Money: Canada due for big drop in home prices, according to housing bubble index - PressFrom - Canada
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MoneyCanada due for big drop in home prices, according to housing bubble index

10:30  31 july  2019
10:30  31 july  2019 Source:   thestar.com

Canadian housing enters a new 'boring' era amid modest gains in sales

Canadian housing enters a new 'boring' era amid modest gains in sales New home sales in Canada edged up 0.3 per cent in June from the previous month, with gains in the Greater Toronto Area and Montreal offsetting declines in B.C. The incremental gains mark a new period of stability for housing sales after a less-than-stellar 2018 and early 2019, according to the Canadian Real Estate Association’s monthly report. While seasonally adjusted sales actually fell 0.2 per cent, they remain slightly above year-ago levels. “The big story here is that sales and prices are essentially flat on a national basis, the market is close to overall balance, and sales activity is almost right on top of its 10-year average,” said Douglas Porter, BMO chief econ

US home values . Bubbles can go on for well over a decade. When they pop, the tide goes out and much is revealed Global housing bubbles are in various stages of correction. When each bubble pops, this will undoubtedly bring pain to local banks and force regional governments and central

A real estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in American economist Robert Shiller of the Case-Shiller Home Price Index of home prices in 20 metro cities across the United States indicated on May 31

Canada due for big drop in home prices, according to housing bubble index© Andrew Francis Wallace According to data from Bloomberg’s Housing Bubble Dashboard, both Canada and New Zealand top the list of countries due for a correction because of high house price-to-rent and house price-to-income ratios.

Canada is primed for a big drop in housing prices, according to a new survey of data by Bloomberg.

According to the financial data and news firm’s recently launched Housing Bubble Dashboard, both Canada and New Zealand top the list of countries due for a correction because of high house price-to-rent and house price-to-income ratios.

Both ratios are indicative of a bubble that could burst, said Bloomberg economist Niraj Shah, who crunched the numbers from the Organization for Economic Cooperation and Development and the Bank for International Settlement.

Negative Interest Rates: Someday The Bank May Pay You For Your Mortgage

Negative Interest Rates: Someday The Bank May Pay You For Your Mortgage Cue a familiar record: Canada has an epic housing bubble. Analysts at Bloomberg News recently put together a new index of housing bubble risk and found that New Zealand and Canada are the developed world’s champions. Yet we’ve been hearing this for years, haven’t we? Experts have been warning of a Canadian housing bubble for nearly a decade at this point. These calls have become like the Boy Who Cried Wolf. Nobody listens anymore. Which is a shame, if you consider how the story of the boy who cried wolf actually ended. Watch: Empty Vancouver mansions make for sweet student crash pads. Story continues below.

One sign of an asset bubble is that home prices have escalated. National median family home prices are 32% higher than inflation. Banks have raised lending standards. According to CoreLogic’s Housing Credit Index , loans originated in 2016 were among the highest quality originated in the last

With home prices starting to correct, Canadians who bought homes at the peak of the bubble risk falling under water on their mortgages, which is defined as a home valued less than the amount owed on the mortgage. Furthermore, the Bank of Canada has raised its policy rate three times since July

Recent moves by federal and provincial governments to keep house prices in check — including the mortgage stress test and B.C.’s tax on foreign buyers — haven’t been enough to relieve the pressure , Shah added.

“While this all should help contain the housing bubble, the dashboard suggests house prices still remain substantially elevated,” said Shah in an email interview.

Shah created the Bubble Dashboard earlier this year in response to a series of rate cuts from central banks around the world. Those cuts, designed to stimulate economies, could also have the effect of further boosting housing prices, Shah added.

“We decided to put together the Housing Bubble Dashboard in light of the new round of global interest rate cuts. That risks exacerbating existing housing bubbles,” said Shah.

