This housing cycle is ending. What’s next?

General Robyn McLean 6 Apr

Some valueable insight from Kevin Skipworth, Chief Economist at Dexter Realty

The sales super cycle that the Metro Vancouver housing market has been in for two years is ending. It is nearly over in Fraser Valley, where March sales were down 22.5% from a year earlier and average prices dropped nearly 6% from February 2022, and similarly in Greater Vancouver where home sales were down 25% from March 2021 and averages prices were down 13%. A sure sign that the lower end of the market is thriving more.

This does not mean a major market correction is coming. It does mean that we could be moving back to a calmer, more friendly environment for homebuyers, which would be a welcome relief to many. March saw a number of Greater Vancouver buyers moving quickly to purchase before the next round of lending rate increase, but we expect the sales and price increases to slow in the months ahead comparative to where we have been. Housing sales in March across Greater Vancouver totalled 4,405, down 25% from March 2021, but a 27% increase from February 2022 and 31% above the 10-year March sales average.

More listings were added in March, with 6,802 new listings, still down 20% from a year earlier but 20% above the 10-year average. There were 7,970 total active listings on the Greater Vancouver market at month end which further dropped to 7,851 at the start of April as some listings expired. The after-spring break activity brought an increase of listings to the market that will continue as we move through April.

However, we are still sitting with just a 2-month’s supply of homes available for sale in most areas, with North Vancouver, Burnaby, New Westminster, Coquitlam, Port Moody, Port Coquitlam, Tsawwassen, Pitt Meadows, Maple Ridge and Squamish all at or less than a 1 month’s supply. And while townhouses continue to be the most challenging type of property to find across the region, apartments are fast becoming a scarce product. Even on Vancouver’s West Side, there are only 2-month’s supply of apartments and areas such as Vancouver East and Richmond have dropped down to 1 month supply. It’s even worse in Pitt Meadows where this is half a month’s supply (7 apartments for sale, down from 22 last March), just over half a month’s supply in Maple Ridge and only 6 apartments available for sale in Ladner, again under 1 month’s supply. The number of apartment sales in Coquitlam in March were actually the highest we’ve seen in March at 211, eclipsing the previous high of 187 in March 2021.

It will take a surge in new listings to get this market back to balance, but the question is, will that happen and if so, when? Realistically we would need to see 15,000 to 18,000 active listings to get to a balanced market.
The rest of 2022 may look a lot like it did just before a global pandemic created the most dramatic counterintuitive housing boom this region has ever seen. We seem to forget that, in 2019, Greater Vancouver March housing starts had plunged 31% from a year earlier and were averaging about 1,800 transactions per month, less than half of what they are today. When 2020 started, we saw the market firing at the 10-year average. Perhaps average would be welcome to many.

The true test of the market will be over the next month as interest rates continue to rise, with the Bank of Canada making its next announcement on April 13. It’s a forgone conclusion that the overnight rate will increase. It just remains to be seen whether it will be up 0.25% or 0.5%, thereby increasing variable rate mortgages. Fixed interest rate mortgages have been on the rise with a 5-year interest rate now approaching 4%. Since the federal mortgage stress test qualifying rate is 2% higher, it will be nearly 6% on a 5-year rate. That negatively affects a borrower’s debt-service ratio and their purchasing power.

There are other signs of a cooling market. Continued lack of supply is keeping buyers from being able to find their next home and list their current one. Despite record-setting demand and prices, B.C. housing starts decreased by 4,000 to 31,300 new homes, seasonally adjusted, in February 2022 from a month earlier. Metro Vancouver home starts are down 23% so far this year, compared to 2021. A key reason is developers’ fear of proceeding with projects because of soaring construction costs, especially for wood frame multi-family.

