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CMHC previous prediction about home price is no longer applies despite of pandemic


Is the CMHC’s forecast of a major price drop this year still relevant?

Ephraim Vecina
Mortgage Broker News

The Canada Mortgage and Housing Corporation’s previous prediction of a 9-18% home price drop this year no longer applies, according to several economists in a new Finder survey.
The Crown corporation’s forecasts were criticized by Christopher Alexander, executive vice president and regional director of RE/MAX Integra’s Ontario-Atlantic Region, as misplaced “fear-mongering”.
“While I can appreciate some of the reasoning that went into CMHC’s prediction, especially in the spring when so much was still unknown, the market data doesn’t support such a steep price decline, especially with the two largest real estate markets of Toronto and Vancouver continuing their upward momentum,” Alexander said in early October. “The Prairies are facing different circumstances and challenges due to the resources sector, but Ontario and BC are expected to offset slower activity in Saskatchewan and Alberta.”
Sherry Cooper, chief economist at Dominion Lending Centres, also called the CMHC predictions “overly pessimistic” considering that Canada’s average home price went up by 1.5% in August.
Helmut Pastrick, chief economist at Central 1, echoed Cooper’s assessment, saying that prices are actually on the rise overall and that historically low mortgage rates will impel a more dynamic market, leading to further price growth.
Seven Finder respondents predicted an average increase of 3% over the next six months. However, while the larger market has exhibited resilience despite COVID-19, around 33% of respondents are still bracing for a modest decline in housing activity up to at least mid-2021.
“This reflects historic loss of income, job insecurity, virus fear and uncertainty, stricter CMHC lending rules, an effective pause on immigration, an exodus out of high-density urban markets, low tourist and foreign student demand for Airbnbs, and end of mortgage deferrals by banks,” said Tony Stillo, director of economics for Canada at Oxford Economics. “These factors may force many homeowners – particularly highly leveraged households and investors – to quickly sell their homes.”

Copyright © 2020 Key Media



CMLS Financial appointee expects demand for multifamily properties and developable land to remain strong


Where are the opportunities in Western Canadian commercial real estate?

Ephraim Vecina
Mortgage Broker News

The Canada Mortgage and Housing Corporation’s previous prediction of a 9-18% home price drop this year no longer applies, according to several economists in a new Finder survey.
The Crown corporation’s forecasts were criticized by Christopher Alexander, executive vice president and regional director of RE/MAX Integra’s Ontario-Atlantic Region, as misplaced “fear-mongering”.
“While I can appreciate some of the reasoning that went into CMHC’s prediction, especially in the spring when so much was still unknown, the market data doesn’t support such a steep price decline, especially with the two largest real estate markets of Toronto and Vancouver continuing their upward momentum,” Alexander said in early October. “The Prairies are facing different circumstances and challenges due to the resources sector, but Ontario and BC are expected to offset slower activity in Saskatchewan and Alberta.”
Sherry Cooper, chief economist at Dominion Lending Centres, also called the CMHC predictions “overly pessimistic” considering that Canada’s average home price went up by 1.5% in August.
Helmut Pastrick, chief economist at Central 1, echoed Cooper’s assessment, saying that prices are actually on the rise overall and that historically low mortgage rates will impel a more dynamic market, leading to further price growth.
Seven Finder respondents predicted an average increase of 3% over the next six months. However, while the larger market has exhibited resilience despite COVID-19, around 33% of respondents are still bracing for a modest decline in housing activity up to at least mid-2021.
“This reflects historic loss of income, job insecurity, virus fear and uncertainty, stricter CMHC lending rules, an effective pause on immigration, an exodus out of high-density urban markets, low tourist and foreign student demand for Airbnbs, and end of mortgage deferrals by banks,” said Tony Stillo, director of economics for Canada at Oxford Economics. “These factors may force many homeowners – particularly highly leveraged households and investors – to quickly sell their homes.”

Copyright © 2020 Key Media



Bank of Canada is still not doing enough to guide the nation out of recession-Economist


Economists: Current BoC measures not enough to counter recession

Ephraim Vecina
Mortgage Broker News



Canada’s housing market sales history in a closer look


A closer look at Canada’s off-the charts home sales activity in September

Clayton Jarvis
Mortgage Broker News

 Last week, CREA released its housing data for September 2020, with the headline number being a nationwide year-over-year increase in sales of 45.6 percent. It’s a colossal figure, but one that makes little room for nuance.

As many Mortgage Broker News readers are aware, there is no “Canadian housing market”, just a collection of distinct housing markets that happen to be in Canada. With that in mind, let’s take a look at where the action took place.

British Columbia

B.C.’s September was ridiculous: 11,368 residential transactions and a year-over-year increase in sales of 63.3 percent. According to data from the British Columbia Real Estate Association, the activity sent the average MLS residential sale price soaring compared to September 2019, when it was “only” $696,647. At the end of the month, the average MLS listing sold for $803,210.

“The provincial housing market had a record-setting September,” said BCREA Chief Economist Brendon Ogmundson. “Both total sales and average prices were the highest ever for the month of September as pent-up demand from the spring pushes into the fall.”

