Bank of Canada holds the line; Royal LePage releases ‘research report’; “Canadian 30 year olds are screwed!”

Bank of Canada holds the line

Those with variable rate mortgages can breathe a sigh of relief as the Bank of Canada held the line on interest rates today, as expected, keeping the overnight rate at a paltry 1%.

Despite rising gas prices, the BoC sees inflationary pressures as “subdued” and nothing more than “short-term volatility” despite the fact that they acknowledge that inflation could reach 3% in Q2 of this year.  We’ll see how true this proves to be.

The press release is largely balanced, though on the surface it does seem to indicate that a round of rate hiking may be in the cards earlier than predicted as they see economic growth improving while the output gaps is predicted to close earlier than forecast.  That being said, the Bank clearly is not feeling significant pressure to start hiking rates.  While the consensus remains that a July rate hike is most likely, I’ll suggest that this is far from assured.

The 5 year bond yield, by far the most important interest rate to watch, has been see-sawing higher since November.  It fell modestly on the news of the rate hold.  As I suggested earlier, due to new rule changes, the housing market is increasingly at the mercy of the bond market, over which Mark Carney and the fine folks at the BoC have little control.  While these press releases from the Bank are certainly interesting, particularly as they offer insights into future movements of the overnight rate, the real market maker right now is the 5 year bond.

Royal LePage releases ‘report’…

Royal LePage (yes….the realtor group) has released a housing report (the Globe called it a ‘study’) outlining their view of future price movements in housing.  Far from a glowing forecast, it is actually fairly muted:

“We expect house prices will continue to creep up, but most of the excess demand created by the initial drop in interest rates has been satisfied, and affordability continues to erode slowly, allowing the listings supply to catch up. In most markets, lower single digit percentage increases are more likely for the balance of the year.”

At the risk of beating a dead horse, I’d say that this is a best-case scenario over the next few years.  Housing is unarguably richly priced by virtually all measures of fundamental value.  Should the stars align perfectly, housing may well manage to pace inflation going forward….But I have some serious doubts.  With the days of loosening lending standards seemingly in the rear view mirror, interest rates hovering near all-time lows, and a strong prevailing bullish sentiment still intact, it suggests to me that housing is sitting in a precarious position.

As usual, the report/study was carried in all the big dailies as news.  *sigh*

In their defense, there was a bit of a barrage of bearish editorials and articles in some of the big dailies over the last few days providing at the very least a counter position to the eternal sunshine in LePageville:

Signs point to a severe housing correction in Canada– Globe and Mail

Canadian Real Estate : The Ignored Election Issue -Financial Post

“Canadian 30 year olds are screwed!”

That’s the title of a great newsletter from Kurt Rosentreter.  I have to say that a number of my friends in this age bracket are exactly as clueless as described when it comes to their finances.  Here are a couple of good snippets:

“Today’s young even look at these wise old folks as backward, “cheap” and out of touch. Frankly, it is the young people who are on the road to financial ruin – today’s attitudes are almost the complete opposite of our grandparents where “put it on plastic and pay later”, take as much debt as we can get, pay off mortgages over 35 years, lease cars, $20,000 vacations and $300 shoes or concert tickets is a norm.”

Indeed…..our staggering complacency with consumer debt levels should be a huge concern.  As I’ve previously highlighted, our aggregate consumer debt as a percentage of our GDP is at a historic high and has now matched the peak seen in the US prior to its credit bubble.

Tough times are great teachers.  What lessons would this consumer-driven generation have learned if the deleveraging that began in 2008-2009 had run its course rather than having been halted by emergency interest rates and massive stimulus programs.  The necessary lessons have not been avoided….the painful reality of these high debt levels will become obvious, but likely not until it is too late for many.

