Canadians have been on a debt binge, and some cracks are starting to appear. The Office of the Superintendent of Bankruptcy Canada (OSB) saw an increased number of filings in October. Insolvency filings have been moving higher for the past year, especially in the consumer segment.
Canadians Filed Over 139,000 Insolvencies
Canadian insolvencies are rising very quickly from last year’s numbers. There were 13,512 insolvency filings in October, up 11% from a month before. The monthly number is up 13% when compared to the same month last year. In the past 12-months there were 139,194 filings ending in October, which is up 8.8% when compared to the same timeframe a year before. This implies growth could be accelerating even faster….CLICK for complete article
Canada is a country of movers, but apparently not everyone wants to move. Statistics Canada (Stat Can) data shows hundreds of thousands of households were forced to move in 2018. Canadian households forced to move were largely due to evictions and foreclosures.
Forced To Move, A.K.A. Evictions And Foreclosures
Today we’re looking at the number of people forced to move, across Canada. Forced could be by a landlord, bank, other financial institution, or the government. In other words, it’s the number of evictions and terminations that occurred in 2018. This is the first data available from Statistics Canada, so we can’t compare it over time. We can compare it to other provinces, and the national rate though. At least we’ll know which provinces are over and under represented.
The territories are included in our charts. Due to the low volume of households though, it’s not really fair to compare them to other provinces. For that reason, we excluded territories from the percent of household counts.
A LOT Of People Are Forced To Move In Ontario
There were a lot of people that were evicted or foreclosed from their home last year. Canada saw 330,800 foreclosures in 2018, or about 2.2% of all households. Ontario had the bulk of forced moves, coming in with 127,600 in 2018, about 38.6% of the total. British Columbia followed with 81,200 forced moves, around 24.5% of the total. Quebec came in third with 61,400 forced moves, representing 18.6% of the total. B.C. has fewer households than Quebec, but a higher number of evictions. CLICK for complete article
The Greater Vancouver Condo sales prices for October came in a $661,204 slightly down from the previous month. More importantly is the technical test that the Condo Market is going through. As Eitel Insights clients and followers know we analyze markets using Technical Analysis. Technically this market is attempting to regain position above the higher of the two yellow lines in the chart below (line indicates $675). The technical price point of $675,000 is hugely important. The market during 2017 spent over 7 months deciding whether prices should go above that psychological value, and at the time the market answered a resounding yes. As we all know the Greater Vancouver Condo Market peaked in Jan 2018 with sales prices fetching over $750,000.
This most recent test to try and stabilize the market will fail just as the attempt to regain position above $675,000 will fail ultimately. As Eitel Insights prescribed in our last monthly update the condo market does lag the Detached Market. As such the Detached Market will be experiencing “need based selling” in 2020. The condo market is in a slightly better position currently, however with prices reaching an average sales price of $525,000 in 2021. The need based selling will eventually rear its ugly head in the condo market as well. That means a further drop of 18% ($135,000) on top of the 12% already realized. We have stated money saved is money earned. When you understand the Condo Market lags the Detached Market it is very difficult to understand how folks could believe the Condo Market has hit its bottom.
Keep in mind the Inventory levels will be through the roof over the next two years as those pre-sold condo’s come to completion and the market will experience an additional factor that will force prices lower as the old supply demand factors show up.
The sales numbers continue to impress and actually has established a very aggressive uptrend as you can see in the chart. This is a natural reaction after seeing such a catastrophic fall off in sales. This is known as a dead cat bounce. The downtrend is still very much in play as the top line has not been tested yet. There is always a demand for primary ownership in the Greater Vancouver Condo Market, however the investors are on vacation and will remain so for years. The purchasers who have been buying, have had their patience tested and were forced to wait until prices came down. When prices decreased to $643,000 in June 2019 that represented a %15 loss, which caused the buyers to take advantage. We would recommend waiting to purchase a condo property until we are closer to the technical bottom in terms of pricing.
Eitel Insights does believe in paying off your own mortgage rather than someone else’s through renting. However with prices going down a further $135,000, there is a more opportune moment to purchase. Always ideal to begin your property ownership seeing prices rise rather than fall. That is the type of actionable intelligence we take pride in.
The inventory has broken out of its aggressive growth trend for the first time since its inception in December 2017. As we say this was an aggressive trend and with realization the market is headed lower we sympathize with sellers resisting to sell at these prices, possibly by listening to the optimistic analysts. Unfortunately if the sellers wait for the spring they will be punished with more competition and ever lowering prices. Again our advice to owners of the Greater Vancouver condo market, start planning for years of chaos, or better yet get in touch with Eitel Insights and we can discuss your personal properties forecast.
Why is the Greater Vancouver Townhouse Market Only Down 7%?
The last bastion of hope in the Greater Vancouver Real Estate market is the Townhouse asset class. With prices only down 7% from the peak (September 2018 $917,399). Why is this market seemingly the strong hold? Simply answer is the townhouse market is a catch all. From the downsizing elderly that do not want to live in a 40 storey building with 2 elevators; and the couple needing more space for the growing family and the detached prices are out of reach.
The natural step out of a Condo is into a townhouse especially over the past decade as the price spread between the Condo and Detached prices has increased. Prices have dropped as low as $775,000 representing a 15% decline however with the stress test introduced in 2018 the forced acceptance of a lower purchasing power has forced potential entry level Detached buyers into the Townhouse market. This is best exemplified as the technical top in the Townhouse did not occur until September 2018 long after the Detached market had topped and an additonal 8 months after the Condo market peaked.