The average selling price ballooned by more than 15 percent year-over-year in seven different regions:

  • Powell River (30.4 percent)
  • Victoria (25.3 percent)
  • Okanagan Mainline (20.6 percent)
  • Kamloops (20 percent)
  • South Okanagan (19.6 percent)
  • Vancouver Island (15.6 percent)
  • Fraser Valley (15.4 percent)

Active listings for September fell by 11.7 percent versus the year before.

The Prairies

Alberta had an uneven September sales-wise. Even in markets that experienced increased sales, prices did not respond the way they did in B.C.

Just over 1,700 units were sold in Calgary, making it the most active September since 2014. But the only asset class to actually see its benchmark price increase compared to last year was detached homes, where the average benchmark price, $488,800, improved by just 0.9 percent.

Sales in Edmonton leapt 35.5 percent year-over-year, led by a 42.8 percent increase in single-family sales. Single-family homes sold for an average of $440,020 in September, a 4.7 percent annual increase. The average condo price in the city, $232,237, rose by 6.7 percent.

Sales fell in Grande Prairie (21.1 percent decline) and Fort McMurray (5.8 percent), but they exploded in Lethbridge, where they were up 58.6 percent year-over-year.

Saskatchewan’s two largest markets both experienced impressive growth in both sales and average price. Saskatoon saw sales increase by 41.1 percent year-over-year, with the average sale price rising from $318,000 to $358,000 over the same period. In Regina, where complete September data was unavailable at time of writing, the number of firm sales in September was 28.7 percent higher than it was a year ago.

Sales in Winnipeg rose 57 percent compared to September 2019, smashing the previous record for the month and establishing new average prices of $352,010 for detached properties and $239,538 for condos. 

“We are witnessing unprecedented times and certainly our third quarter sales activity of over 5,500 sales is unrivalled from any previous quarter in WinnipegREALTORS history,” said Catherine Schellenberg, president of WinnipegREALTORS.

Ontario

Sales in Ontario were 41.9 percent higher in September than they were a year before. It was the first time sales for the month surpassed 25,000. Year-to-date, however, sales in the province were only up 2.7 percent compared to the same period in 2019.

The average resale selling price in Ontario was $741,395 in September, a 19.7 percent annual increase. But there were several regions where the average price spiked by far more than the provincial average: Northeastern Ontario (the Kawarthas, Barrie, Muskoka), where it rose by 32.8 percent; Eastern Ontario (Kingston, Ottawa, Cornwall), where it increased by 28.5 percent; and Western Ontario (Windsor, Chatham-Kent, London), where it grew by 26.6 percent.

Quebec

Add Quebec to the list of provinces that generated gaudy sales data in September. Sales in the province were 51 percent higher than a year before, bringing active listings down by 33 percent.

Quebec City, where condo and detached sales skyrocketed by 99 and 64 percent, respectively, led the way. Detached homes in the capital are now fetching a median price of $282,500, while condos are selling for just over $201,000.

Montreal proved it still has plenty of upside, with total sales climbing 42 percent year-over-year in September. Sales grew most in Laval (59 percent increase) and the North Shore (61 percent), where the median price for single-family homes, $429,950, and condos, $270,000, were 20 percent and 16 percent higher, respectively, than a year before.

Atlantic Canada

Every province east of Quebec set new sales records in September.

Moncton, where sales jumped just under 40 percent year-over-year, came out ahead of New Brunswick’s other major markets. The composite benchmark price for Moncton rose 13.7 percent in September, hitting $220,500 by month’s end. In Fredericton, where sales surged 34.4 percent, the average price of homes sold was $210,015, 22.6 percent higher than a year before. Sales increased by 27.1 percent in Saint John, helping push the average sale price to a record $205,247.

“Much like other parts of New Brunswick, Saint John’s usually busy fall market is experiencing significantly increased demand,” said Corey Breau, president of the Saint John Real Estate Board. “When you combine that with the lowest inventory numbers that we have seen in over a decade, it creates sustained upward pressure on prices.”

In Nova Scotia, after the market posted a 38 percent yearly increase in sales during the month, the provincial average sale price climbed to a record $303,599, the first time in history it broke $300,000.

Of the eight regions governed by the Nova Scotia Association of Realtors, five experienced year-over-year sales growth of 38 percent or more, with sales in Yarmouth increasing by an absurd 153.8 percent.

In Prince Edward Island, sales rose by 24.5 percent, while in Newfoundland they increased by 39.5 percent. The average price in PEI swelled by 17.2 percent to hit $274,619. In Newfoundland, it climbed a more modest 7.7 percent to reach $256,663.

 

Copyright © 2020 Key Media



Front Yard, second largest single family landlord closed deal in $2.4 Billion Deal


Pretium, Ares to Purchase Front Yard in $2.4 Billion Deal

Patrick Clark and Prashant Gopal
Bloomberg

Pretium and Ares Management Corp. have agreed to purchase Front Yard Residential Corp. in a deal valued at $2.4 billion that would create the second-largest single-family landlord in the U.S.