Then there is the uncanny ability for the government to bring in new regulations just when they are not needed. The B.C. finance minister has confirmed that a mandatory ‘cooling-off’ period is coming as their way to protect buyers, especially when competing in multiple offers, which could very well be at a reduced level by the time the legislation is law. The rules will then stick around and simply frustrate buyers and sellers. This in effect will give a buyer a period of days to reconsider their offer and walk away from it. While no details were provided, a monetary penalty could be part of that ability to walk away, which in effect would lock in first time buyers and those without the resources to utilize that strategy. The other option is complete freedom to walk away, but imagine how many properties would be tied up in that process and the potential confusion of that. In an already supplied starved market, what purpose will this really serve? And through all this, there are still some that contend we don’t have a housing supply crisis and in fact supply is keeping pace with population growth. These two wrongs certainly don’t make a right. Mechanisms to supposedly limit demand and a contention that supply isn’t an issue will only further exacerbate the issues we see in the housing market.

Finally, we are seeing price exhaustion. This is apparent now in outlier suburbs, which had seen dramatic price hikes since 2020, but we will also see price increases slowing in central areas, at least through the first half of 2022. Prices can only go up so much.

If you thinking of selling, list now. If you are buying, enjoy the greater selection on the market.

Bank of Canada increases its benchmark interest rate, updates its 2022 outlook

General Robyn McLean 2 Mar

Insight from our friends at First National on today’s Bank of Canada highly anticipated rate increase. 

Bank of Canada increases its benchmark interest rate, updates its 2022 outlook

  • Mar 2, 2022
  • First National Financial LP

Today, in its second scheduled policy decision of 2022, the Bank of Canada made good on its pledge to increase interest rates in the face of higher inflation.

For the first time since the pandemic began to hurt the economy in March 2020, the Bank raised its overnight benchmark rate to 0.50% from 0.25%. As a result, the Bank Rate increases to 0.75% from 0.5% and the knock-on effect is that borrowing costs for Canadians will rise modestly although by historical norms, remain low.

The BoC also announced it is continuing its reinvestment phase, keeping its overall holdings of Government of Canada bonds on its balance sheet “roughly constant” until such time as it becomes “appropriate” to allow the size of its balance sheet to decline.

In its updated comments on the state of the economy, the Bank and singled out the unprovoked invasion of Ukraine by Russia as a “major new source of uncertainty” that will add to inflation “around the world,” and have negative impacts on confidence that could weigh on global growth.

These are the other highlights.

Canadian economy and the housing market

  • Economic growth in Canada was very strong in the fourth quarter of 2021 at 6.7%, which is stronger than the Bank’s previous projection and confirms its view that economic slack has been absorbed
  • Both exports and imports have picked up, consistent with solid global demand
  • In January 2022, the recovery in Canada’s labour market suffered a setback due to the Omicron variant, with temporary layoffs in service sectors and elevated employee absenteeism, however, the rebound from Omicron now appears to be “well in train”
  • Household spending is proving resilient and should strengthen further with the lifting of public health restrictions
  • Housing market activity is “more elevated,” adding further pressure to house prices
  • First-quarter 2022 growth is “now looking more solid” than previously projected

Canadian inflation and the impact of the invasion of Ukraine

  • CPI inflation is currently at 5.1%, as the BoC expected in January, and remains well above the Bank’s target range
  • Price increases have become “more pervasive,” and measures of core inflation have all risen
  • Poor harvests and higher transportation costs have pushed up food prices
  • The invasion of Ukraine is putting further upward pressure on prices for both energy and food-related commodities
  • Inflation is now expected to be higher in the near term than projected in January
  • Persistently elevated inflation is increasing the risk that longer-run inflation expectations could drift upwards
  • The Bank will use its monetary policy tools to return inflation to the 2% target and “keep inflation expectations well-anchored”

Global economy

  • Global economic data has come in broadly in line with projections in the Bank’s January Monetary Policy Report
  • Economies are emerging from the impact of the Omicron variant of COVID-19 more quickly than expected, although the virus continues to circulate and the possibility of new variants remains a concern
  • Demand is robust, particularly in the United States
  • Global supply bottlenecks remain challenging, “although there are indications that some constraints have eased”

Looking ahead

As the economy continues to expand and inflation pressures remain elevated, the Bank’s Governing Council made a clear point of telling Canadians to expect interest rates to rise further.

The Governing Council also announced it will consider when to end its “reinvestment phase and allow its holdings of Government of Canada bonds to begin to shrink.”