“People have gone real estate crazy in the last decade as the low cost of mortgages has caused a frenzied market for the purchase of detached homes, condos, cottages and spurred massive renovations to existing properties. “Starter homes” in major Canadian cities can cost more than $500,000 today – prices that twenty years ago were considered only available to the wealthy. Now 30 year old kids making $60,000 a year are getting mortgage approvals to carry massive mortgages and think nothing about amortizing it over 35 years – ridiculous. Further, thirty five year olds think nothing about dropping $50,000 on a kitchen upgrade or a bathroom because, after all, it has to be done – we can’t live like this. On top of the monster mortgage, these kids are carrying sometimes six figure lines of credit as well. All these 30 somethings are leveraged to the hilt. No wonder the papers are full of stories of how Canadians now have some of the highest debt levels in the world – I have seen this happen over the last five years – my life has been full of dealing with everyone’s 30 year old kids. The story has been the same every time: recently married or a baby on the way and they want to buy a home. I ask them what they have saved for a deposit – often no more than $10,000 between them both…..

…The stage is set for disaster now. When a couple commits to a huge mortgage that commits more than one third of their net cash flow to debt servicing and fixed costs of ownership, the cracks in their life will start to appear after a few years. Unless they have huge annual incomes, there may be no extra money for vacations, for renovations, to buy new cars or even basic furniture. Inevitably these costs end up on lines of credit, adding even more debt, well, because, they have to have it.”

“The average Canadian family without pensions cannot afford big real estate investment and hope to achieve their other goals- plain and simple”

On this last point it is worth remembering just how anomalous the current sense of entitlement really is.  Real estate as a form of conspicuous consumption has financially crippled many families for a lifetime, yet we continue to view it as normal.  However, the large McMansions are still salable; there is still a market for them.  My suspicion is that as our perception of what constitutes ‘normal’ and ‘comfortable’ realign either willingly or by the forced realization that the McMansions that dominated the past decade are simply not affordable or practical, that window will shut rather quickly.



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Measuring the potential economic impact of a housing bust

We do in fact live in unique times.  While we can disagree on exactly what the future holds for real estate in Canada and what implications (if any) this may have on the economy, we can not disagree on certain facts.

With that in mind, let’s take a look at a handful of anomalous economic phenomena relating to real estate and its impact on the Canadian economy.  My firm belief is that it is in fact not different this time and that there will be an eventual reversion back to the long-term mean in each metric we will examine.  This is not to say that the dislocation cannot persist for some time, even years potentially, or that it can not in fact get larger, but that eventually it will revert.  I’ll offer my suggestions on how this might affect the economy and job market.

Home renovations as a percentage of GDP

Perhaps it’s symptomatic of our collective addiction to HGTV house porn.  Perhaps it is the constant flow of tax credits aimed at promoting renovation.  Regardless, I will suggest (and it is supported to a degree by CAAMP data) that this increase in renovation as a percent of GDP is highly correlated with the growth in home equity extraction via HELOCs.  My guess is that in the event of a significant housing correction, as HELOC growth slows or even turns negative as it has in the states, there would be a sharp reversal in renovation activity which alone could strip the better part of a full percentage off GDP growth for several years.

Percent of GDP derived from residential construction

We see that the percentage of GDP derived from residential construction is well above its long term trend line and is sitting near the highs reached before the last great housing bust in the late 80s.  Unfortunately this data set ends in 2008, so it is not particularly useful in measuring the current level of GDP derived from residential construction.  I will see if I can fill in the gaps at some point.  Certainly we would expect a sharp pullback in 2009 followed by a strong rebound in 2010, but just where those data points sit is entirely a guess.

Nevertheless, if we assume that GDP will revert back to its trend line over several years, we see a drag of as much as a third of a percentage point on GDP each year.

Construction jobs as a percentage of total employment

The graph nicely explains itself here.  Construction accounts for over 7% of the total labour force, a full percentage point above its long term trend line and currently at historic highs only matched in late 2008.  A reversion to the trend line would involve the loss of nearly 200,000 jobs from the Canadian economy.  This has been a constant criticism of mine with regards to the ‘rebound’ in employment from the recession lows.  It has overwhelmingly been driven by growth in construction jobs, public sector jobs, and part time jobs…..not overly impressive.