How Charlottetown has become one of the hottest housing markets in Canada

How Charlottetown has become one of the hottest housing markets in Canada House prices in Charlottetown rose 38.5 per cent over the last three years, one of the fastest rates in the country, according to the Canadian Real Estate Association. That's faster than Victoria (33.3 per cent), Vancouver (10.93 per cent), Toronto (25.3 per cent) and Montreal (17.7 per cent). In Calgary, Edmonton, Regina and Saskatoon, house prices fell. The average house price in Charlottetown rose from $200,000 to $277,000. Of the areas commonly tracked by CREA, only the Niagara Region and Vancouver Island saw higher percentage price increases. Greg Lipton, president of the P.E.I.

Housing bubbles occur when home prices rise significantly faster than the underlying fundamentals. If you graph incomes versus real estate prices you would get the following graph: According to TD, Deutsche, OECD, and IMF home prices in Canada are overvalued against

Home prices in Canada hit record highs in late 2013, according to the Teranet-National Bank house price index . Industry data showed the average home “Both these measures fail to take into account the drop in interest rates over the last two decades,” TD economist Diana Petramala said in her report.

In Canada, the Bank of Canada has held its key interest rate at 1.75 per cent since October 2018. This week, the U.S. Federal Reserve is expected to cut its key rate for the first time in a decade, with many economists predicting a cut of half a per cent.

Still, RBC senior economist Robert Hogue, who studies Canadian housing prices, isn’t convinced the bottom’s about to fall out of the market.

“This is telling me that there’s an affordability problem, not that there’s going to be a big correction. Hedge fund people have been saying for a decade that we’re in a bubble and that there’s going to be a big correction, but that hasn’t happened,” said Hogue, who added that national numbers hide the real problem with housing affordability in Canada.

“Really, the numbers are reflecting Vancouver and the Greater Toronto Area, and we’ve seen a bit of a cooling off in both those places already. And that’s a healthy thing. It’s better to have a gradual, small correction than a sudden one,” said Hogue.

TSX, U.S. markets recover from Wednesday's drop on Fed announcement

TSX, U.S. markets recover from Wednesday's drop on Fed announcement TORONTO — Canada's main stock index was up moderately despite weakness in several sectors. The S&P/TSX composite index was up 81.02 points at 16,487.58, with some of the lift provided by Shopify, BCE and Thomson Reuters. In New York, the Dow Jones industrial average was up 259.69 points at 27,123.96. The S&P 500 index was up 27.38 points at 3,007.76, while the Nasdaq composite was up 119.84 points at 8,295.26. The Canadian dollar traded at just under 75.70 cents US, down compared with Wednesday's average of 76.06 cents US. The September crude contract was down $1.60 at US$56.98 per barrel and the September natural gas contract was up about a cent at US$2.24 per mmBTU.

House prices have also decoupled from local incomes in London, Paris, Singapore, New York and Due to relatively high incomes, purchasing an apartment is also relatively feasible for residents of According to the UBS Global Real Estate Bubble Index , the bubble risk in select world cities has

"This is a bubble . A very big bubble . And it is going to end in tears." Jesse Ferreras The Huffington Post Canada . Looking for someone to blame for skyrocketing housing prices across Canada ? In other words, your house might drop in value , but the amount of money you owe won't change.

The mortgage stress test, implemented in early 2018 by the Office of the Superintendent of Financial Institutions, means that borrowers with a down payment of more than 20 per cent, who don’t require mortgage insurance, have to show they can afford a mortgage with an interest rate that’s two percentage points above the rate being offered, or the Bank of Canada’s 5-year benchmark, whichever is higher.

Those who do purchase mortgage insurance have to show that they afford the mortgage rate being offered, or the Bank of Canada’s 5-year benchmark, whichever is higher

In 2016, the B.C. government added a 20 per cent tax for foreign buyers of property in the Vancouver area.

Josh Rubin is a Toronto-based business reporter. Follow him on Twitter: @starbeer

Soaring House Prices Could Return As Interest Rates Head To Zero: BMO.
The recent slowdown in Canada’s hottest housing markets is turning a corner and a potential new price boom is threatening to frustrate would-be buyers’ hopes. The real risk to Canada’s housing market today is not a crash, but a return to nosebleed levels of price growth thanks in part to falling interest rates, said Doug Porter, chief economist at Bank of Montreal. 

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