The resulting quantitative tightening (which central bankers framed as “QT” rather than the previous term “QE” for quantitative easing) would complement increases in the Bank’s policy-setting interest rate. The timing and pace of further increases in the policy rate, and the start of QT, will be guided by the Bank’s ongoing assessment of the economy and its commitment to achieving a 2% inflation target.

BoC’s next scheduled policy announcement is April 13, 2022.

Bank of Canada Hikes Policy Rate by 25 bps, and Sustains Current Bond Holdings

General Robyn McLean 2 Mar

A closer look at today’s interest rate hike by the Bank of Canada; reviewed by Chief Economist for Dominion Lending Centres, Dr. Sherry Cooper.

Bank of Canada Starts Hiking Rates, Signalling More To Come
The Governing Council of the Bank of Canada raised the overnight policy rate target by a quarter percentage point in a widely expected move and signalled that more hikes would be coming. This is the first rate hike since 2018. In a cautious stance, the Bank announced it was continuing the reinvestment phase, keeping its overall Government of Canada bonds holdings on its balance sheet roughly stable.

The Bank’s press release highlighted the major new source of uncertainty provided by the unprovoked invasion of Ukraine by Russia and suggested that it is a new source of substantial inflation pressure. Prices for oil, metals, wheat and other grains have skyrocketed recently. Moreover, this geopolitical distention negatively impacts confidence worldwide and adds new supply disruptions that dampen growth. “Financial market volatility has increased. The situation remains fluid, and we are following events closely.”

The Bank commented that economies have emerged from the impact of the Omicron variant more quickly than expected. Demand is robust, particularly in the US.

“Economic growth in Canada was very strong in the fourth quarter of last year at 6.7%. This is stronger than the Bank’s projection and confirms its view that economic slack has been absorbed. Both exports and imports have picked up, consistent with solid global demand. In January, Canada’s labour market recovery suffered a setback due to the Omicron variant, with temporary layoffs in service sectors and elevated employee absenteeism. However, the rebound from Omicron now appears to be well in train: household spending is proving resilient and should strengthen further with the lifting of public health restrictions. Housing market activity is more elevated, adding further pressure to house prices. Overall, first-quarter growth is now looking more solid than previously projected.”

Canadian CPI inflation has risen to 5.1%, as expected in January, well below the 7.5% level posted in the US.” Price increases have become more pervasive, and measures of core inflation have all risen. Poor harvests and higher transportation costs have pushed up food prices. The invasion of Ukraine is putting further upward pressure on prices for both energy and food-related commodities. All told, inflation is now expected to be higher in the near term than projected in January. Persistently elevated inflation increases the risk that longer-run inflation expectations could drift upwards. The Bank will use its monetary policy tools to return inflation to the 2% target and keep inflation expectations well-anchored.”

The final paragraph of the Bank’s press release speaks with great clarity: “The policy rate is the Bank’s primary monetary policy instrument. As the economy continues to expand and inflation pressures remain elevated, the Governing Council expects interest rates will need to rise further. The Governing Council will also be considering when to end the reinvestment phase and allow its holdings of Government of Canada bonds to begin to shrink. The resulting quantitative tightening (QT) would complement the policy interest rate increases. The timing and pace of further increases in the policy rate, and the start of QT, will be guided by the Bank’s ongoing assessment of the economy and its commitment to achieving the 2% inflation target.”
Bottom Line

The Bank of Canada has made a clear statement regarding the outlook for a normalization of interest rates. We expect a series of rate hikes over the next year. Expect another 25 basis point increase following the next meeting on April 13. The increased uncertainty and volatility arising from the war in Ukraine is front of mind worldwide. Still, it will not deter central banks from tightening monetary policy to forestall an embedded rise in inflation expectations.

The Bank of Canada has postponed Quantitative Tightening, for now, a prudent move in the face of geopolitical uncertainty.

 

 Demand pressure pushing up prices

General Robyn McLean 14 Feb

What’s really at the crux of our rising home prices??? Here’s some alueable insight from our friends at First National. 

Fresh data just released from the 2021 census shows Canada is the fastest growing country in the G7.  Canada’s population jumped by 1.8 million people (5.2%) since the last census in 2016.  Much of that is due to federal immigration policies.

