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August 7, 2020 | Now What?

You caught the virus and woke up dead. So now what? It’s been on the mind of a lot of people lately. Lawyers have been busy with wills and POAs since the bug hit in March. Same with funeral homes, where pre-planning is a fun new thing to do. As this not-a-virus blog has stated […]

August 6, 2020 | The Toll

This blog stepped off the curb yesterday into a steamy little pile of poo. That’s tough on the spats. Worse, it creates havoc in the steerage section. Karens everywhere. The crime was simple, saying people wear masks because they have fear. Fear of Covid. Fear of getting it, spreading it, facilitating it, enabling it. This […]

August 5, 2020 | Moral Hazard

As goes 416, so goes Van. The latest housing stats from YVR echo those in Toronto, where sales have jumped more than 20% from last July, despite the fact last summer there was (a) no pandemic, (b) no CERB, (c) no mortgage deferrals, (d) eight million people still had jobs, (e) your office was still […]

August 4, 2020 | Really?

The head fake continues. This week – perhaps tomorrow – real estate boards will start reporting July stats. They will be, at least in Toronto (and perhaps Montreal, Van and Victoria) wholly detached from reality. Buyer activity will not reflect millions of people on the dole, a 13.6% local unemployment rate, close to a million […]

August 3, 2020 | Simple

Over the last decade we’ve endured much. Credit crisis recovery, US debt ceiling panic, oil price collapse, Trump, trade wars, protectionism, Brexit, Bitcoin, Hong Kong, record debt and now the first global pandemic in a century. Stock markets swooned in a serious way four times. Interest rates collapsed. GICs pay 1%. Houses are inflated. Wages […]

August 2, 2020 | The Crash

“We’re doing a story about the potential for a residential real estate crash,” the email from glitzy mag Toronto Life read. “The premise is basically that prices have held steady for the past few months, despite crippling economic conditions, so does that mean the bottom will inevitably fall out?”

A follow-up phone call materialized from the editor (I explained no crash was near). Then another note arrived. Housing is a hot thing these days. Apparently, even bigger than the virus and glory holes. ‘Okay,” I relented. ‘Send me the questions.’

“Has anything surprised you about how the market reacted during the pandemic? Pls explain.”
The current market sucks. Bidding wars. Blind auctions. Bully bids. Multiple offers. Prices rising double-digits. Many are incredulous how this could take place in the midst of a global pandemic with the downtown core a ghost city and a withering 13% unemployment rate in the GTA. Eight million Canadians have been on government pogey for four months, and the GDP has crashed the most on record. Yet when it comes to real estate, we’re partying like it’s 2017 again.

The reasons are profound, and temporary. There was no spring market in 2020, since we were all going to die of Covid, and stayed home in our underwear. Hence a big pent-up demand once it appeared life was going to carry on. What normally happens in April this year took place in June.

Second, lots of demand was unleashed on scant inventory. Available listings shrank faster than a dude in the Humber when the virus arrived. Live showings halted. Owners were totally unwilling to have anyone view their homes. The choices for buyers once public fears started to dissipate were thin. Good properties were immediate objects of desire and competition. Prices popped.

Third, money’s cheap. Ridiculously cheap. The major lenders are quietly giving mortgages for less than 2% on a five-year term. Even decade-long loans are 2.5%. As central banks rushed to rescue the economy from the pandemic, rates were slashed and billions thrown at buying up mortgage securities. Liquidity is sloshing over the gunnels. As mortgage costs decline, of course, people can borrow more money on the same income. So they are. The fact we no longer have any fear of excessive debt is driving real estate higher, unwisely.

But these things are temporary. The demand surge will temper. More properties will hit the MLS. Unemployment will stay elevated. Any economic or public health reversal now could make those who overpaid in June regret things in November.

“You mentioned the likelihood of a potential residential real estate crash is “basically zero.” Can you flesh out how you came to that conclusion?”
Sure. If this were Calgary or Kelowna or Windsor, a protracted period of decline would be no surprise. Lots of places in Canada will have many problems for the next couple of years. But the GTA will fare better, because of a highly diversified local economy, the financial core, migration and the synergy of a six-million-strong market.

