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Highest Inflation in Canada since MC Hammer’s 2 Legit 2 Quit release

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Highest Inflation in Canada since MC Hammer’s 2 Legit 2 Quit release Households in Canada are currently facing the highest level of inflation seen in a whole generation. The Consumer Price Index (CPI) data for the month of April was just released by Statistics Canada (Stats Can). The agency places the recent acceleration, which sent growth to the highest level since the early 1990s, on the shoulders of the need for food and shelter. Although there are those who are predicting that growth has reached its peak, leading analysts on Wall Street do not see this happening in the upcoming report. The inflation rate in Canada has reached 6.8 percent, marking its highest level since 1991. The annual rate of inflation in Canada went up once more, although the rate of increase was lower than in recent months. The Consumer Price Index (CPI) grew at an annual rate of 6.8 percent in April, up just 0.1 points from the previous month. It had the highest read count ever recorded, dating back to September 1991. To put it another way, if you are under the age of 30, you have never witnessed how your cost of living has increased. Inflation in Canada was Driven by the Cost of Food and Shelter During the Past Month According to Stat Can, the majority of the most recent increase can be attributed to increases in the cost of food and housing. Food prices rose by 9.7 percent in April, marking the period since September 1981 during which they have increased at the fastest rate. According to the agency, this marked the fifth consecutive month in which the food component scored more than 5 points. As a result of disruptions in the supply chain, including restrictions on exports, it is not likely to drop anytime soon. The majority of Canadians are aware that the cost of housing is going up, but the increase in CPI is not due to the reason you might think it is. The agency reported that the annual rate of inflation for housing costs reached its highest level since 1983 in the month of April, reaching 7.4 percent. The majority of the increases can be attributed to higher fuel costs, such as those for heating and cooling. The costs of home replacement for homeowners are also climbing at a lofty rate of 13.0 percent, which is a proxy for new homes. “The prior boom in home prices is now aggressively working its way into CPI, with new home prices and “other owned accommodation expenses” (mostly real estate fees) the two single biggest drivers last month,” said Douglas Porter, Chief Economist at BMO. The Next Inflation Report Is Expected to Show Rapid Acceleration In April, the annual growth rate only increased by 0.1 points, which is a tenth of the increase in CPI that was seen in March. Although this may point to a moderation in future expansion, the consensus on Bay Street this morning is not to that effect. BMO Capital Markets issued a warning to its clients that the relatively slow month was just a temporary blip. According to Porter’s explanation, “… this is the relative calm before another downpour in next month’s report, as gasoline prices are tracking a double-digit increase for May alone.” Additionally, the National Bank of Canada (NBF) issued a warning that the tight labour market poses a threat to inflation. According to Matthieu Arseneau, the deputy chief economist at the National Bank of Canada (NBF), “In an environment where the labor market is extremely tight with the unemployment rate at a record low, workers are well-positioned to ask for compensation, which should translate into relatively high inflation in services,” In addition, “For these reasons, the Central Bank must continue its fast-paced process of normalizing interest rates, which are still far too accommodating for the economic situation.” When allowed to continue, high inflation evolves into a problem that is both more extensive and more challenging to address. Once wages start adjusting to the levels of inflation, the potential for “transitory” employment will no longer exist. The general trend is for higher wages to result in higher consumer prices, which can contribute to higher levels of inflation. Getting out of a downward spiral of inflation is extremely challenging, and the top brass at RBC has warned about the issue.   Related posts. Expert’s Reaction to the increasing rates by the Bank of Canada by admin123 Living in Main Floors- A Great matter of importance for Aging Canadians who want a Pleasant Life Ahead by admin123 National home prices historically higher, listings terribly low by admin123 Housing prices kicks off, stuck historically high, but trended lower in January by admin123 Soleil Condominiums by Mattamay to beam in Milton by admin123 As home prices rise, Ford wants to approve developments as soon as possible by admin123

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Growth in Canadian real estate prices may stall within the next three months