Of course, the true number of lost jobs mentioned above would be multiple times higher in the event of a significant real estate correction as consumer spending fueled by consumer debt growth, itself primarily fueled by a rise in HELOCs, would be choked off.

Hopefully tomorrow we’ll begin a two part series exploring provincial data in an attempt to view any potential housing bubble through several metrics such as the change in GDP derived from construction by province, the change in housing starts per 10,000 and the change in construction jobs as a percentage of total employment.

Cheers for now,




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“Housing: Real Insanity”…..Great article in Canadian Business

A quick note to my readers:  Posts will be a bit sparse over the next two weeks while the final bugs are worked out of the new site. Within a couple weeks, this blog will exist no more.  The transition will be a bit tedious, but it should pay off.  The new site is much more user friendly and has some great features.  Bear with me during the transition.

I wanted to quickly highlight a great article from last week that should be mandatory reading:

Housing: Real insanity–  Canadian Business

A great read overall if for no other reason than it emphasizes just how anomalous the past decade was for real estate in Canada.  Was it real estate simply catching up after a decade of stagnant growth?  Was it simply the realization that Canadian real estate is undervalued on a global scale as suggested by one commenter?  Or is it more symbolic of a temporary, but powerful shift in mass psychology, aided and abetted by cheap interest rates and loosening credit conditions?

Some key quotes:

Financially speaking, at least, the past decade has been a great one for owning a home. Resale prices increased by an average of 7% each year, and more than 10% between 2002 and 2007. And the market is still going strong. The average resale price rose 6% between January and February.

But amid this frenzied property chase, we’ve forgotten a crucial fact: the past decade has been far from typical for real estate. Between the late 1990s and 2006, the share of homeowners jumped four percentage points, to 68.4%. Now consider that it took from 1971 to 1996 for the ownership rate to increase that much….Prices nationwide have never appreciated like this before, and credit has never been so easy to come by, nor as cheap. For an entire generation of first-time homebuyers, these conditions are the norm. Their perceptions have been warped as a result.

…Yet the country has a lot riding on keeping housing aloft. Home equity accounts for roughly a third of the average Canadian’s net worth, and one-fifth of our gross domestic product is driven by housing-related spending, from renovations to new appliances. Hundreds of thousands of jobs are tied to the sector.

This is the topic of a post coming out later this week examining the increase in GDP derived from construction (for Canada as a whole and also broken down by provinces), the change in provincial housing starts relative to populations, and the change in the percentage of the workforce employed in the construction sector.  I’ve prepared about half of the charts so far, and the results are indeed interesting.  Watch for that post later this week…

As for the renter’s fear of losing out financially, that too is exaggerated. Today, the average home-price-to-rent ratio is at its highest level on record, which means renting may actually be more affordable than paying a mortgage. Furthermore, a 2007 study from the UBC Centre for Urban Economics and Real Estate found that over the past three decades, renters could have beat homeowners’ financial results. The study examined the theoretical returns of buying versus renting in nine Canadian cities. In four of them, renters who invested wisely could accumulate 24% more wealth than homeowners, and match it in three others.

This is a point I often make here.  As I like to say, most new ‘home owners’ are actually still renters.  With so little in equity, they’ve essentially just gone from renting space to renting money.  The notion that the math is tilted in favour of home owners over the long term is completely false.

Cheers for now,


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Is a Canadian first time home buyer’s strike in the works?

RBC releases first time home buyer survey

As Australia wrestles with a housing bubble that dwarfs our own, home buyers in Australia have wisely clued in to the dangers of buying at such inflated prices and have been busy organizing a formal buyer strike campaign.  It now appears that first time buyers here in Canada may be adopting a similar, albeit less organized approach.

The 18th annual home ownership study conducted by RBC has revealed some interesting factoids:

“Over half of young Canadians (55 per cent) believe that it makes sense to delay a home purchase until next year, 10 points higher than the national average, and almost half (46 per cent) of younger homeowners admit that their mortgage is using up too much of their income.”

