Mike's Spotlight

Mortgage Fund Investing Workshop

On this week’s show Justin Smith of Hawkeye Wealth shares with Michael some of the reasons investors might consider adding mortgage funds to their portfolio. Justin also presented a workshop on the topic at the 2021 World Outlook Financial Conference – providing more detail and analysis on this new type of asset class, and why it is becoming so popular in this low interest rate environment.

As a special bonus for our MoneyTalks audience, we’ve pulled Justin’s full presentation out from behind the paywall and are able to offer you free access. CLICK to Watch

Home Sales Prices Rise to Peak Level – Buoyed by Woeful Inventory

Detached properties across Greater Vancouver have risen over 14% in the past 12 months. January began 2021 with an average sales price of $1.814 Million. Just 1% below the historical high of $1.830 achieved during May 2017.

Technically speaking the 14% increase uplifted values from the middle threshold to the peak. During 2016 – 2017 multiple attempts to increase home values beyond 1.830M had failed. Can the current market conditions hold tight to surpass the our previous highs? Possibly, but very little room for error. Inventory would have to remain at abysmal levels, interest rates remain around 1%, stimulus needs to keep flowing and the sales totals have to remain or improve. Any wavering of inventory, interests rates, stimulus, or sales and the market could reverse the current trajectory.

For comparison sake you will notice in the chart below the dramatic difference between the supply and demand metrics of 2016-2017 and todays market environment.

Other analysts tout the how strong the demand was during 2020. The supply & demand chart does not corroborate their claims. The less than average sales totals was enough to completely overwhelm the anemic inventory.

During the initial market peak during 2016, sales which translates into demand, were through the roof and recorded a 2.805 data point while the supply was worn down to a -1.160 data point. The supply demand spread during 2016 was an impressive 3.965. During January 2021, the demand data point comes in at -0.7625 and the supply sits at -2.088. resulting in a 1.827 spread between the two market metrics. This leads to a straw which broke the camels back scenario, if the inventory returns, it is unlikely the demand will be able to continue to out pace the supply, which would have a deleterious effect on sale prices.

As a result of the increase to the average home sales price, sellers could return with gusto during 2021. With multiple offers prevalent again, owners who put selling their property on the back burner during 2020 will likely revisit the notion of listing. Owners looking to downsize have an amazing opportunity as the average detached home now sells for over 2.5 times more than the average condo. This is the first instance in 4 years where the divergence of the average detached property has reached over two and a half times the value of the average condo.

For an example longtime owner of a Vancouver East home, can sell their property on average for $1.827 Million. The average 1 bedroom condo in West End is selling for $533,694. That implies the sale of a single detached property would enable you to buy 3.4 West End 1 bedroom condos.

What makes this example intriguing is if one chose to downsize they would be selling their East Vancouver home at the peak of the Vancouver East market’s cycle. The purchase of the West End condo is currently selling at a 21% discount compared to West End market cycle peak prices. The 21% discount on each 1 Bedroom condo is akin to savings of $140,000 per purchase resulting in over $420,000 savings on the 3 condo properties. The $140,000 savings per purchase is nice but also the timing of the Vancouver East property would net you over $250,000 additional proceeds compared to January 2020. Add it all up and one could have netted $670,000 in gains, through selling at market peaks and purchasing during the market lows.

Just one example of the many opportunities that exist for home owners looking to downsize. Get in touch with Eitel Insights for your individual actionable intelligence market analysis.

Inventory through January broke above 3000, which is the lowest data point on record. 2020 finished the year down 28% below the yearly historical precedent. January 2021 begin the year with 37% less inventory compared to 16 preceding January data points. That said the aggressive downtrend (red line) which began in 2019 will likely be broken during 2021. If inventory can amass another 1000 active listings to break the 4000 level in the next few months, the market could become very interesting by the summer.

