to Vancouver. That city led the market into a FOMO-inspired orgiastic frenzy in 2015-6, and is now on the leading edge of the largest housing market correction since 1991.

Local real estate poohbahs have been working overtime to mask the depth and speed of the plunge now taking place. Buyers have retreated in fear as Mr. Market and Comrade Premier Horgan team up to deliver a fatal one-deux blow to YVR. As if five central bank interest rate increases and a tough borrower stress test weren’t enough, tone-deaf politicos added in an extreme foreign buyer tax, a speculation tax which has nothing to do with speculation, an empty houses tax on the wealthy and a special property tax in demand hoods. As a result, the market is truly and well rolling over – as official stats will reveal in a couple of weeks.

Meanwhile, here’s a report from one insider unafraid to be truthy.

“March is projecting to come in 30% below the lowest month ever in recent history, more than 50% below the average, almost 35% below last year (a bad year) and 70% below the best month. The stats are coming in even worse than an average Jan or December.

“If I straight-line the MTD to the whole month, we could come in at 1500 sales – but to be generous, I’m projecting 1600 – – So here are the numbers for history. And – we are about to go into Spring Break – so perhaps that makes it even quieter!!!”

Below are the sales numbers for the month of March reaching back 13 years. If March of 2019 does come in at 1,600 sales, it would be 52% lower than the average of 3,318, a third below the weakest month and, as our whistleblower reports, an incredible 70% dive from the spring of 2016.

Now, given the four scary points at the outset of this post, it’s hard to see what will arrest the downward momentum. The economy is slowing, households are already indebted as never before, and buyers are running for the hills. Even a budget on Tuesday sanctioning 30-year mortgages and offering a new buyer tax credit might be lame when facing this wall of fear. After all, if sales are collapsing, then prices are bound to follow. So why would anyone buy a house now?

 

Naturally, all real estate is local. Doug Ford is not John Horgan. Even Rachel Notley ain’t that rabid. In most markets the locals haven’t been as extreme, obsessed or paranoid as in the LM. But realtor numbers show 75% of Canadian markets are sliding or in distress, while StatsCan confirms debt-to-income ratios have hit historic highs in Toronto. The decade-long plunge into a single asset class, which has forced prices to levels that were undreamed-of when this pathetic blog began, is a dangerous social and economic phenomenon.

If you need to buy this spring, can afford it and understand the risks, go ahead. Mortgages are cheap and we all need a place to live. But now real estate is an expense, not an investment. In most places, at this moment, you stand a greater chance of losing money than making it.

Make sure your spouse gets it.

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March 17th, 2019

Posted In: The Greater Fool

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