Technically the Townhouse market has more uptrends that will show support for the prices going forward and causing this asset class to be the “cleanest shirt in the dirty laundry”. Eitel Insights is forecasting a market cycle of 21% – 26%. In our Chart you can see two orange lines that represent psychological pricing levels that the market will inevitably return to. Currently the market has tested the middle ground and is responding to the conservative uptrend established in August 2016. Going forward this conservative trend will be broken and prices will indeed dip to $723,000 signalling a loss of 21% from the peak. If that price point does not hold the next level tested will be $676,000 (26% loss) and that will definitely be the buoy that bottoms out this market likely in mid 2021.
Sales for the Townhouse market were near all-time highs for 3 consecutive years from 2015 – 2017. Interestingly the peak in sales prices occurred when the sales where at the low of the projected market cycle for sales. Again signaling to us that there was forced purchasing in the majority of 2018 due to the stress test. The falling knife trend in sales has been broken and the range will begin to be filled out in the upcoming years. Likely finding peak selling months hovering round 480 sales and low months seeing 250 sales.
Due to the high sales during 2015 – 2017 it is an obvious correspondence that the Townhouse market experienced a serious lack of inventory during 2015 – 2018. 15 year historic low levels to be exact, in December 2015 the market had its lowest level coming in at 626 active listings. Current numbers are in the middle of the chart and testing the staunch uptrend that has propelled the market inventory to see over 2100 active listings in June 2019. We anticipate seeing levels grow in the spring, summer of 2020 and prices will indeed find a new downtrend to follow until we see a market base. Unlike the Detached market where some areas are nearing their technical bottoms and owners are advised to hold, the Townhouse market will experience a drop of definite 14% from current levels representing over $120,000 of equity. With a realistic chance of seeing the market go down 19%, over $240,000.
Canadian real estate markets are on fire. Canadian Real Estate Association (CREA) data shows sales across the country jumped in October. The rise was actually so large, last month was the biggest for the industry in over a decade. This is the opposite of what the government wants to see ahead of rolling out new demand stimulus.
Canadian Real Estate Sales Rise Over 12%
The headline number used by the industry is seasonally adjusted, which downplayed growth. There was 42,970 seasonally adjusted sales in October, flat from a month before. Unadjusted however, sales reached 44,499 in October, up 12.9% from the same month last year. FYI seasonally adjusted numbers are compared using consecutive periods. Unadjusted numbers are compared on a year-over-year basis…CLICK for complete article
The October data has come in and has been touted as a signal of strength from the Real Estate Board and optimistic analysts. The truth in the matter is prices are down almost 100 Thousand from October 2018. Over 300 Thousand from the peak. In addition the detached market produced an average sales price of $1,533,135, signaling no pricing momentum over the past quarter. Simultaneously falling behind the 10 year uptrend. What this means to us is the market is holding on for dear life. Eitel Insights anticipates seeing another drop in prices for the first quarter of 2020, likely testing the 1.4 million prices point on an average sales basis.
If you go back and look at the Real Estate Board of Greater Vancouver outlooks over the past few years while the market has been falling. Each outlook is anticipated for the upcoming year to be in recovery mode. Not to mention they never caught any market top. Eventually this forecast will be correct just not in 2020. The board has never once anticipated anywhere near a 20% correction, Eitel Insights on the other hand absolutely predicted this outcome.
As we have always advised not all markets are created equal, some markets inside of Greater Vancouver have dropped 30%+ and are close to their technical bottom. While other markets still have much further to go and will bottom in 2021. The markets that are nearing their bottoms will hover at the low end of the market cycle. The lagging markets will continue their evolution lower. With no increase to the leading markets, the Greater Vancouver Average sales price will be forced lower as well.
The sales numbers have rebounded from paltry levels however no where near recovery territory. The market is experiencing is need based buying. What the analysts are missing out on is the purchasing activity is largely tied to the mortgage stress test mitigation that is occurring in many markets across Greater Vancouver. Prices have hovered around 16% – 18% correction over the past quarter.
Unfortunately there hasn’t been too much newly listed inventory over the past quarter causing purchaser to battle over the newly listed properties that are in line with the actual market trajectory, lower. In 2020 listings will pile back onto the market, unfortunately the buyers that had a need, will have already purchased. The purchasers who have held back will be rewarded. Investable markets are still rare but there are a few gems out there that Eitel Insights can guide you to.
Noticeable is the lack of growth in the inventory market, expect that to change again in the early part of 2020. When prices decrease back to the 1.4 million price threshold that will have eroded any equity gains over the previous 5 years. Signalling a tough time during mortgage renewal conversations. Not only this factor will start to become prevalent but the market has been holding off with the optimistic hope that 2020 will be better. Now that there has been a blip of buyer activity, you will see a rush of new listings come to the market in 2020.
Sellers are advised to take advantage of the fall market before the spring market is yet another disappointment. It is very difficult for any market to go up or even base when there is a market upcoming with need based sellers. Just wait you’ll see what we mean.
Money saved 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
Canadian mortgage credit is growing, but isn’t quite where it should be. Bank of Canada (BoC) numbers show the balance of mortgage debt hit a new high in September. Mortgage credit growth has improved substantially from last year. However, the improvements to growth, still don’t bring it into typical range.
Canadians Owe Over $1.6 Trillion In Mortgage Debt
The balance of outstanding mortgage credit at institutional lenders is chugging higher. The balance hit $1.6 trillion in September, up 0.5% from a month before. This represents an increase of 4.2% from the same month last year. The new balance is a new record high for the segment, and improvement from last year’s rate of growth….CLICK for complete article