All posts for the month June, 2021

Real Estate Adds $1 Trillion to Canadian National Net Worth

Published June 28, 2021 by Real Estate Leads

Much has been made about the ever-increasing role real estate has in making up Canada’s GDP, and there’s a lot of truth to when people say that’s both a good thing and a bad thing. One thing that IS for sure is that it’s certainly not natural to have that much of a country’s gross domestic product consisting of home sales, but it is what it is and the fact is that that policy makers in Ottawa have chosen this course for the country. The median price for a home in Canada has never been higher, so in as far as a strictly dollars and cents perspective that’s good for the role of real estate in the country’s economic well being.

One would also assume that’s fantastic news for anyone working as a real estate agent in Canada, and especially because the hot housing market has extended itself into smaller cities in Canada too over the last year and some. That’s partially true and more so if you’re an established realtor, but if you’re new to the business the fact that fewer people are qualified homebuyers now because of the ever-higher prices means you might be struggling to get new clients during these times. That’s why our online real estate client lead generation system here at Real Estate Leads is such a smart choice. It will help put your first in touch with genuine would-be clients.

No guarantees they become clients of course, but the opportunity is there for you to meet them first before other realtors and impress them with your knowledge, professionalism, and friendly, helpful, an caring demeanour.

If we move back to our topic of discussion today, recent economic reports are showing yet again just how much of an infusion the real estate market is making to the country, and if the sound of the figure ONE TRILLION dollars is staggering to you – it should be.

Scorching Heat, Scorching Home Prices

Where we are the talk is not about real estate in Vancouver as much as it is how hot it is in Vancouver this last week. It’s currently 41 degrees C here today and this kind of heat is pretty much unheard of on the West Coast of Canada. Some like it hot, but not this hot and some also like that scorching real estate prices helped add to the wealth of Canadian households at a record pace during the first part of this year, despite COVID-19 lockdowns shutting down much of the economy.

Stats Can is saying the national net worth jumped more than $1 trillion to nearly $15 trillion, That’s a 7.7% jump from the previous quarter. Further, the value of residential real estate rose by $595 billion and that’s a BIG 9.4% increase as well as the 3rd straight quarterly one. The value of residential real estate rose just over $750 billion in 2020. More and more people want homes, and obviously a sufficient number of them are being able to find ways to afford these homes despite how much more they cost now.

Keep in mind as well that the average selling price of a home is up 87% over the last decade.

Never-Before-Seen Mortgage Debt Levels

Debt isn’t necessarily a bad thing, and especially when it means you’re putting a quality roof over your head and the value of your property stands to appreciate nicely in the future. That doesn’t mean that it’s not intimidating, and it’s kind of like that with just how deeply mortgaged some people are to be able to afford to buy the home they’ve bought.

Buoyed by low interest rates, Canadians continue to take advantage and pile on mortgage debt. This collective level went down to $29 billion but that follows an all-time high of $32.1 billion in the previous quarter and that’s the second-largest level every recorded. At the same time higher-interest debt is being paid down with Stats Can saying non-mortgage loans dropped $13.5 billion since 2019 to $786.5 billion.

Swapping High-interest Debt for Low-interest Debt

It’s also been well documented how Canadians have been saving money during the pandemic. The country’s seasonally adjusted household savings rate increased from 11.9% in the fourth quarter to 13.1 for the first quarter. Stats Can claims it has been at double-digit levels since the 2nd quarter of 2020. The result of this is that household debt-to-income ratio has been pushed down to 172.3% for Q1 2021 from 174% Q4 2020.

This works out to an average of $1.72 of credit market debt for every $1 of household disposable income. This type of number means that high household debt remain a key vulnerability for the Canadian economy, although it’s not likely we’re going to see interest rates rise soon given the precarious state of the economy right now. But it should be something of a cause for concern.


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High of Canadian Housing Market Expected to Crest in 2021

Published June 21, 2021 by Real Estate Leads

One certainly can’t be envious of the Canadian government and the way the population has such adamant demands that they do something to reign in the ‘runaway train’ that some people have described the Canadian housing market as. The meteoric rises in home values over the last while has been somewhat surreal to watch, but the reality is that it is tough for the Feds to continue with their mandates and still keep housing affordable in Canada.