No, no crash – which we’d define as a 20% price correction. But this does not mean a rosy market, either. There are several worrisome trends.

“You mentioned there might be a flatlining in the 416. What factors do you think would contribute to that? How long would you expect that to last before prices recover?”
After this little boomlet, it reasonable to expect a far different market to emerge. As mentioned, swollen unemployment is not going to shrink anytime soon. It will be well in 2021 before we get back to the levels of February. Second, a serious number of people deferred mortgage payments, ending in the next few months. An unknown number will still be without work and forced to sell, so more listings. Also many coming up for renewal may be unpleasantly surprised at the reception they get from lenders who were just denied six months of payments.

And big troubles with condos. Airbnb has collapsed. Pre-virus, the GTA had over 21,000 short-term rental properties. Hundreds of those have been hitting the market lately, with thousands more to come. Add to this the 15,000 units coming available as new construction is completed over the next two years. Supply will overwhelm demand. This is why condo prices and rents will decline, pulling the entire market back.

Finally, the virus. It freaked out millions. No surprise that detached sales in 416 have actually declined while those in the boring, soulless expanse of 905 have jumped. People want backyards. Front doors to the street. No elevators or garbage rooms, corridors or parking garages. Besides, Covid showed that a lot of companies can function perfectly well with employees working remotely. So no need to spend three hours a day on the QEW and Gardiner Expressway. The burbs are suddenly sexy. The clogged Kingdom of 416 is tarnished.

“How do you think it would impact the market if there was a much-dreaded second wave of coronavirus?”
Like an asteroid. Combine that with joblessness, more shutdowns, the condo plop, mortgage deferral cliff, CMHC rule tightening (no more HELOCs to finance rental props) and more risk-averse lenders and the market would be a smoky hole in the ground for at least a year. Until the vaccine.

But why would this happen? We’re all wearing masks now. Leaping off the sidewalks from each other. Lining up like ducks at the grocery store. Washing hands all day and bathing in sanitizer. This is not March. The authorities are not going to lock down society or turn off the economy again. If infections rise and hotspots develop, so be it. The virus risk ain’t going to zero. It never will. And it will be a long, long time before the herd is dosed and social distancing ends.

The best time is to buy a house is when you need it and can truly

July 31, 2020 | Us, 1. Them, 0

Friday of a long weekend. Yahoo! In the middle of a pandemic. Yuck! These are weird days, as this pathetic blog chronicles. In the last 24 hours, for example, more evidence some industries are in deep poop (technically speaking) while others are feeding off Covid. Air Canada’s revenues have collapsed 89% and its stock is […]

July 30, 2020 | Bug Update

Just another day on the farm. Ninety thousand more bank workers told to stay home. Trump suggests the election (that will likely defeat him) be delayed. The American economy contracts the most in, oh, 200 years. You don’t need to pay your income taxes now until the end of September. And a ten-year mortgage costs […]

July 29, 2020 | Deeper & Deeper

Did you think it would take this long? Me neither. The hammer came down mid-March. Now it’s August, almost. Yesterday Scotiabank says it  decided few, if any, workers would return to its gleaming, 68-storey Toronto head office tower at King & Bay Streets in 2020. In the spring. Perhaps. Google announced a few days ago […]

July 28, 2020 | When Fear Wins

If you’re a wuss, these are tough days. Not only do you need to fret about being infected while shopping for prunes at Loblaws, but the whole financial world seems, well, nuts. The stock market might have jumped 48% since the end of March, rewarding risk, but savers and equity scaredycats have been seriously whacked […]

July 27, 2020 | All That Glitters

There was a time I believed in gold. I saw it as a noble defender against inflation which steals the worth of paper money. Anonymous currency you can covet, hide in the back garden and use when the zombie apocalypse arrives. Portable insurance against war, pestilence, insurgence, revolution, chaos, social disintegration, asset confiscation, mayhem or […]

July 26, 2020 | The Bad Idea

So a quarter million people received double CERB payments, amounting to $442 million. They applied twice, once through the CRA and again through Service Canada. We also know over $11 billion in virus payments of $2,000 a month are going to children living at home who worked part-time in the last year. Ottawa will send […]

July 24, 2020 | Are You Sure?