The RBC report doesn’t adequately explain what they mean by ‘too much of their income’.  Does that mean they have to sacrifice going on an annual cruise?  Does it mean they are finding saving for retirement difficult?  I’d be curious to know how they worded this question.

Regardless, these are not an insignificant findings.  The data continues to suggest that a significant portion of house price appreciation over the past decade has been due to the loosening of CMHC mortgage standards.  To reuse an example I showed in an earlier post, consider that up until just over a decade ago, a $20,000 down payment would get you an $80,000 mortgage, meaning you could buy a house priced at $100,000.  The loosening of mortgage standards down to the current 5% minimum (a misnomer given that banks offer up to 7% cash back mortgages meaning you can technically buy with nothing down) has had a huge effect on opening the credit spigots.

Today that same $20,000 would secure a mortgage worth $380,000.  Not hard to see how this has had an effect on house prices as credit growth has blasted higher, pulling house prices with it.  Note that mortgage credit growth (the red line) went parabolic in the early 2000s.

The major impact of these loosened mortgage lending requirements has been to allow more people into the housing market who would otherwise have to wait until they had saved up an adequate down payment (….I know…..the injustice!).

As a result, we see that mortgage loan approvals and spiked around the same time while the home ownership rate rose significantly.

This entire process was aided by a general downward trend in fixed and variable interest rates, particularly since the turn of the century:

Finally, housing starts have outpaced household formation for the better part of a decade, with household formation running at approximately 175K and housing starts running well over 200K.

This excess inventory has been absorbed primarily because of the expansion in ownership rates, itself owing to loosening mortgage standards and falling interest rates.  We’ll explore just what effect this building boom has had on GDP and employment in a later post, but for now, recognize that a significant chunk of economic and job growth has been reliant on this arguably artificial boom in housing demand.

And this brings us back to the original point of this post.  First time buyers, the driver of our housing boom, are getting nervous.  They recognize that the era ahead of us is fundamentally different from the past decade.  Rather than falling interest rates, we will see rising ones.  Rather than loosening credit conditions, it seems that the government is determined to rein them in.  It seems a given that demand is set to fall, and I believe it will fall hard.  What remains to be see is how supply will respond.  Certainly home builders have pared back their activity and a lack of resale inventory has kept MLS listings at well below average for most of the past 8 months…..but will it continue?

This is indeed the million dollar question.  The attitudes of the young ‘uns and the overall inventory levels are barometers worth watching.



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What are the implications?

I’m working on a neat series looking at the historical percentage of GDP derived from residential construction in different provinces and connecting that to the change in the percentage of the workforce employed in construction over time. It might give us some hints on how a potential housing correction might weigh on economic and job growth.  Stay tuned for that.

In the meantime, I’m going to throw out two charts I’ve created in the hopes that some of our astute readers might make some connections for me.  Tell me what these graphs say to you, and what are the potential implications…if any?  These are all derived from Stats Canada data.

Exhibit 1: Inflation adjusted investment in residential structures in Canada.

Exhibit 2:  Cumulative change in real house prices and CPI deflated mortgage debt

I’ll take a break doing the analysis for tonight and instead turn it over to my readers.  Have at ‘er.

Also note that the website on the graphs is…

This is my new website.  It is running and functional, but there are a few bugs to work out.  All content should be ported over within a couple weeks.  Check it out!  It is pretty snazzy if I do say so myself.



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Another look at mass psychology, asset bubbles, and the Canadian real estate market

Understanding the driver of asset bubbles

Perhaps the greatest distinction between those economists who have correctly identified asset bubbles in the past and those whose economic models failed to identify them is the ability of the former group to recognize the role that mass psychology plays in building asset bubbles.