Front Yard shareholders will receive $13.50 a share, a premium of about 36% over the closing price on Friday, according to a statement on Monday. The equity value of the deal is about $800 million.

Shares of Front Yard surged 35% to $13.45 in New York.

Wall Street has been plowing money into the single-family rental industry in recent months, betting on the demand for homes with more space in the suburbs. While record-low mortgage rates have fueled a housing rally, that’s driven up prices, possibly pushing homeownership out of reach for many.

That has investors looking at single-family rentals, which give residents who can’t afford to buy access to backyards and extra rooms for home offices. Blackstone Group Inc., Nuveen Real Estate, and JPMorgan Chase & Co.’s asset management arm have all made fresh bets on rental houses since the pandemic started.

“Across the country, you can see rent growth in single-family rental, increased demand, and a significant reduction in available home supply,” Don Mullen, Pretium’s chairman, said in an interview. “That turbocharged our confidence.”

Mullen, a former former Goldman Sachs partner, founded Pretium in 2012. It was part of an early wave of Wall Street firms to invest in single-family rental homes in the aftermath of the U.S. foreclosure crisis, building economies of scale that made sprawling portfolios of rental houses easier to manage.

Roughly three-quarters of Front Yard’s rental houses are in markets where Pretium has an existing footprint, allowing the firm to add density to its portfolio that should translate to higher quality services for renters and better margins for investors, Mullen said.

 

Deal Nixed

Amherst Holdings had announced a deal to buy Front Yard back in February for $12.50 a share, or about $2.3 billion. But the deal fell apart in May as the coronavirus roiled real estate markets. That announcement sent Front Yard’s shares spiraling lower.

While other single-family rental landlords have seen share prices recover from market lows in March, shares in Front Yard languished, leading shareholders to call for the company to liquidate itself. The stock had dropped 19% this year and closed Friday at $9.96.

Front Yard put itself on the block last year after settling with an activist investor. The landlord owns roughly 15,000 homes, making it an attractive target in an industry where efficiencies of scale are key.

Pretium has more than $16 billion in assets under management across residential real estate, mortgage finance, and corporate credit. Last year, it completed a $1.5 billion recapitalization of more than 20,000 houses acquired through an early single-family rental fund.

The new combined company would own and operate more than 55,000 homes across the U.S., making it the second-largest landlord in the industry.

Invitation Homes Inc., which owns roughly 80,000 houses, recently announced a new joint venture with a Boston-based firm to deploy more than $1 billion, including debt, to buy and renovate homes.

 

 

© 2020 Bloomberg



Different predictions for Metro Real Estate market


Diverging predictions for Metro real estate market

Joanne Lee-Young
The Province

The Vancouver real estate industry reported another month of higher sales and prices in September and continues to defy dire predictions of a pandemic-induced downturn.

But some analysts point out fragile aspects of the market, such as a rising condo inventory and falling condo prices.

The number of real estate sales in B.C. year-over-year in September increased 63 per cent. The average residential price in B.C. increased by 15.3 per cent compared to last year, and set a monthly record of $803,210. Total sales dollar volume in August increased 88 per cent compared to last year, according to the B.C. Real Estate Association, which represents real estate agents.

The Canada Mortgage and Housing Corp. has been in a high-profile clash with some in the real estate industry over its prediction of double-digit percentage price drops in markets such as Vancouver.

The federal government housing agency, which has tightened underwriting policies for high-ratio borrowers, has also been vocal about the danger of fuelling the stress of home ownership in expensive markets for buyers with uncertain financial prospects in a weak economy.

Now, with sales and prices rising, there continues to be agreement about a housing market cleaving in half, but disagreement about where this could lead.

“The overall housing market system seems to be dividing in two, and this is where risks start to appear,” said Aled ab Iorwerth, deputy chief economist at the CMHC.

He and others think that while prices are holding and rising, there are nuances such as falling rents, a growing preference for suburban over city locations, and extended economic weakness that could hit the condo market and pull down other house prices too.

“I think it’s still too early to be doing the happy dance. Condo prices are declining while house prices are moving higher. The result is a higher average sales price as the composition of homes selling has changed. It’s very much a mixed market and the potential fallout from deferred mortgages has yet to be realized as these deferrals are only beginning to expire,” said Vancouver realtor Steve Saretsky.

Saretsky adds there will be a record number of new condos completing this year and next. These are projects that were started during the building boom which began in 2016.

“That new construction is finally completing at a time when condo demand has slowed, and the rental market has softened. These are obvious risks that are contending with the lowest mortgage rates we’ve ever seen and a sea of liquidity provided by the Bank of Canada. Hence, the short- to medium-term direction of the market remains very much in flux.”

Realtor Ian Watt, who specializes in downtown Vancouver condos, where rising inventory has been more pronounced, said the median price in September decreased 10 per cent from THE previous month, and the median price decreased 14 per cent from September 2019.

Housing starts across B.C. in September hit 25,308, down from 33,100 during the same period in 2019.

However, that is comparing housing starts in 2019 that ended up reaching a record high of 44,932, even though most forecasts had been for the number at the end of the year to be around 35,000.

 

© 2020 Postmedia Network Inc. All rights reserved.