Bank of Canada steps up to the bully pulpit

General Robyn McLean 25 May

Some great insight on market conditions from our friends at First National…and even more reason to get honest & informative advice when looking for mortgage financing! 

In its latest look at the threats to the country’s financial system, the Bank of Canada puts household debt and imbalances in the housing market at the top of the list.

The Bank says these are not new problems, but they have intensified during the pandemic.  Consumer debt has actually dropped in the past year or so, but rising mortgage debt has more than offset that decline.  At the end of last year Statistics Canada reported that the household debt-to-income ratio stood at 170.7, or $1.71 of debt for every $1.00 of disposable income.

The housing boom has been supporting the overall economy in the short-term but it is also adding to the vulnerability of the economy and financial system.  The BoC is also expressing concerns about the declining quality of mortgage borrowing during the pandemic.

The key concern is that any significant economic shock that leads to loss of employment, a drop in income, or a sharp reduction in home prices would force “overstretched” households to cut other spending in order to make their mortgage payments.  That, in turn, would curtail the economy as a whole, and could put significant stress on the financial system.

Just because the central bank says there could be a problem, does not mean there will be a problem.  There are a number of market watchers who see the Bank using its annual Financial System Review as a bully pulpit in an effort to talk down overly exuberant market expectations that might lead to trouble.

Other key concerns include cybersecurity, too much reliance on cheap credit and the possibility of a premature withdrawal of pandemic support for businesses.

  • May 25, 2021
  • First National Financial LP

10 Popular Home Renovation Trends to Tackle This Summer

General Robyn McLean 25 May

Some great summer reno tips from Justin Kirby @ REW. 

 By Justin Kerby May 21, 2021

There are plenty of home renovations you can take on this summer, many of which can increase the value of your property. If your renovation attempts this spring didn’t quite go as planned, or if you’ve been putting them off for longer than you intended, get things started while it’s hot outside and the skies are clear. Here are 10 of the most popular home renovations that you can tackle this summer.

1. Replace your fence

With proper care, a good fence should last roughly 15 years. Unfortunately, in wet climates like Vancouver, you’d be very lucky to hit that number. Wood fences eventually rot and need replacing, and it’s not something you want to be doing in the rain. The summer months are the perfect time to replace your fence.

Alternatively, you could plant cedar trees in front of your fence if greenery is more appealing to you. Cedars can be purchased in all sizes; just keep in mind that the taller they are when you buy them, the more expensive they will be.

2. Deck replacement or addition

Deck additions are easily one of the most popular home renovations in 2021. Outdoor gatherings are one of the few ways friends and family can get together during the pandemic, making having a meeting place like a deck or patio extremely valuable. Deck companies are busy right now, so call early or plan to do the work yourself.

If you already have a deck but would like to update it for the summer, adding a new layer of vinyl is a great way to freshen things up. Replacing rotting wood railings with aluminum or glass railings is another excellent way to improve the look of your deck or patio area (and make things safer as well).

3. Update your roof

A new roof should last you a minimum of 15 years, though they can hold out for much longer than that if you don’t live below large trees. Wood and asphalt shingles are both widespread, though asphalt will need to be replaced sooner in most cases. When it comes to warning signs, watch for any sagging, moss (which can signal trapped moisture), and any patches of shingles that are buckling. If you notice any of these signs, and it’s been over 15 years since the roof was replaced, it’s time to have a professional come out and take a look.

4. Bathroom remodel

Starting a bathroom remodel can seem daunting at first, but once you begin you’ll see that small spaces really aren’t too overwhelming. Retiling your bathroom floors and shower, replacing showerheads and toilets, hanging new mirrors, and adding a new vanity can be done relatively quickly and leave you with a beautiful new space. These renovations often pay for themselves, as they’ll increase your home’s value when it comes time to sell your property.

5. New kitchen backsplash 

The kitchen can be a considerable job depending on how much you want to take on, but a new backsplash is an excellent place to start if you’re looking for a smaller project. A new backsplash can make a kitchen look fresh, or give it a pop of colour depending on your personal preferences. If you’re matching your backsplash colour with your counters (which is common if you’re doing white on white), try to make sure your counters are a slightly warmer tone than your backsplash. This keeps your backsplash looking very clean. Kitchen renovations, in general, are a great way to increase the value of your home.