My personal belief is that an asset bubble needs several key components in order to be birthed. It’s difficult to say which comes first, but I do believe that an asset bubble requires the following:

1) A new and widespread optimistic sentiment towards an asset. This is often a ‘new era’ story in which all potential restrictions on growth are explained away. Consider the tech bubble of the late 90s in which the mind blowing prospects of a new internet economy caused people to abandon all reasonable skepticism. One company that sold toys over the internet and was in fact losing money on each transaction had a higher market cap (number of shares outstanding multiplied by the price of each share) than the largest and most profitable toy retailer, Toys ‘R’ Us. Similarly a company that sold plane tickets online and had razor thin profit margins was considered more valuable than some of the largest US airlines (and consider that these airlines actually had tangible assets like airplanes).

In hindsight, the whole thing was ridiculous. But you couldn’t help being caught up in the emotion and awe at the time.  Lest you think this same dynamic is not at work at least to some degree in Canada, let me highlight just a few memes you’ll likely hear in any discussion of real estate in Canada:  “House prices never go down”….”Buy now or be priced out forever”….”Wealthy immigrants will keep house prices high”….”Best investment I ever made”…..

In fact, we could look to the most recent RBC opinion poll which found that well over 90% of Canadians view real estate as an excellent investment.  For why this is potentially problematic, check out this primer.

2) Abundant credit. Historically, the largest and most painful asset bubbles often involved significant leverage created by loose credit conditions. It’s the nature of leverage that makes the crash so painful. Consider real estate in the US. If a new home owner purchases a $200,000 home with a %20,000 down payment, they have a 10% equity position at first. But if real estate drops by 10%, they have now lost 100% of their equity.

It’s this leveraged element that generates fantastic profits on the way up, but cuts deep on the way back down. I think we’ve spent quite a bit of time examining how this dynamic of abundant credit is impacting our real estate market. Consider that a little over a decade ago, a $20,000 down payment would get you a CMHC insured mortgage of $80,000. Today that same $20,000 gets you a mortgage of $380,000.   Not hard to see how this will impact house prices.  This is where CMHC has played such a massive role in bloating house prices….despite their mandate to “help Canadians access…affordable homes”.  Of course it’s even worse than that since you can actually purchase a home with zero equity. If you’re interested, here’s a step-by-step guide on how to blow your brains out on mortgage debt:

Step 1- Borrow the 5% minimum down payment on a credit card or from a family member…….Step 2- Take advantage of the 5% cash-back mortgage offered by almost all of the big banks…….Step 3-  Buy the house you want.  Make sure it includes granite, stainless steel, and double the space you really need…….Step 4- Once the deal closes, pay back the down payment with the cash the bank gives you as their thanks for signing up for a lifetime of debt servitude.  Enjoy your new home (which is actually just a rental as we know that a home without equity is just a rental with debt).

3)  A persistent and significant deviation from underlying fundamentals.  For stocks, people often reference the price/earnings ratio.  In the case of real estate, we can reference price/income, price/GDP growth, price/rent, overall affordability, etc.  Once these start showing a significant and persistent deviation from their long-term norms, we should get suspicious…..and house prices are doing exactly this by the way.

4)  A feedback loop where rising prices become the justification for rising prices. Once the three previous elements are in place, you have all the necessary components for a virtuous feedback loop.  The power human emotions of fear, greed, and envy become the motivator for many to jump into the market, spurred on by the stories of easy riches made by co workers and friends and fearful of being left behind.  Eventually the rise in prices becomes the justification for rising house prices.

It’s here that we are wise to remember the teachings of the Wall Street legend, Bob Farrell, whose rules for investing offer timeless wisdom. Two in particular are worth remembering:

“Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways”

Indeed it is the seemingly limitless supply of ‘Greater Fools’ who keep irrationally priced markets buoyant for longer than would seem possible.  But alas there is a finite limit.  Reaching that limit seldom (if ever) results in a sideways market while the pool refills.

“The public buys the most at the top and the least at the bottom”

Sad, but true.  Remember this at times like these when sentiment towards real estate is exceptionally high and nearly everyone is convinced of a rosy future picture for housing.