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Growth in Canadian real estate prices may stall within the next three months After being derailed by higher rates, the record run of the Canadian real estate market is quickly coming to an end. According to a recent research note published by BMO, the national sales to new listings ratio (SNLR) decreased in the month of April. This indicator acts as a leading price indicator by measuring supply in relation to demand. According to BMO, the real estate market in Canada can anticipate prices to compete with those in the country’s largest market, which may see price growth disappear within the next three months. Inventory Levels in Canadian Real Estate Markets Are Almost at a Balanced Level The sale to new listings ratio, also known as the SNLR, is a method for evaluating the relative levels of inventory. It is the proportion of homes that have been sold relative to the total number of homes that have been recently listed for sale. When the SNLR is higher, it indicates that there is less space for inventory in comparison to the amount of buying activity. The Canadian Real Estate Association (CREA) has collected data that demonstrates an abrupt decline in the ratio. In April, the SNLR came in at 66 percent, which is significantly lower than the average of 76 percent seen over the course of the previous year. According to BMO, the market is on the verge of becoming balanced as a result of this healthy decline. At the national level, there has been a sudden transition from a hot market to a balanced market. However, the Greater Toronto Area market has the lowest ratio of any market in the country. Surprisingly, Canada has the weakest relative demand for real estate despite having one of the largest real estate bubbles in the world. The Real Estate Market in Toronto Is the Biggest in Canada, but It’s Beginning to Level Off According to BMO, one of the most important real estate markets to keep an eye on is Greater Toronto. The seasonally adjusted national listing ratio (SNLR) for Canada’s largest real estate market dropped to just 45 percent in April, putting it dangerously close to the bottom of a balanced market and inching closer to a seller’s market. According to the findings of the bank’s study, the regional SNLR has been on average 70 percent over the course of the past year. The disappearance of the Home price growth in 3 months  The industry utilizes SNLR to measure the price growth in homes and this measure is mainly confirmed by the BMO. “Decades of history show that this ratio is an excellent leading indicator for average transaction prices, leading prices by about three months,” said BMO chief economist Douglas Porter. “…what the ratio is now telling us is that prices are about to go from 20%+ gains to a sudden stall. And that’s assuming the sales/listings ratio doesn’t fall further in coming months.” As interest rate hikes have only gotten us halfway to neutral, it is likely that the SNLR will fall even further. At the beginning of this week, economists from a number of different financial institutions issued a warning to investors that the slowdown in the market is just getting started.   Related posts. Expert’s Reaction to the increasing rates by the Bank of Canada by admin123 Living in Main Floors- A Great matter of importance for Aging Canadians who want a Pleasant Life Ahead by admin123 National home prices historically higher, listings terribly low by admin123 Housing prices kicks off, stuck historically high, but trended lower in January by admin123 Soleil Condominiums by Mattamay to beam in Milton by admin123 As home prices rise, Ford wants to approve developments as soon as possible by admin123

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Suburbs lead Canada’s housing boom as downtown falls behind.

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Suburbs lead Canada’s housing boom as downtown falls behind. Canada’s suburbs had an increase in home values that outpaced downtown areas during the pandemic, according to a new study. Many downtown businesses closing and people’s desire for greater living space are driving the rising demand for suburban properties, according to research released on Monday by the Bank of Canada. Proximity premiums associated with metropolitan regions, where land is limited and commutes are shorter, have been undercut by this shift in the housing market, according to the central bank. In most neighbourhoods, housing prices rose significantly during the epidemic, but the gain was particularly pronounced in the suburbs, according to the data. Canada’s suburbs and downtown districts had already been decreasing progressively pre-pandemic, but now the distance has shrunk significantly, the bank says. As an example, research by a major Canadian bank found that, on average, suburban residences sold for 33% less than those in the city centre in 2016. By 2019, the price difference had shrunk by 26%. In 2021, if the current trend continues, properties in the suburbs will sell for around 21% less than those in urban regions. According to a report from the bank, the difference in price between the suburbs and downtown districts has narrowed by around 10% in the past year. There has also been an increase in businesses reopening or transitioning to a combined working environment, wherein the staff is only required in the office part of the week. There have also been reopenings of services and amenities that had been closed during the pandemic like salons, gyms, and restaurants. Workplace changes and the reinstatement of downtown offices and businesses may have an impact on the housing market once again. Mortgage rates could be affected in suburbs because of the shift toward larger residences outside the city centre, according to the bank. According to the report, “if this preference shift is transient, the proximity premium could return partly to its pre-pandemic level,” the bank stated. In anticipation of rising local demand, a significant change in housing supply in more suburban locations could be particularly troublesome. Related posts. Expert’s Reaction to the increasing rates by the Bank of Canada by admin123 Living in Main Floors- A Great matter of importance for Aging Canadians who want a Pleasant Life Ahead by admin123 National home prices historically higher, listings terribly low by admin123 Housing prices kicks off, stuck historically high, but trended lower in January by admin123 Soleil Condominiums by Mattamay to beam in Milton by admin123 As home prices rise, Ford wants to approve developments as soon as possible by admin123

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Mortgage costs in Canada are on the rise, making renting a more logical option.