6. Exterior painting

Interior painting is always a good idea when it comes time to sell your home, but exterior painting shouldn’t be overlooked. The summer months are the perfect time to update the exterior of your home, and adding a fresh coat of paint, even if it’s the same colour as before, really brightens things up. Adding some new trim colours to the exterior, doing a flat stucco job to make things look more modern, or simply removing old wood panelling can go a long way.

7. Window upgrades

Upgrading your windows will not only make your home more attractive and modern, but it will also save you money in the long run. Replacing your windows is one of the best kinds of renovations – those that will save you money every single month, whether you’re keeping the cold air in during the summer months or the warm air in during the winter months. In addition to saving you money on your heating bill, it will also make you money when it comes time to list your property. Double pane, triple pane, and Low-E windows are precisely the kinds of features that energy-efficient buyers are looking for right now.

8. Frame in your carport

You’ll likely need to get a permit to frame in your carport, so be sure to check with your city before you begin this renovation project. It’s become extremely popular to opt for a garage instead of a carport for practical and overall home security reasons.

Look for a garage door with good insulation so that your home stays warm in the colder months. The thicker the door, the better, and with no windows if possible – unless the designer in you needs them!

9. Replace your doors

You’ll be surprised by how much this freshens up your home. Whether it’s replacing those ageing doors in your bedrooms, swapping an old sliding door for a set of beautiful french doors, or replacing your front door with a new exciting design and colour, you’ll enjoy this renovation. For a smaller project, you can update every door handle in your home in just a few hours, and this can also add some charm. Black or brass door handles stand out and make an impression.

10. Add new siding or stucco

If you are going ahead with redoing a deck or framing in a carport, there’s a chance you’ll need to re-stucco or add some siding to your new exterior walls. Siding, in particular, is very low maintenance, and if you opt for fibre cement siding, you’ll be choosing a durable product as well. If your home has stucco, try to find someone to match your current style or pattern. This isn’t an easy task, so be sure to go with a professional with a good track record and plenty of reviews.

These home renovation projects are all extremely popular right now. Don’t be afraid to give home improvement a shot this summer. It’s the perfect time to get started.

Housing Market Slowed in April as Renewed Lockdown Took Its Toll

General Robyn McLean 17 May

Understanding what’s happening in the real estate market from Dr. Sherry Cooper, Chief Economist at Dominion Lending.

Starting to See a Slowdown in Canadian Housing
The Canadian Real Estate Association (CREA) released statistics showing national existing home sales fell 12.4% nationally from March to April 2021. Over the same period, the number of newly listed properties fell 5.4%, and the MLS Home Price Index rose 2.4%.

While home sales fell month-over-month in April, largely due to the new lockdowns, April sales were still the strongest ever for that month and well above the 10-year monthly average.

Month-over-month declines in sales activity were observed in close to 85% of all local markets, including virtually all of B.C. and Ontario.

New ListingsThe number of newly listed homes declined by 5.4% in April compared to March. In a market with historically low inventory, where sales activity depends on a steady supply of new listings each month, the synchronous gains in new supply and sales in March followed by synchronous declines in April suggest the slowdown in sales may be partially about the availability of listings as opposed to only a demand story. New listings were down in 70% of all local markets in April.

The national sales-to-new listings ratio eased back to 75.2% in April compared to a peak level of 90.6% back in January. That said, the long-term average for the national sales-to-new listings ratio is 54.5%, so it is currently still high historically. The good news is that it is moving in the right direction.

Based on a comparison of sales-to-new listings ratio with long-term averages, only about a quarter of all local markets were in balanced market territory in April, measured as being within one standard deviation of their long-term average. The other three-quarters of markets were above long-term norms, in many cases well above.

There were 2 months of inventory on a national basis at the end of April 2021, up from a record-low 1.7 months in March but still well below the long-term average for this measure of a little more than 5 months.

In a separate release, Canadian housing starts fell to 268,600 annualized units in April from the blowout (334.8k) month in March. While down sharply month-over-month, this is still a solid level of new construction activity in Canada by historical standards. In fact, average annualized starts over the past six months run at the strongest level on record, topping building booms in the 1970s and 1980s. All regions but the Prairies and Atlantic Canada saw lower starts in April.

Home PricesThe Aggregate Composite MLS® Home Price Index (MLS® HPI) climbed by 2.4% month-over-month in April 2021 – a historically strong gain but less than in February and March. Most of the recent deceleration in month-over-month price growth has come from the single-family space compared to the more affordable townhome and apartment segments.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 23.1% on a year-over-year basis in April. Based on data back to 2005, this was a record year-over-year increase.