As house prices have risen, no longer do people reference economic growth as the justification for high house prices since that correlation has long since been broken.   No longer do they reference rising wages, inflation, or any other fundamental, since none of them serve to explain the rise in price.  Instead they are left explaining that house prices rise simply because they rise.  They respond accordingly by piling in and driving house prices higher…..which encourages others to dive in….rinse, repeat.

That’s a quick fly-by of the dynamic that creates asset bubbles.  Now let’s take a minute and zoom in on the element of mass psychology.

Another look at mass psychology

Interestingly, Re/Max released a ‘report’ yesterday which nicely highlights the workings of mass psychology.  (As an aside, I am constantly amazed that this self-serving propaganda is lapped up by the mainstream media as reliable and newsworthy information).

“Driven by the threat of higher interest rates down the road, first-time buyers are contributing to strong upward momentum in residential housing markets across the country”

I actually don’t doubt that this is true, though I question what that implies about sales levels going forward.

“Despite homeownership rates approaching 70 per cent, there is clearly room for growth as entry-level buyers make their moves from coast-to-coast, undeterred by higher housing values and changes to lending criteria”

This statement is highly suspect.  We’ll take a closer look at home ownership rates in a moment.

“While some may feel discouraged by eroding affordability levels, the underlying confidence in the concept of homeownership is rising….“While market conditions are one thing that influences first-time buyers, few things trump the fundamental belief in homeownership”

Well that pretty much sums it up, doesn’t it?

My position has been that the overall impact of cratering interest rates by the Bank of Canada and loosening credit requirements via CMHC has been to pull demand forward.  The propensity of humans to find comfort in herd behaviour and the impact of positive reinforcement as people have seen house prices rise well beyond incomes, inflation, and other underlying fundamentals have created the very mentality succinctly described by Re/Max.  The big question is whether or not this is benign.

One way we can quantify this dynamic at work is by examining home ownership rates which we know are at historic highs and have increased across all demographics, firmly dismissing the notion that the rise in ownership is simply a result of an aging population.

Note that this data stops in 2006.  Given the rise in ownership since that time, any guesses as to what the latest census data will reveal?

Furthermore, if we look at the new CMHC mortgage loans as a percentage of total population, we see the following trend:

Note that this includes those who have renewed their mortgage as well as new mortgage originations.  This is CANSIM table 027-0017 if anyone wants to replicate the graph (you’ll also need to track down population data).  Note also the significant difference between the 2000-2009 period and the earlier period.  My belief is that our credit bubble began in the early 2000s and intensified since 2004 as CMHC lending requirements were eased and the element of mass psychology took root.

So just how high can the ownership rate go?  This data suggests that the buyer pool is already thin.  The danger from here is that those who have not yet bought are increasingly made up of people who either can’t afford to buy or those who see high house prices for what they really are.  Given our propensity to think as a collective, all it takes to induce a buyer strike is to break that “fundamental belief in homeownership”. Exactly what will trigger that remains to be seen, though I suspect that a modest fall in house prices will be enough.  Should this fundamental belief be shaken, the same dynamic of mass psychology that drove prices higher will act as a dead weight on house prices moving forward.



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Tour through the board stats: March 2011

It’s that time of the month again.  Time to turn our eyes to the month end sales data from the big real estate boards.  Frankly these numbers may well be meaningless until a clear trend can be established next month.  With new mortgage rule changes coming into effect mid month, there was a significant chance that sales were front loaded during the month as some people no doubt rushed to beat the new rules.

With that in mind, let’s turn to the numbers and see how things are shaping up.  Click on the city name to see the press release for that particular board.  Many realtor boards are still frustratingly slow at releasing their month-end data.  I’ve included the largest realtor boards that have released their data as of today.  It’s unfortunate that at the time of posting, the boards in Edmonton, Winnipeg, Ottawa, and Montreal had not yet posted their final month end numbers.