Of course, immigration is needed to support continued economic prosperity, but the population boom is widely seen as the key reason for spiking home prices.  It is basic, supply and demand.  Ottawa hopes to bring in a record breaking 411,000 permanent residents in 2022, while 2021 ended with an annualized rate of housing starts at 260,567.  That number is expected to decline this year.

“Household formation in Canada is very, very high…”  “We’re not building dwellings, or housing units, fast enough for household formation,” says Peter Routledge, head of the Office of the Superintendent of Financial Institutions (OSFI), the federal, banking regulator.

The resale market is also incredibly tight with record high sales-to-new-listings ratios and record low inventories.

Many market watchers say regulation and red tape at the municipal and provincial levels are to blame.  That argument is the cornerstone of a recent housing affordability report done for the Ontario government.  Its 55 recommendations include several development-friendly changes.

On a long-term basis there is little doubt changes and simplifications are needed.  But there are short-term realities to deal with as well.  Simply put, the housing construction industry cannot respond to the rapidly rising demand quickly enough to satisfy it.  Well known Canadian economist Robert Hogue noted recently that housing starts would have to triple to meet current demands.

  • Be the expert
  • Feb 14, 2022
  • First National Financial LP

 

 

So you need to buy a home. Now is a good time to do so.

General Robyn McLean 4 Feb

Valuable insight from Kevin Skipworth, Chief Economist at Dexter & Associates. 

“If you have the courage to begin, you have the courage to succeed.” David Viscott

There have always been challenges purchasing in one of the most expensive housing markets on the planet. It is still possible, though, to find the home or investment of your dreams in Metro Vancouver, and despite the headwinds, this is actually a good time to be purchasing, with the help of an experienced and connected real estate company.

The main challenge is finding a home to purchase.

The big question in today’s Metro Vancouver housing market is not ‘where will the new supply’ come from?’ but ‘why is there such a shortage of homes for sale?’ especially in an environment where buyer demand and price increases are at such a feverish pitch.

This past month we have seen houses and townhouses sell within days for well over the asking price. It is not uncommon for a single listing to attract a dozen or more offers. The demand is coming from conventional buyers wanting to buy their first home or trying to move up to investors and families hoping to buy a second or perhaps a third property as a smart hedge against the highest inflation rate in more than 30 years. But let’s not forget, the investment properties become rentals for a starved rental market and allow developers to build more supply.

Caught in the headlights of this traffic is homeowners who are fearful that if they sell, they won’t be able to purchase a similar or better home because of the shortage of listings and the amazing price parity being seen across the region.

In January, for example, the benchmark price of a detached house was the almost exactly same on Bowen Island – $1.48 million – as in North Delta at $1.45 million. A typical townhouse sells in Squamish, at $936,000, the same as the average price in the Fraser Valley. At just under $600,000, a Sunshine Coast condo apartment is priced at the same level as in New Westminster or Ladner or Cloverdale.

This is the time when a great buyer’s agent is very much worth working with.

Why buy now?

Low mortgage rates are a prime reason to move into the market as soon as you can.

The first step is to get a pre-approved mortgage. It is no secret that lending rates will be rising this year, likely with the first Bank of Canada increase coming by March. Lock in a pre-approval home loan at today’s historical low rates, good for 90 days, right now.

Restrictions are coming: If you are an investor or are buying a second home, there is a very strong chance that the federal government is about to increase the down payment required, in a bid, it says, to curb speculation.
Currently, about one in four homes in Canada is purchased as an investment. With home prices in Metro Vancouver rising about 25% over the past year, investing in real estate is naturally more popular here than in most of the country.

Federal housing minister Ahmed Hussen said in a January statement: “By developing policies to curb excessive profits in investment properties … and reviewing the down payment requirements for investment properties, we are targeting the issues the market is facing from multiple angles.”

Today, an investor can buy a home with a 20% down payment, but this could be increased to 25% or even higher. It is better to buy that investment condo, perhaps a suite for the university student in the family, or other secondary home now before tighter restrictions kick in.