The largest year-over-year gains continue to be posted across Ontario (around 20-50%), followed by markets in B.C., Quebec and New Brunswick (around 10-30%), and lastly by gains in the Prairie provinces and Newfoundland and Labrador (around 5-15%).

The MLS® HPI provides the best way to gauge price trends because averages are strongly distorted by changes in the mix of sales activity from one month to the next.

The actual (not seasonally adjusted) national average home price was slightly under $696,000 in April 2021, up 41.9% from the same month last year. That said, it is important to remember that the national average price dropped by 10% month-over-month last April as the higher-end of every market effectively shut down for a couple of months. That will serve to stretch these year-over-year comparisons over and above what is actually happening to prices until around June.

By segment: Single-detached remains extremely strong, but earlier signs that condo markets in the large cities were tightening up continue to play out. Condo prices were up 8.5% y/y in April, the strongest pace since mid-2018, and price gains are now running even stronger month-to-month in the biggest cities. We continue to expect these markets to come back stronger than most might think.

By region: It’s as close to wall-to-wall strength that we’ve probably ever seen in this country. Long-dormant markets like Calgary and Edmonton are awake again with prices up roughly 9% y/y; Toronto, Montreal and Vancouver remain strong as usual; some smaller markets (think Halifax, Moncton, Southwestern Ontario) are even stronger than the big cities; and cottage country is booming.

Bottom Line

Headlines will probably flag housing market declines in April, but don’t that fool you…this market is still robust across geography and segment, even if we’ve likely seen peak momentum. Activity will likely remain strong this summer, especially if the COVID restrictions are eased, and people begin to get their second vaccine.


House Hunting Mistakes to Avoid

General Robyn McLean 10 May

Some invaluable tips from my friends at DLC.

By Dominion Lending Centres Apr 7, 2021

Buying a home is one of the largest investments you will ever make! In order to make your home hunting experience the best it can be, there are a 5 house hunting mistakes to avoid and be aware of before you start your journey:


1. Not Getting Pre-Approved

One of the most important aspects of buying a home is the mortgage application and approval process. No matter what type of home you are looking for, you will need a mortgage. One of the biggest mistakes when it comes to the home-buying process is NOT getting pre-approved prior to starting your search. Getting pre-approved determines the actual home price you can afford as it requires submission and verification of your financial history to ensure the most accurate budget to fit your needs.


2. Not Setting or Following a Pre-Determined Budget

Another mistake that people make when home-hunting is not setting, or following, a pre-determined budget. It can be tempting to start looking at the top of your budget, or even slightly over, but when you consider closing costs and the long-term financial responsibility of home ownership, it is best to avoid maxing yourself out. Getting pre-approved will help determine what you can afford, as well as making an appointment with your mortgage broker to determine your financial situation and the best options for you now, and in the future.


3. Not Hiring a Real Estate Agent

Your mortgage broker and your real estate agent are two of the most important members of your homebuying A-Team! In today’s competitive real estate market, it can be very difficult to acquire property without the help of a realtor. One reason is that realtors can provide access to properties that never even make it to the MLS website! They can also gain access to information about homes that may come onto the market, before a listing is even signed. Most importantly though, a realtor understands the ins-and-outs of the home buying process and can tell you how to be successful in your endeavors to purchase a home by guiding you through the process from the first viewing to having your bid accepted.


4. Focusing Too Much on Aesthetics

While we understand that bad interior design can really affect the perception of the home, you don’t want to be blindsided by it. At the end of the day, aesthetics can always be updated! Giving up the perfect price or location or size for a few aesthetic details (such as paint color, flooring, or even outdated appliances or light fixtures) is one of the biggest mistakes people make! Most homes have incredible bones that only need some minor tweaks to become your perfect space.


5. Not Thinking Ahead

What you want and need in a house today, could be very different from what you want and need in a house in the future. It is important to be able to look ahead – are you planning on having children? Are your parents getting older and in need of a retirement space? These are things that are good to take into consideration when buying a new home. Buying a home isn’t a permanent decision as you can always sell your home later on if it doesn’t work for you in the future, but it is almost always easier to plan ahead so you can grow with—and not out of—your home whenever possible.

Weak April Jobs Report Reflects Canadian Lockdown

General Robyn McLean 7 May

The Canadian jobs market review from Dr. Sherry Cooper, Chief Economist at Dominion Lending Centres.

