Canadian seniors are slowing down on the equity binge, but they’re still tapping quite a bit. Office of the Superintendent of Financial Institutions (OSFI) filings show reverse mortgage debt reached a new high in June. Canadian reverse mortgage debt is decelerating in growth, but is still one of the fastest growing segments of debt.
A reverse mortgage is an increasingly popular way for seniors to tap their home equity. Lenders will give you a lump sum or regular payments, secured by the equity in your home. They’re similar to a home equity line of credit (HELOC), but no regular payments are not required. Instead, the balance is only generally due in the event of death, sale, or default.
For this privilege, they generally charge a higher fee than a HELOC. Combining no payments and a higher interest rate is a great way to see your home equity vaporize. So it’s always best to thoroughly think a move like this through. Got it? On to the data….CLICK for complete article
Eitel Insights forecast of the stress test mitigation has come to fruition. June and July 2019 Average Sales Price for Greater Vancouver Detached properties realized a loss of 17% & 18% respectively. That signaled a stress test mitigation.
The stress test was introduced in 2018 and basically cut any potential buyers purchasing power by 20%. Buyers needed to qualify at higher rates and terms than were ever required before. That sent a significant segment of the market to the sidelines.
Now that the market has dropped off, there is a portion of those sidelined buyers that are off the bench and in the purchasing game. During August prices rose back to $1.560 Million, which is perfectly in the middle of the market downtrend that has been established. Equally important the market has jumped back above the ten year uptrend after two months of threatening to break the important technical indicator.
We at Eitel Insights believe sellers should take advantage of this temporary market. We have been stating for the last quarter that this stress test mitigation would come, now that it is in play, we feel obligated to warn that this is a blip in the markets evolution lower. Before you know it the average sales prices will officially break the ten year uptrend and the market will be sent lower with a significant test of $1.400 million likely in 2020.
The Detached sales figures which had broken out of the falling knife trend. Is now, seemingly in a triple top scenario with sales not being able to climb above 920 sales with any sustainability. This will be a short term problem as sales can indeed increase from their very low levels and still be in the overall downtrend. We do anticipate seeing higher lows in the sales numbers and it is not hard to imagine higher lows being put in place considering all the market needs to realize is more than 344 sales to achieve the goal in place. However as we say the market needs to have a heartbeat. Just because there are sales does not give you the whole story of supply versus demand.
The inventory growth has curtailed as of late, with properties staying on the market longer and some sellers giving up hope and taking properties off the market. The new activity brought on by the stress test mitigation will cause another increase in inventory over the next couple of months. As old sellers hop back on the bandwagon believing the market has turned. This will again cause a further imbalance between buyers and sellers. Once the sidelined buyers have purchased there is no pent up demand following them and prices will indeed head lower while inventory grows.
Money save is money earned. Since our initial forecast that the Greater Vancouver Market had indeed topped out and prices would begin to trend lower. The market has realized a $360,000 price loss. For an individual report please visit www.eitelinsights.com.
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The bank of mom and dad may be undergoing an aggressive expansion. Teranet, Canada’s largest land registry operator, conducted an analysis on ownership in Ontario. First-time buyers scoring a place on their own is on the slide. Most aggressively taking its place, is buying with a second owner at least 20 years older. The firm believes this may confirm what you already know – more people need help from mom and dad.
Fewer Homes Have One Owner On The Title
Higher prices mean fewer first-time buyers are pursuing homeownership alone. The rate of condo apartments with only one person on title was 57.1% in 2012, and fell to 48.4% by 2018. For all home types (the general market), the rate fell from 40.2% to 33.9% over the same period. Double income households? Shocking… not. What is interesting is who they’re buying with….CLICK for complete article
Detached sales prices of $1.494 million are at the low end of the downtrend established in 2017, simultaneously testing the one of the low ranges of Vancouver’s current detached market cycle. We had anticipated a tight selling range for the remaining portion of the year. However if the prices dip to $1.480 million before the year end we will have a greater probability of the market recession reaching $1.225 million (red line).
