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October 1, 2020 | Careful What You Wish For

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.

An hour into the disgraceful Trump-Biden brawl Google searches for ‘moving to Canada’ peaked. Of course once scared Americans started looking at real estate prices in this great, frozen, pooched nation, it fizzled a bit.

“My grandparents’ small house in southern Ontario was just resold for $775,000,” a Twitterite posted. “About 3 times what we sold it for 10 years ago. The average income in the town is $50k. How do Canadians afford to live there?”

We can’t. We just borrow heaps of money and pretend we own stuff.

But look at this. If just 1% of Americans moved here, that would soak up about two million houses. In all of 2019, right across all of Canada, only 458,500 property transactions took place – and prices still went up. Just imagine if the Yankee invasion were to materialize after a second Trump victory – with al those liberal, SJW, progressive, NYT-reading Karens flooding across the 49th.

‘Move to Canada’ trending. Are you sure?

 

Source: Google Trends

But is it already happening, sort of?

Covid has had material impacts on the housing market in 2020, as this pathetic blog has chronicled. And there are more to come. The virus crashed the market in March and April, then turned it blistering hot in July and August. Condos have fallen seriously out of favour as people worry about germy elevators and diseased neighbours. Meanwhile Airbnb crashed, rents were frozen, evictions halted and amateur landlords skewered.

As WFH turned into a thing, suburbia caught fire. Now silly people are paying seven figures for ugly houses with garages stuck on their noses perched on streets where nobody walks with sticks called trees, miles from the core. And recall that rental weirdness a couple of days ago in Huntsville? Oy.

As mentioned here recently, this blog has been stuck inside the Atlantic Bubble for a while which, apparently, has the best virus record in North America. A single new case in NS, for example, is a rare thing. They’re normally dumped at sea. But one guy who escaped and is in hospital at the moment.

Anyway, here’s the skivvy from a Halifax realtor:

Any way you slice it, summer had to have smashed some records in real estate this year, it truly has been an incredible market. Still, many await their turn to enter the Atlantic provinces, hoping someday soon the bubble will burst and they can plan their relocation. Until then, many people stand by to send another surge towards our housing market when it does happen, so tracing the impact of that event will prove interesting indeed.

Halifax has 600,000 people and – until last year – was incredibly cheap. Now the average selling price for a SFH has increased 28% – or almost double that of the GTA (to $415,000, which is still a bargain). Total listings have shrunk by about half as buyers overrun the place and days-on-market have dropped 53%.

And the little 2,000-soul touristy puddle where my baby bank-by-the-sea building is located? Listings are snapped in a couple of days. Prices in the ‘old town’ have risen 40% in a year. Unprecedented. Most buyers are online FaceTimers. The locals are being shut out. Again. First Americans and Airbnb were the scourge. Now it’s those damn Upper Canadian refugees.

Thus the virus has plumped values from here to Nanaimo. Niagara is a bidding war disaster. Valuations in London and Windsor are nuts. Urban Montreal has seen a 40% spike in sales and detached prices have risen 24%. Transactions in Quebec City were up 62% in August.

So here’s why this is all so strange, and Americans yearning for a simple safe and Trump-free life may need to consider Lithuania instead.

The chart below comes from mortgage rockstar blogger Rob McLister and debunks this myth: cheap mortgage rates make home ownership more affordable in Canada. No, actually, they don’t. You are still screwed if you try to buy without a pile of money.

 

Source: Ratespy.com

This portrays the minimum monthly cost a typical borrower would have to shoulder to buy the average new home in this land. Calculated in constant dollars (no inflation) it tracks routine financing, heat and taxes and is based on 5-year posted mortgage rates. So it gives a true answer to this question: are houses more affordable now? Answer: not a chance. As rates have dropped, prices have jacked. Buyers rushing in today are embracing more risk than ever. They just think they’re smart. Mortgage payments down. Mortgage debt up. Ownership costs historic.

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October 1st, 2020

Posted In: The Greater Fool

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