The Federal Liberals did recently make the mortgage stress test for would-be borrowers even tougher. Considering what would happen if interest rates rose (and eventually they will have to) to newly-mortgaged buyers who can’t afford the fluctuation and might find themselves underwater, they’re actually doing a lot of people a favour. But it doesn’t really dissuade those who insist the government is not being proactive enough in regulating the housing market.

But maybe there is some good news for those who are more than a little displeased about this. We can assume there’s more than a few realtors that are disappointed too, unless they’re the ones who are continuing to get listings and sell multiple properties for top price and beyond. If you’re aim is that one of those realtors then our online real estate lead generation system here at Real Estate Leads here is an excellent resource to have. The power of internet marketing and polling putting you in the position to contact would-be clients first.

We mentioned good news though, and we imagine some are anxious to hear what that might be. Apparently the heated nature of the housing market is expected to crest sometime this year in 2021, and beginning next year median home prices should come down.

Should being the operative word there of course, but the people making these predictions tend to know what they’re talking about.

Still Some Climbing

The expectation is that activity in Canada’s residential real estate market will become more moderate in comparisons to the unsustainable levels seen so far this year. However, sales should remain at an elevated pace and prices will continue climbing for quite a long while still, at least according to the latest forecast from the national housing agency.

The number of homes being sold to new buyers could climb as high as 602,300 this year from about 550,000 sales seen last year. That is according to a report from the CMHC on Thursday. The expectation is that could lift the average price for a home in Canada as high as $649,400 ($533,000 is USD), and that is up 14% from last year

Then we have the specific equation that everyone has been talking about for the last year and a half. Low interest rates, combined with a demand for more space to ride out the pandemic, have pushed the Canadian housing market to never before seen heights over the past year, with some communities seeing annual price gains of more than 30% . With the economy recovering quicker than expected, however, we may see some of the frenzy drivers losing steam.

Economic conditions returning to pre-pandemic levels by the end of 2023 should mean the pace of home sales and prices slowing over the same period. Plus, it’s expected that with faster economic growth the country’s standard 5-year mortgage rate will rise, though likely staying at very low levels if we’re going to look back all along the timeline. Unusually high savings rates have been created by people having less opportunity to spend during the pandemic, but that is obviously not going to continue once the opening-up is relatively complete.

Plus we also higher demand for single-family homes brought on by intermittent lockdowns and developers and construction companies will shift in that direction, while resuming immigration will bring demand for rental accommodation back to urban areas meaning fewer vacancies and higher rates.

The big picture predication is that the number of homes sold across Canada in 2022 and 2023 will be less than this year, though still higher in number than the quantity sold in 2019. Prices are expected to keep on increasing, with the average price stretching as high as somewhere in the vicinity of $705,000 by the end of 2023 being a real possibility.


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Certainty of Long-Term Supply Shortage Almost Guarantees Unaffordability in Vancouver

Published June 14, 2021 by Real Estate Leads

Vancouver is unique as a big city in Canada in many ways, but it’s also unique in a very geographical sense too compared to other major metropolitan cities like Toronto and Calgary. Urban sprawl is able to happen more naturally because the cities have the capacity to grow outwards. Vancouver has no such ability, with mountains to the North, the ocean to the West, and the US border to the south.

Growth out into the Fraser Valley past Chilliwack has occurred, but much of this ALR farm land and that’s the way it should be. This means expansive new housing builds are challenging, and a big part of why housing is so expensive in Vancouver.

Now if you’re a realtor in Vancouver, it can certainly be feast or famine as the expression goes. This is very true if you’re a newly licensed realtor who is keen to make a name for themselves as speedily as possible. Our online real estate lead generation system is a proven effective way to build up your client base more effectively than just standard approaches, and it’s done a lot of good for many realtors like you who now enjoy a larger client base because of it. If you need listings, you really should consider Real Estate Leads.

But enough with the self promotion end, we’re going to talk more about why the housing problem and high prices for real estate are almost certain to continue long-term for the city of Vancouver.

All-Continent Unaffordability

A report recently indicated Vancouver as being North America’s least affordable city, and local real estate professionals say that won’t be any different in the future. The only way it will be different according to many experts is if wholesale investment is made to increase the city’s housing supply.

Vancouver saw a 0.98% population rise last year of roughly 25k people, and it’s been reported the city intends to add 1 million new residents by 2050. That works out to 34,482 annually over the next 29 years.