Then there is appreciation. The BC Real Estate Association forecast in January that the average home price in Metro Vancouver, now at $1.2 million, would increase a further 8.1 per cent this year, compared to 2021, and rise again by 3.2% by 2023.  This means that a typical buyer could make at least 10% or about $120,000 in appreciation over the next two years. Across the province the composite home price is predicted to top $1 million this year for the first time.

Little competition: Finally, there is little fear of the Metro Vancouver housing market seeing a huge increase in supply. Listings of homes for sale have been declining for months and hit an all-time low in January as just 4,251 homes were added to the market, 19th lowest amount for the month of January. However, 2,329 homes sold, the third-highest for January sales in history.

Despite all the government pledges to increase the supply of homes, total housing starts in Metro Vancouver last year reached 26,103 units while immigration to the area totaled more than 35,000 people.  One of the barriers to new detached house construction in Metro Vancouver is that average municipal fees and taxes on a new house which now total $199,000, according to a survey released by the Homebuilders Association of Vancouver in January.

Short story is that when you buy a home this month, it will likely have little competition when you go to sell it or rent it. B.C. has only 425 housing units per 1,000 people in a country that has among the lowest average housing supply per capita in the G7. The Metro Vancouver rental vacancy rate is around 2% and the rental costs are the highest in Canada.

Unnecessary costs and delays continue to hurt supply and contribute to the added price of housing. In January, a local developer lamented that they have waited five years for building approval from the City of Vancouver on a project that includes 20% below-market homes around the SkyTrain. And while the city delayed building permits, they were also being charged $250,OOO in annual Empty Home Taxes. This can make affordable rental projects financially unviable.

Highlights of this Report:

  • Why now is the time to buy. Really.

  • Only market where townhouse prices dropped from December 2021: Vancouver East Side (down 3% after a 21.5% increase in the previous 12 months) – expect that to swing the other way in the months to come as lack of available townhouses push prices up again

  • Greater Vancouver benchmark home price appreciation year-over-year: $234,900

  • Biggest year-over-year detached house price increase: Surrey, up 43%

  • Biggest year-over-year detached house sales decline: Surrey, down 38%

Hiking rates without an increase

General Robyn McLean 1 Feb

Interest rates are on the rise. Some insight on recent moves from our friends at First National. 

The Bank of Canada has, once again, held its trendsetting interest rate 0.25%.  But it has stepped off the sidelines.

Expectations of a rate hike were high heading into the January 26th announcement.  Calls for an increase have been loud as inflation has jumped to generationally high levels.  Business and consumers are pushing for action to bring it back under control.

The Bank, however, appears to have opted for a compromise.  It is holding the rate at its record low while the rhetoric has been given a sharp increase.  Bank of Canada Governor Tiff Macklem has made his most direct statement, yet, on the matter.

“Canadians can be assured that we will use our monetary policy tools to control inflation,” Macklem said during the January announcement. “Canadians should expect a rising path for interest rates.”

Well known bank economist Benjamin Tal calls it a “PR story.”

“There are two opposing forces: one is that you want to maintain the credibility of the Bank of Canada,” Tal said in an interview with Mortgage Broker News.  “At the same time, you don’t want to be seen as insensitive to the suffering of people during the Omicron wave.  So, what do you do?  You basically raise rates without raising rates.”

Popular American financial expert John Mauldin has called this tactic, “talk tough and drag your feet.”

COVID-19 remains the key variable in the BoC’s planning, but it now appears increasingly likely the Bank will pick up its feet and step off the sidelines with a rate hike in its next announcement on March 2nd.

  • Jan 31, 2022
  • First National Financial LP

Bank of Canada maintains policy rate

General Robyn McLean 26 Jan

Today’s Bank of Canada announcement.

FOR IMMEDIATE RELEASE
Media Relations
Ottawa, Ontario
January 26, 2022

The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ %, with the Bank Rate at ½ % and the deposit rate at ¼ %. With overall economic slack now absorbed, the Bank has removed its exceptional forward guidance on its policy interest rate. The Bank is continuing its reinvestment phase, keeping its overall holdings of Government of Canada bonds roughly constant.