Inventory through January broke above 3000, which is the lowest data point on record. 2020 finished the year down 28% below the yearly historical precedent. January 2021 begin the year with 37% less inventory compared to 16 preceding January data points. That said the aggressive downtrend (red line) which began in 2019 will likely be broken during 2021. If inventory can amass another 1000 active listings to break the 4000 level in the next few months, the market could become very interesting by the summer.

Sales dipped back into the sales channel that held the market during 2017- 2019. The January sales were 751, the highest total since 2016 when sales totalled 1,049. Compared to the preceding January average sales began the year up 19%.

Individual markets vary, contact Eitel Insights to gain actionable intelligence about your neighbourhood.

Canada’s Real Estate Market Is The Fastest Growing In The G7, And The Most Inflated

Canadian real estate prices aren’t just fast growing by local standards. They’re growing fast by any standard. US Federal Reserve data shows real home prices advanced in most of the G7 in Q3 2020. Canada topped the list of advanced countries for annual price gains. This isn’t a new trend though. Canadian real estate prices have become such a focus of speculation, they’ve grown almost 3x faster than the second fastest growing G7 country.

Canadian Prices Are The Fastest Growing In The G7

Canadian real estate prices are still growing at a breakneck speed. Real prices increased 2.93% in Q3 2020, bringing them 8.27% higher than the same quarter a year before. The annual growth is now the biggest of the G7 countries. Since the beginning of the Great Recession, Canadian real estate prices have outperformed every G7 market… by a wide margin. CLICK for complete article

Canada’s Largest Real Estate Markets Are Still Far From Seeing Employment Recover

Canada’s largest real estate markets aren’t even close to seeing employment recover. Statistics Canada (Stat Can) data shows the number of employed people in the country slipped in December. The largest real estate markets moved in various directions last month. However, all have significantly fewer jobs than they did last year.

Canadian Employment Slipped Lower In December

Canadian employment slid lower last month, causing a minor setback in the recovery. Stat Can estimates there were 18.59 million people employed in December, down 20,500 jobs (-0.11%) from the previous month. This represents a drop of 560,500 jobs (-2.93%), when compared to the same month last year. The decline is the first rollback since employment bottomed last June…CLICK for complete article

Anemic Detached Inventory Pushed Home Values Higher in 2020, Will This Continue in 2021?

The Greater Vancouver real estate detached market was seriously deprived of inventory during 2020. Resulting in the lowest amount of homes for sale in the past 15 years. The total amount of available detached properties achieved just 50,225. Which is down nearly 30% from the 15 year average of 70,082. 2020 was by far and away the lowest total active listings. Recent history shows during 2016 there was 58,650 active listings, 2017: 65,974, 2018: 75,459, 2019: 69,630. Comparing 2020 to 2018, there was a drop of 33% available properties.

Some analysts believe the increased prices were due to the increased demand, we disagree. The 2020 total sales completed with over 10,800. This data point indicates an increase compared to the previous 2 years of data but well below the 15 year average of 12,748 sales.

Eitel Insights believes the increased prices resulted directly from anemic levels of inventory, along with lower interest rates, which resulted with increasing home values. The statistical anomaly of not being able to surpass 5000 active listings in any month during 2020 will not likely occur again in 2021. The increase to the number of mortgage in arrears will likely result with increased inventory, due to need based sellers. Add in the struggling economy with continually increasing personal debt, just as government stimulus wanes.

All in all, there is a possibility the market can sustain current pricing levels, if the inventory does continue to buck historical norms. The more likely outcome is inventory increases along with a diminished demand for the detached homes, due to the pulled forward sales which occurred during 2020.

This low level of inventory combined with sudden demand to own a detached properties combined for the perfect storm and forced prices the highest price of 2020 during December. Achieving a 1.770M average sales price across Greater Vancouver, the highest sales price since May 2018. During the upcoming year, if inventory remains virtually non-existent, prices can be sustained into 2021.

As the majority of detached homes are owner occupied, the thought of having buyers come through your home during the pandemic was not acceptable to most. Even though prices increased over $190,000 from the May 2020 low of $1.586M to over $1.770M in December. The inventory hit its 15 year low of just 2,762 active listings in December 2020. Typically inventory increases as the prices rise. With prices back into the upper third of the current market cycle, and a vaccine en route, the notion of selling will become acceptable again.