Only some 11k new homes are being built in the city on average these years. Would be fine for a smaller city, but it’s painfully inadequate for Vancouver. But somewhat in the defence of the city, where can builds be approved for zoning and construction when the land for it just isn’t in existence. It’s not that it’s not available, it really is that it’s just not there.

It doesn’t take a mathematician to figure that 11k homes for 34+ thousand newcomers each year plus domestic demand and we can be certain that housing prices are going to continue to be pushed because demand is going to WAY outstrip supply. That works out to about 18 people in each of those new homes. Surely this is not what multi-family dwelling is or was intended to mean.

Is that good news for homeowners building equity in their homes? Absolutely it is, but it makes difficult for first time homebuyers to get into the market and as a realtor these are very valuable clients to have and usually they are also really rewarding to work with.

Upwards Pressure

This chronic supply and demand imbalance puts upward pressure on the cost of housing. There’s been historically low-interest rates for a long time now and that has enabled purchasing activity in the Vancouver real estate market that hasn’t really been seen before. The average sales price of a Vancouver home in 2020 went up by 11.4% to $1,270,000 from $1,140,000 in 2019. Then add to that an additional increase of 4% to $1,320,800 that is foreseen for this year.

Canada Mortgage and Housing Corporation figures showed 21,141 housing starts in Vancouver in 2019 and 22,371 for 2020 but only 950 new homes registered in Vancouver in April of this year. Experts say this rate indicates servicing just 10-20% of demand at present, and if this number goes lower it will be reflected in an even hotter housing market in Vancouver.


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Listings, Now!

Published June 7, 2021 by Real Estate Leads

Probably one of the stranger titles you’ve seen attached to one of our blog entries here, but the reason we chose it is because it’s not just new realtors who need more homes to come on to the market. Fact is the entire real estate market in Canada needs them and not only to meet the need for housing in the country but also to continue having real estate make the needed contribution it does to the country’s GDP. We’re not economists so we’ll steer clear of that end of it but we do know why there needs to be more housing on the market in Canada, and that includes sales of existing homes as well as new home builds.

The builds will almost certainly be more important in the long term and bigger picture, but in the here and now there’s a lot of reasons why fewer homes are going onto the market than are needed, despite it 100% being a seller’s market in most areas of the country right now. Any time there’s type of supply shortcoming when there are many people who want to be homebuyers it can be tough for realtors new to the business. That’s why our online real estate lead generation system here at Real Estate Leads is such a good choice for real estate agents who are looking for every competitive advantage.

Let’s look at this shortcoming in greater detail this week.

Starving for Supply

Over the last 14 months demand for housing has been much, much higher than expected and that is true for both major urban centres and rural communities. Historically low interest rates are prompting a lot of people to want to dive into the housing market. The problem is they can’t because of insufficient housing stocks and demand outstripping supply creating a tremendous spike in valuations.

There’s been a lot of talk about how first-time homebuyers and young families are being priced out of the real estate market. Recent months have seen suggestions that the Bank of Canada (BoC) should begin to normalize monetary policy by raising rates. Maybe, but the long-term solution is additional inventory coming to market.

Much easier said than done.

The good news would be the Canada-wide sales-to-new listings ratio looks to be heading in the right direction. April’s ratio eased to 75.2 per cent, down from a peak of 90.6 per cent in January and our long-term average for the nation sales-to-new listings ratio is just under 55%, highlighting that the latest reading remains historically high.

But inventory is not doing its part.

The number of months of inventory – how long it would take to sell present stocks at the current sales activity – is at just 2. This is up from 1.7 months in March. Long-term the average is just over 5 months. That’s a very bare cupboard as the expression goes, and a lot of people are looking for a plate.

Buyers Starting to Boil?

It’s also true that Canadian homebuyers are quite displeased about it all. A recent Nanos Research-Bloomberg News survey found that 70% of them agreed that the spike in home prices was a major problem for the national economy, and many feel that interest rates should go up the same way new homebuyer mortgage stress testing regulations have. That has its drawbacks too of course.

More Roofs Over More Heads

Nearly every housing expert believes that the more effective solution to dousing the red-hot Canadian real estate market is by adding more supply. While it’s not as easy as snapping your fingers to make that happen, there needs to be a more long-game approach to this. Federal government intervention is probably not a good idea.

We’ll conclude with some good news in that price growth might have peaked, which could give those hoping to buy a home some reason to think positively.


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