The global recovery from the COVID-19 pandemic is strong but uneven. The US economy is growing robustly while growth in some other regions appears more moderate, especially in China due to current weakness in its property sector. Strong global demand for goods combined with supply bottlenecks that hinder production and transportation are pushing up inflation in most regions. As well, oil prices have rebounded to well above pre-pandemic levels following a decline at the onset of the Omicron variant of COVID-19. Financial conditions remain broadly accommodative but have tightened with growing expectations that monetary policy will normalize sooner than was anticipated, and with rising geopolitical tensions. Overall, the Bank projects global GDP growth to moderate from 6¾ % in 2021 to about 3½ % in 2022 and 2023.

In Canada, GDP growth in the second half of 2021 now looks to have been even stronger than expected. The economy entered 2022 with considerable momentum, and a broad set of measures are now indicating that economic slack is absorbed. With strong employment growth, the labour market has tightened significantly. Job vacancies are elevated, hiring intentions are strong, and wage gains are picking up. Elevated housing market activity continues to put upward pressure on house prices.

The Omicron variant is weighing on activity in the first quarter. While its economic impact will depend on how quickly this wave passes, it is expected to be less severe than previous waves. Economic growth is then expected to bounce back and remain robust over the projection horizon, led by consumer spending on services, and supported by strength in exports and business investment. After GDP growth of 4½ % in 2021, the Bank expects Canada’s economy to grow by 4% in 2022 and about 3½ % in 2023.

CPI inflation remains well above the target range and core measures of inflation have edged up since October. Persistent supply constraints are feeding through to a broader range of goods prices and, combined with higher food and energy prices, are expected to keep CPI inflation close to 5% in the first half of 2022. As supply shortages diminish, inflation is expected to decline reasonably quickly to about 3% by the end of this year and then gradually ease towards the target over the projection period. Near-term inflation expectations have moved up, but longer-run expectations remain anchored on the 2% target. The Bank will use its monetary policy tools to ensure that higher near-term inflation expectations do not become embedded in ongoing inflation.

While COVID-19 continues to affect economic activity unevenly across sectors, the Governing Council judges that overall slack in the economy is absorbed, thus satisfying the condition outlined in the Bank’s forward guidance on its policy interest rate. The Governing Council therefore decided to end its extraordinary commitment to hold its policy rate at the effective lower bound. Looking ahead, the Governing Council expects interest rates will need to increase, with the timing and pace of those increases guided by the Bank’s commitment to achieving the 2% inflation target.

The Bank will keep its holdings of Government of Canada bonds on its balance sheet roughly constant at least until it begins to raise the policy interest rate. At that time, the Governing Council will consider exiting the reinvestment phase and reducing the size of its balance sheet by allowing roll-off of maturing Government of Canada bonds.

Information note

The next scheduled date for announcing the overnight rate target is March 2, 2022. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the Monetary Policy Report on April 13, 2022.

 

Interest rate anticipation runs high

General Robyn McLean 24 Jan

As the first Bank of Canada announce approaches, all eyes are on interest rates. Here’s some solid insight on the issues at hand from our friends at First National.

Interest rate anticipation runs high

Market watchers have their gaze firmly fixed on January 26th.  The Bank of Canada will make its first rate announcement of 2022 and deliver its first Monetary Policy Report for the year.

The key factors that are top-of-mind ahead of the announcement are inflation and what the central bank will do about it.

There has been a rising chorus of calls for the Bank to start increasing interest rates in an effort to quell generationally high inflation, which is now running at 4.8%.  Many analysts and economists expect the BoC will do that on the 26th, even if it is just to provide reassurance that the Bank is prepared to act.  They point out that the broader economy no longer needs stimulus and support, and the labour market is strong.

From the Bank’s point of view, a prime consideration is warding off “inflation expectations”, which could trigger a self-fueling inflation spiral of higher consumer demand, higher prices, higher wage demands, and so on.

But there are solid reasons for the central bank to stick with its stated plan to wait until at least March to start raising rates.  Chief among them is the Omicron variant, which is currently befuddling all efforts to keep the overall economy on track.

Further, the exact start date of interest rate hikes is not as important as where the increases take the economy over the next year or two, and that is what the Bank of Canada is really trying to manage.