Those who are willing to list will reap the rewards, the December low data point not only broke below 3000 active listings for the 2nd time in 16 years but the data broke the longer term uptrend which was established during 2015. Is the historic low of December due to the recent shutdown measures imposed by the government or will the low levels persist?

The data accumulated in the initial 6 months of the 2021 market will likely set the tone for years to come. If the inventory remains at extreme lows, prices can be sustained at the current level with a possibility of achieving a new all-time high. If this occurs, the growth cycle will have been born through the lack of supply. We anticipate this to be the less likely scenario of the two. Longer term, yes, prices will eventually escape the market cycle that Vancouver has been in since 2016, but in the short term we believe the impact of a deteriorating economy will force the home prices back lower in the market cycle to test previously established price points.

Interesting point, when there is an anomalous low data point, the market historically reacts with a much higher set of data, in an effort to counter act the anomaly. This implies inventory could rebound heavily in 2021.

Prices were volatile during 2020. Home values began the year with an average sales price of 1.590M in January. During February there was a spike higher with the average sales price achieving 1.710M. After the first lock down, prices fell back to 1.586M in May. Then like a shot out of a cannon, home values rapidly increased back up to the February high and beyond. With the December price reaching 1.770M that indicates prices have re-entered the upper third of the market cycle, only down 3% form the all-time high of 1.830M experienced during April of 2017.

Home values rose due to the serious lack of options, the peak of inventory during 2020 could not rise above 5,000 active listings. In the past 16 years, 2020 was the first instance where not one single month of active listings was able to achieve above 5,000 detached properties for sale. The limited inventory forced buyers to compete with each other for the very few new listings that came out each month. Until inventory begins to dramatically improve, prices will have an artificial bottom which could propel the market higher.

The detached market finished 2020 with over 10,800 sales. A relatively high number considering there was only 393 sales during April 2020. This unusual activity given historical seasonal norms, meant the spring market was pushed into the summer, summer to fall and so on.

Taking the year as a whole, rather than using year over year monthly indicators which were heavily affected by the initial lock down, the data become much less impressive. Sales rose to 10,832 during 2020 which is down 15% from the 15 year average of 12,748. The 2020 sales were higher than the 2019 & 2018 totals, but below the 2005, 2006, 2007, 2009, 2010, 2011, 2013, 2014, 2015, 2016, and 2017.

Greater Vancouver detached achieved the 5th lowest sales total in the past 16 years. Again to the earlier point, the increase of home values during 2020 had less to do with the sales, and everything to do with the inventory.

Going forward the key to the detached market can be reduced to one factor, supply. With home prices back up to the 2016 levels coupled with an economy is not recovering nearly as fast as the housing market would indicate. The Covid vaccine is seemingly on the way, coupled with higher prices than 2019 and 2020, owners who put selling their property on the back burner, may refocus during 2021. Again the current inventory is only at 2,762 signaling the lowest level on the 15 year chart. This creates an excellent selling opportunity for home owners.

Dane Eitel, Eitel Insights

See Eitel’s latest video here:

Greater Vancouver Detached Real Estate And Condos Are Both Flat From 3 Years Ago

Greater Vancouver real estate is seeing big price growth, but it hasn’t made up for lost ground yet. Real Estate Board of Greater Vancouver (REBGV) data shows prices generally increased in December. Some segments even printed very large year over year gains. However, the board’s data also shows prices are still around where they were three years ago.

Greater Vancouver Real Estate Price Rise Over 5%, But Still Flat From 3 Years Ago

Greater Vancouver real estate prices climbed last month, bringing annual gains closer to where they were a few years ago. The composite benchmark price reached $1,047,400 in December, up 0.3% from the previous month. Prices are now 5.4% higher than the same month last year, and about 0.2% from 3 years ago. Fairly substantial gains for the composite, but still just regaining ground from a few years ago. CLICK for complete article