Canada’s Jobs Recovery Impaired by Third-Wave Virus Restrictions
This morning, Statistics Canada released the April 2021 Labour Force Survey showing a major deterioration in the jobs market following the third-wave Covid containment measures. Employment fell by 207,100 (-1.1%) in April, and the unemployment rate rose 0.6 percentage points to 8.1%.Employment declined in both full-time (-129,000; -0.8%) and part-time (-78,000; -2.3%) work. The number of employed people working less than half their usual hours increased by 288,000 (+27.2%).

The number of Canadians working from home grew by 100,000 to 5.1 million.

Total hours worked fell 2.7% in April, driven by declines in educational services, accommodation and food services, and retail trade.

The labour underutilization rate, which captures the full range of available people who want to work, rose 2.3 percentage points to 17.0% in April.

The number of Canadians unemployed for 27 weeks or more–the long-term unemployed–increased to 486,000. This group might well be the most scarred by the pandemic in terms of their job prospects and skill deterioration.

Hardest Hit By Industry SectorIn April, employment fell in several industries directly impacted by public health restrictions, namely retail trade (-84,000); accommodation and food services (-59,000); and information, culture and recreation (-26,000).

Accommodation and food services accounted for more than two-thirds (70.9%) of the overall employment gap (-503,000) compared with February 2020.

Employment increased in public administration (+15,000); professional, scientific and technical services (+15,000); and finance, insurance and real estate (+15,000), three industries where many activities can be performed remotely.

Employment in goods-producing industries was little changed in April.

Fewer people working in Ontario and British Columbia

Following gains over the previous two months, employment in Ontario fell 153,000 (-2.1%) in April.

Employment in British Columbia declined by 43,000 (-1.6%)—the first decrease since substantial employment losses in March and April 2020.

Employment increased in Saskatchewan and New Brunswick, while there was little change in all other provinces.

Bottom Line 

The third wave restrictions cut heavily into Canadian employment in April, mostly in line with expectations. However, in contrast to the mild impact on growth from second-wave restrictions, the latest drop may leave more of a mark on the broader economy, with full-time positions also hit this time. On a less downbeat note, the employment-to-population rate remains a full point above January’s level (at 59.6%). The participation rate is also higher than in the second wave at 64.9% (albeit down a bit from the pre-pandemic trend of 65.5%).

Looking ahead, as in prior waves of virus spread, employment will rebound once the government can ease containment measures. And that light at the end of the tunnel is getting closer, with vaccination rates ramping up. In the meantime, government support programs for those losing work remain in place and help put a floor under household purchasing power.

Canada’s economy remains about half a million jobs shy of pre-pandemic levels. The Canadian dollar rose to 82.36 cents US after the report. The yield on Canada’s 5-year bond yield dipped to 0.894%, down a few ticks from Thursday’s close.

The U.S. Labor Department also released soft jobs data Friday that were even more disappointing. U.S. payrolls increased by just 266,000, versus estimates for a 1 million gain.

Interest rate uncertainty

General Robyn McLean 3 May

A look at interest rate uncertainty from our friends at First National.

The latest economic forecast from the Bank of Canada has rekindled the “age old debate”: Fixed vs Variable.

In its Monetary Policy Report last month, the BoC indicated that the time horizon of its “low for longer” interest rate policy may be moving closer.  The Bank had expected to hold its trend setting overnight rate at 0.25% until sometime in 2023, based on its forecasts for inflation.

Now the Bank thinks its inflation target – a sustainable 2% – could happen sometime in the second half of 2022.  The Bank cites Canada’s resilient economy, and the most recent GDP numbers tend to bear that out.  Statistics Canada reports the economy expanded at an annualized rate of 6.5% in the first three months of this year.

That would suggest that mortgage borrowers might want to go with a fixed rate or consider locking-in their variable rates at today’s lows, avoiding unwanted increases.  However, the pandemic continues to cloud any view of the future and uncertainty was a key element in the Bank’s last report.

A number of market watchers point out that variable rate mortgages continue to offer savings and that there are ways to mitigate the cost of rate increases whenever they occur.

Of course, fixed rate mortgages continue to offer the peace of mind that comes with interest rate and payment certainty.  The key considerations being possible penalties, and flexibility in the terms.

For borrowers, the message would seem to be: base your decisions on your own circumstances rather than the broad economic considerations of the Bank of Canada.

  • May 3, 2021
  • First National Financial LP