  • Jan 24, 2022
  • First National Financial LP

There Are Fewer Homes For Sale Now Than Any Time In Canadian History: CREA

General Robyn McLean 20 Jan

Some interesting data from our friends at REW and the CREA. What’s in store for 2022? Read on to see…

December rounded off 2021 with a record-breaking lack of homes for sale on the market, pushing red-hot conditions into the new year.

The latest data from the Canadian Real Estate Association (CREA) reports that with only 1.6 months of inventory available on the market last month, December 2021 tops the list for the month with the least amount of inventory in Canadian history. This means that if no new homes came onto the market, we’d completely sell out at our current pace before March Break.

Previously, the record low was 1.8 months, as seen in March and November of 2021. Before last year, there hadn’t been a month dip below 2 months of inventory, and in 2021 almost half of the year was spent below this benchmark.

It’s clear that record-low inventory levels are continuing to drive the separation between extremely low supply and strong consumer demand.

A total of 35,971 transactions took place in the month of December across the country, which is -9.9% below the record set in 2020. As was the case with most of the later months in 2021, although the sales were below last year’s peak, they were still the second-highest on record. High demand for housing coupled with record-low supply continues to drive prices higher, as the national MLS Home Price Index Benchmark reached $811,700, an increase of 26.6% or $150,000 from a benchmark of $661,700 this time last year.

New listings did not keep up with the seasonally-heightened level of transactions seen last month, as the national sales-to-new-listing ratio (SNLR)  climbed to 79.7%. Almost two-thirds of CREA’s reported local markets were recorded as being a seller’s market (SNLR above 70%) with the remaining one-third of markets being recorded as a balanced market (SNLR between 40-60%).

Ultra-Low Listings In Early 2022 Set the Stage for a Hot Spring Market

Looking at 2021 in its entirety, a total of 666,995 residential properties traded hands over the year. This was a new record by a considerable margin, up 20% from the previous record set in 2022 and 30% from the ten-year average – demonstrating just how high sales demand has been this year, and how inventory is struggling to keep up.

And while sales volumes have decreased in the latter half of 2021 compared to the year prior, it’s clear that the extremely-low supply levels on the market are constraining the total number of transactions, as buyers quickly snatch up any new properties that hit the market.

According to industry experts, we can expect this trend to continue into 2022. “With the housing supply issues facing the country having only gotten worse to start 2022, take any decline in sales early in the year with a grain of salt because the demand hasn’t gone away, there just won’t be much to buy until a little later in this spring” said Cliff Stevenson, Chair of CREA.

“But when those listings eventually start to show up, the spring market this year will almost certainly be another headline grabber. If you’re thinking about jumping into the market as either a buyer, seller or both, your local REALTOR® has the information and guidance you’ll need to navigate the market in these unprecedented times,” continued Stevenson

Do you know the difference between a variable rate mortgage and an adjustable rate mortgage?

General Robyn McLean 19 Jan

Subtle differences in your mortgage term can mean big differences in payment amount and how long it takes you to pay off your mortgage. Are you aware that a variable rate mortgage (VRM) is different from an adjustable rate mortgage (ARM)?

While both are tied to Prime – the key lending rate set by the Bank of Canada – a variable rate mortgage (VRM) is one where the interest rates change with the market but the monthly payments are always the same.* When the Prime rate changes, more of your monthly payment goes towards interest and less towards principle. Some people like this feature because their monthly payment is predictable and they won’t have to worry if the interest rates rise, that the payments will suddenly increase. On a fixed income this can be appealing however keep in mind that each time the Prime rate rises, it will take you longer to pay off your mortgage.

An adjustable rate mortgage (ARM) is one where the monthly payments can change when the interest rate changes. So, if the Prime rate goes lower, then the monthly mortgage payments will be lower too. But if the Prime rate goes higher, then the monthly mortgage payments will also go higher.

For more information on what term is best for you, always discuss your options with a mortgage professional.

* A VRM will have a “trigger” rate where mortgage payment is no longer sufficient to maintain the new interest payment. At that time, you will be notified by your lender that you regular mortgage payment will be changing.

 

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