Detached sales which have been touted as a sign of strength has been greatly misinterpreted by the majority of Real Estate Analysts. There were 852 sales in July 2019, well below the average since 2005 of 1070. Not to mention that there could have been 1100 sales and the market would still be in a downtrend with respect to detached sales.
There were 6370 detached properties for sale in July, continuing in the upward trend of available listings throughout Greater Vancouver. Again we are well above the growth cycle of active listings. Greater Vancouver could have seen only 5275 listings in the month of July and still been in the upward trend. The average since 2005 has been 5858 available listings in any given month.
The rationale for why the market is seeing a temporary lift is due to the Stress Test Mitigation. What we mean by that is the sale prices have fallen off 18% from the peak. Meaning those that have been forced to the sidelines due to the 20% increase of mortgage qualification, can now begin to purchase. This, as we say, will be a temporary effect. Once the demand due to stress test mitigation is introduced to the market the sales will pick up and we anticipate a tighter range of average sales price. However once that buildup of demand dissipates, we will see the market continue lower.
The Detached market is still plummeting especially when you take a 1 or 2 year outlook. Eitel Insights sees a tumultuous time still upcoming for sellers, and we anticipate the market to continue lower with a test of $1.400 million in our future. If that price point does not hold we expect the market to sink lower until we see prices of $1.225 million across Greater Vancouver on an average sale price. With inventory above historical norms and sales below, we do not see the market changing immediately. Of course with a 20 year outlook you can purchase anytime, however we offer actionable intelligence that allows our clients to purchase with real insights of short and long term market trends.
Condo Market Update
Unlike the Detached market, the condo market is at the downward trend highs. As you can see in the chart the Condo market is in the middle of the projected market cycle. With the average sale price of Greater Vancouver coming in at $656,000 the market is down 13% from the peak. We anticipate this price point decreasing over the upcoming years leading to a test of $525,000 a total drop of 30% from the peak. Before that occurs we will see tests of $635,000 and again a test at $584,000. Once both of those support lines fail to prop up the market we will see that test of $525,000.
Condo sales in July saw 1245 higher than the July of 2018, and analysts are acting like the flood gates are about to open, we see it differently. In truth the sales could have been at 1600 sales in July and we would still firmly be in a downtrend. Yes we have found our way out of the falling knife down trend, however we still are in the midst of the overall conservative downtrend depicted in the chart below.
The inventory of the condo market saw 5588 available listings across Greater Vancouver. Staying near the 4 year high in active listings. We anticipate this level to continue to grow and be the major cause of prices falling over the upcoming years. With all those presale properties eventually coming to completion. The market will be inundated with active listings, even now the realtors are continually getting emails about assignments sales because developers do not allow their buyers to publicly advertise the listing on the open market. Once the property is completed the market will sharply rise in active listings and with each new month see higher and higher inventory. Eventually leading to the cannibalization of the condo market with new properties selling with warranties and kickbacks the resale market will be forced to lower their prices to see any offers. Thus forcing newer properties to lower their prices and the vicious cycle will repeat until the market bottom likely in 2022.
Dane Eitel is the founder and lead analyst of Eitel Insights. Click here for more information.
as more and more three letter organizations declare Canada’s real estate prices unsustainable, Canada’s national housing agency thinks things are getting better. The Canada Mortgage and Housing Corporation (CMHC) latest report mentions improved fundamentals. The organization even went so far as to downgrade the risk in Greater Vancouver.
About The Ratings
The ratings are displayed in a color-coded scale, not unlike the US terror threat advisory scale. Green means there’s a low risk of vulnerability, that is the CMHC doesn’t see an issue. Yellow means a “moderate” risk of vulnerability, meaning it’s just breached a risky reading. Red means a “high” degree of vulnerability, and there’s a major imbalance or it’s persisted for a while. It’s pretty self explanatory when looking at individual readings….CLICK for complete article