The fifth annual Price per Square Foot Survey, released August 11 from Century-21 Canada, shows that real estate continues to be a strong investment. While real estate is most often dependent on local market conditions, the past year has seen widespread increases in prices from coast to coast.

The annual study compared the price per square foot of properties sold between January 1 and June 30 this year, compared to the same period last year.

“Looking at the prices across Canada, there isn’t one region that hasn’t seen price growth in the past year,” said Brian Rushton, executive vice-president of Century 21 Canada. “It’s still a seller’s market from Victoria to St. John’s.”…read more.

Canadian home sales continue to cool, logging another month of declining volumes. Canadian Real Estate Association (CREA) data shows home sales fell in July 2021. It was the first annual decline seen in over a year. Despite the negative factors, it was still the second biggest July for home sales ever.

Canadian Home Sales Fell 15%
Canadian existing-home sales continue to pull back from record levels. There were 53,870 homes sold through the MLS in July, down 14.9% from a month before. Compared to a year ago this represents a 15.2% decline. It was the first time in over a year that home sales have seen negative annual growth.

Home Sales Are Down 28% From This Year’s Peak
This is a huge drop for home sales, continuing the trend of a market slowdown. July managed to be the fourth consecutive month to see home sales decline, after peaking in March. Sales have fallen about 28% from that peak. Even though it was the second biggest July ever, that’s a substantial decline in activity.

Will Activity Pick Up In The Fall, Like Last Year?
The pandemic didn’t just disrupt your sleep schedule, but it also screwed up real estate sales. Looking at the above sales overlay, you can see the seasonal norms are disrupted. Volume for 2020 peaks much later in the year than typical. This was due to the initial lockdown delaying the Spring market.

Looking at 2021, we can see home sales peaking in March — much earlier than usual. The mix of reads has made the end of the year a bit of a mystery.

Many observers think the end of the year will see a surge in activity, not unlike…read more.

Canada’s massive multi-billion dollar program to create affordable housing will only have a “limited” impact. That’s the take from the non-partisan Parliamentary Budget Officer (PBO), tasked with explaining the numbers behind policies, to lawmakers. They found the federal program is billed as a “$70+ billion plan,” but failed to find a significant impact. In fact, in some cases they indicate it might be taking credit for existing supply in the pipeline. It’s actually generous to say it does nothing though. The plan creates an environment that actually attempts to drive home prices higher.

Canada’s $73.4 Billion Affordable Housing Plan
First, let’s start with the PBO’s breakdown of where the $73.4 billion in spending actually comes from:

The CMHC is delivering $36.7 billion to execute the National Housing Strategy from 2018 to 2028;
An additional $24.4 billion will be delivered through the same plan; and
Existing spending represents $12.3 billion of funding.
That’s not all. according to the PBO. On top of that, new and existing loan authorities get $31.2 billion. Non-incremental provincial-territorial cost matching, also adds up to another $7.4 billion. Though they explain these commitments aren’t a budget issue for the Federal government. They are commitments undertaken by other taxpayer entities…read more.

Canadian real estate is perfectly efficient, and households never display signs of exuberance. That or it’s a ticking time bomb, waiting to go off. This year marks the 24th year of expanding home prices in Canada, and we’re two quarters into it. This isn’t just the longest expansion in Canadian history, it’s one of the longest in the world. The current expansion has lasted almost twice as long as the next G7 country. This one is going to take a little unpacking, so let’s get to it.

Duration Dependence
Duration dependence is a belief in economics that a trend is more likely to end the longer it persists. It’s common when discussing risk, especially around the business cycle. Longer periods of expansion are more likely to correct than brief ones. Similarly, longer periods of contractions are more likely to end and show growth.

Why? Human nature. The longer a trend occurs, the more likely it is to be overextended from a fundamental driver. Trends will often persist just because everyone thinks that’s what it does. Have you ever heard someone say, “real estate prices will rise,” without a reason other than “they always do”? That’s someone who now thinks growth will occur for the sake of growth. They believe the market is running solely on the same philosophy as cancer.

The further a trend extends from fundamentals, the higher the risk to shock. One wrong earnings report, too few sales, or everyone changing their mind can blow it up. Correcting inefficiencies can be delayed, but that only makes a market more inefficient. Inefficient markets result in toxic spillover. Ultimately, this creates a larger and more destructive market inefficiency…read more.

Canadian real estate affordability deteriorated so fast, it will delay buyers by years. National Bank of Canada (NBC) crunched the numbers on how long it would take to save a down payment in Q2 2021. Not buy the home, but to just have the minimum required down payment to get a mortgage. Over one quarter, home buyers in some markets saw the time needed to save extend by years. That was on top of a timeline that already took up to three and a half decades to save the bare minimum down payment.

Canadian Months To Save A Down Payment
Today we’re looking at how long it takes to save the minimum down payment to buy non-condo housing. The savings are using 10% of the median gross household income for each region. Non-condo housing means any single-family dwelling (e.g. detached, semi, town, etc.).

The length of time is then expressed in years, with a small catch. For the time to be true, incomes need to keep pace with home prices for the whole period. The last part is obviously unrealistic, but not much more unrealistic than expecting 30 years of savings to buy a home, right? More likely home prices fall, or absurd inflation causes incomes to rise in line with prices. The latter sounds better but is usually so disastrous it causes the former as well — making it much worse. Got it? On to the data…read more.