The realtors are at it again. Listing low. Holding off on accepting offers. Stoking bidding wars and blind auctions in which the vendor (and her agent) hold every single card. And those CCs are back. That’s code on a listing cut for certified cheques which must accompany offers. The standard amount in Toronto is currently […]

July 23, 2020 | Head Faking

Sales of detached houses in Toronto fell double-digits last month. But deals for properties in the burbs – even the faraway ones – rose by just as much. Toronto condo listings are growing like mushrooms in the humidity, Rents and prices are under pressure. Meanwhile in Muskoka and the Kawartha locals say the market’s on […]

July 22, 2020 | The Big Infection

Could Covid take out the leaders of both Canada and the US? The virus that just won’t quit has lasted longer than most people imagined, continues to chew its way through society, has levelled economies, erased the jobs of hundreds of millions, has public finances circling the drain and now, spectacularly, weakened both Trump and […]

July 21, 2020 | The Surprise

Have you ever noticed the way media covers financial stuff? Never fails. When the market loses 2% in a day, it ‘plunges’ as ‘investors stampede the exits.’ This is big news. Pay attention and be terrified. However, when stocks add hundreds of points in a day, the story is buried, and preceded with, ‘Markets moved […]

July 20, 2020 | Not There Yet

The Royal Bank of Scotland has told its 50,000 employees not to bother coming back to work. Until sometime in 2021. Hmm, so it’s Scotland, not Canada. But this is definitely a trend. Not just working remotely, but the conclusion of major corporations that the virus will rage for a long time. A long, long […]

July 19, 2020 | So Now What?

My buddy Ryan stirred the loins of the rightist barbarians who roam the barren steppes of this blog, bareback, when he dissed the Trudeaus. Papa and junior. Together they’re responsible Ryan pointed out, for half the trillion-dollar debt that Canada will shoulder by the end of the year. Deficits and debts result from political decisions. […]

July 17, 2020 | Unintended Consequences

Welcome to the Friday edition of the not-a-virus, real estate, investing, macroeconomics, canines, babes (can I say that?) & balanced portfolio blog. Even if you’re not quite sure about your pronouns, we’re here to help. And the price is right.  Worth every damn cent. First a follow on yesterday’s head-scratcher about how real estate values […]

July 16, 2020 | Huh?

It’s, like, eleven feet wide. Midtown Toronto. No parking. Asked $1.5 million. On the market one day. Multiple offers, sold for $1.8 million. With land transfer tax and closing costs, add another $90,000. So, yes, almost $2 million. While this transaction was happening, Toronto mega-mayor John Tory was moaning the city faces a $2 billion […]

July 15, 2020 | The Burden of Fear

When the virus came, the Vix spiked and markets tanked, fear seized Jason. He’d given me a couple of hundred grand in an RRSP to invest for his retirement in a decade. “But wait,” he said. “There’s no way I’m investing now.” When the spring arrived, volatility had crumbled and markets were higher by a […]

July 14, 2020 | Going Hyper

Chris worries a lot. These days it’s about the guys running this joint. “My hubby and I are in our late-50s,” she tells me.  “We’ve worked hard, bought a house for half of what [email protected] told us we could afford, went without fancy cars and vacations, so that we could make double payments to pay off the […]

July 13, 2020 | Beware the Algo

Roughly 2,000 people a week, every week, ask for their mortgage payments to be deferred. Yes, this is atop the 750,000 (or so) households who have already told their lenders they cannot/will not make the monthly. The banks continue to accept deferral applications, and will do so until September. As a certain pathetic blog reported […]

July 10, 2020 | The Temptation

What did the nation’s housing agency mean when it warned about a ‘deferral cliff’? (Because it appears most people think this is a nothingburger.) Housing Armageddon, apparently. After all, about 750,000 households are currently withholding payments on $180 billion in mortgage debt, blaming the virus. One third of the Canadian workforce is unemployed (despite this […]

July 9, 2020 | ‘Can’t Pay, Won’t Pay”

  Peter and Janey bought an investment condo, pre-con, three years ago. “For capital gains, of course,” the suburban blog dog says, “but also for some steady retirement income. Three more years, and I’m done with the grind. The monthly cash flow is a big piece of our plan.” Or not. Covid happened. Who knew […]

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