The fine folks at VREB did their best to spin the fact that sales declined 21% over last year, choosing instead to focus on month-over-month sales numbers which always rise at this time of the year anyways:

“Victoria Real Estate Board President, Dennis Fimrite, commented that the increase in sales last month, coupled with stable prices, shows continued consumer confidence in the market. “The latest figures offer further evidence of the return to balanced market conditions…”

Integrity at its finest.  And what of those stable prices?  You’ll note that the press releases chooses to instead use the 6 month average.  Why?  I have one idea.  Due to seasonality in house prices, the six month average can be highly misleading.  What we need is a year-over-year comparison.  Behold!

So much for ‘stable’.  I guess Mr. Fimrite (or is that ‘Fibrite’?) hasn’t read his own board’s Code of Ethics which states that its members are committed to, “Absolute honesty and integrity in business dealings”.  This is shameless manipulation of numbers and there’s no excuse for it.

New listings were also 11% higher than last year, a fact that Mr. Fimrite brushes off in the press release as a normal, expected rise in sales associated with the Spring buying season.

The sales to new listings ratio came in at roughly 0.4 or slightly into buyers market territory.  This ratio is calculated by comparing the number of new listings with the number of sales for any one month.  It is a measure of supply and demand.  Though there’s no broad consensus, a reading of roughly 0.5 is balanced, 0.4 or less is a buyer’s market, and 0.6 or more is a seller’s market.

Months of inventory came in at 6.6, lower than last month’s 7.6 month total and also slightly into buyer’s market territory.

Despite the best efforts of the fine folks at the Victoria Real Estate Board, there doesn’t appear to be a bottom under their market yet.  I suspect it has a ways to fall.


Crazy times continue in Vancouver, which registered a 30% jump in sales over last year.  Just how much strength can be attributed to the looming mortgage rule changes will be seen in next month’s numbers, though the recent activity seems to suggest a continued strong demand for Vancouver real estate.

The sales to new listings ratio was 0.60 or slightly into seller’s market territory.  Months of inventory also decreased to 3.2, well into seller’s market territory.

Prices for all housing types were up on a year over year basis by 5.4%.

It’s hard to know whether the March numbers are a signal of an extremely strong Spring buying season or the result of a rush to beat the new mortage rules.  Final April numbers will give more insight.


An interesting month in Calgary as sales dipped very slightly compared to last year, but active listings tanked by 20%.

Meanwhile, average single family home prices shed another 2% while the median value was down 5% over last year’s numbers.  The condo market fared worse, shedding 5% off the average and 7% off the median price in the past 12 months.

Sales to new listings ratio for the month came in at 0.56 (balanced….thanks to the drop in new listings), while months of inventory came in at 3, perhaps slightly into what might be considered a seller’s market.

If the low levels of inventory can persist, it should slow the bleeding.  April will be a telling month.


It appears that the rush to beat the new mortgage rules may have been seen most prominently in Toronto, where every district saw an unusually high bounce in their sales/new listings ratio.

Total sales were very strong at 9262, a modest 11% decrease from last year’s record numbers.  Sales to new listings registered at a healthy 0.6.

On the back of continued low inventory numbers, months of inventory was a paltry 1.8.  This is exceptionally low.  Inventory numbers are well below normal (usually 20-23K at this time of year, versus 16K currently) while sales are still very high.  Kudos to Guava for the graph.

This remains the great Toronto mystery.  As long as supply remains constrained, a strong floor will remain under Toronto house prices.  I have little doubt that demand will experience continued weakness, but it is now the supply side that is worth watching.  For now, no significant signs of stress in this market.


I debated even doing a tour through the board stats this month as I think the sales data will likely be largely skewed by the irrational rush to beat the new mortgage rules.  The true test will be April and through the rest of the summer.  Inventory remains largely suppressed by historic standards in many large centres.  This has been an 8 month theme now.  How this will play out going forward will indeed be the big question.  I am certain that sales levels will experience continued weakness through most large centres, though the inventory levels will be the determinant of how the weaker demand will impact prices.



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