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Mortgage costs in Canada are on the rise, making renting a more logical option. As a result of inflation’s effect on bond yields, the Canadian real estate market is undergoing rapid transformation. Mortgage rates are expected to continue rising, according to First National, one of the major non-bank mortgage lenders in Canada. An email was sent out to customers by Neil Silverberg, a senior analyst working for the lender. In the email, he explained how quickly yields have climbed and how this will affect ownership. As the market readjusts, it is anticipated that a greater number of Canadians will choose to remain in their current homes or may consider renting in the near future. An increase in mortgage bond yields by 1 basis point each day  The yields on Canadian mortgages are climbing at a rapid pace. In order to drive home this point, First National describes how there have only been 139 days in this year. On average, yields for both the five- and ten-year Government of Canada bonds as well as the Canada Mortgage Bond (CMB) have grown by more than one basis point every day. Although Silverberg does not see yields remaining at this fast level, he does believe there is a possibility for further expansion. Increasing bond yields are pushing up mortgage rates significantly The rising returns on bonds have led to a significant increase in the amount of money available for home mortgages in the year 2022. According to the lending institution, the interest rate on a conventional mortgage with a term of five years is now 4.84 percent, up from 2.94 percent at the beginning of the year. According to Silverberg’s explanation, this represents an increase of over 200 basis points in a span of less than five months. This results in a considerable rise for borrowers who may already be operating at or near their financial limits. “If you had a mortgage totaling $1million with a regular amortization period of 25 years, monthly payments would have gone from $4,702 to $5,726 in a matter of months,” he said. More people will consider renting as a result of rising mortgage payments Higher mortgage payments will encourage more people to rent rather than buy. Borrowers will face higher interest rates as short-term rates reach non-stimulus levels. As a result, the loan principal is reduced while the interest costs are increased. Renting will become more attractive when the cost of mortgages and interest rises. Higher interest rates tend to lower property values, but it takes time for the market to respond. As a result, the number of persons interested in purchasing a property will decrease if housing prices fall. “Does a payment change of over $1,000 a month on a $1mm mortgage or $500 a month on a $500k mortgage get people thinking about renting instead? The answer is yes. This is especially true when mortgage rates move up faster than housing prices move down,” said Silverberg. Those with lower earnings won’t be the only ones whose attention will be drawn to the rental market by rising rates. Mark Kiesel, an executive at PIMCO and a specialist on bonds, mentioned a few weeks ago that he was thinking about renting instead of buying his home. He had previously sold his home at the peak of the housing bubble in the United States and bought another one at the bottom of the market. His decision to sell and buy was largely dependent on the bond market. While he is in the United States, conditions in both regions with regard to money and valuation are very similar. Related posts. Expert’s Reaction to the increasing rates by the Bank of Canada by admin123 Living in Main Floors- A Great matter of importance for Aging Canadians who want a Pleasant Life Ahead by admin123 National home prices historically higher, listings terribly low by admin123 Housing prices kicks off, stuck historically high, but trended lower in January by admin123 Soleil Condominiums by Mattamay to beam in Milton by admin123 As home prices rise, Ford wants to approve developments as soon as possible by admin123

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Inflation will slow Canada’s economy this summer.

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Inflation will slow Canada’s economy this summer. Canada’s hot economy necessitates pumping the brakes. According to RBC Economics’ recent study on inflation, that was the takeaway. Inflation is so high that the world’s central banks have no choice but to raise interest rates aggressively. The new strategy is to bring inflation (and the economy) down quickly by returning interest rates to more normal levels. Summer is expected to be the first sign of the slowdown, which will begin long before inflation has stabilized. Although the Canadian economy appears strong, a decline in demand is expected soon. Artificially low-interest rates have propelled the Canadian economy into overdrive. RBC expects Canada’s GDP will rise at a rate of 0.3 percent in April, which is higher than the initial 0.2 percent estimate from Statistics Canada. This year’s increase in Alberta’s oil production has resulted in an economic boon for the region (and budgets). With data going back to the 1970s, unemployment is at the lowest level ever recorded. All of these macroeconomic indicators are life-or-death for Canada. Even though it doesn’t feel like it, the economy is in fact flourishing While the present economic background appears to be extremely robust, rising interest rates are increasing the cost of debt servicing for Canadians. According to Nathan Janzen, associate chief economist at RBC, “this increase will eventually cause erosion of demand.” Let’s go back to the “artificially low rates” part. The recovery of the economy was aided by the utilization of massive sums of inexpensive capital. Canada, for example, recovered considerably more quickly than projected after the financial crisis. However, even after a full recovery, it didn’t slow down. In fact, low-interest rates are still providing demand stimulus. Low-interest rates raise a difficult question: What do they really represent? Many people think in terms of absolute numbers or comparisons to last year’s results. Some say it’s low by historical standards (it is very low compared this way). According to some, it’s high because it’s above the levels that were witnessed a few years ago. For the most part, analysts focus on the current interest rate with respect to the long-term interest rate target range. When the current interest rate is lower than the final interest rate, we say that we have a low-interest rate. It is predicted that the terminal rate is between 2 and 3 percent, where monetary policy is no longer stimulating. Inflation rises more quickly when the overnight rate is lower than the terminal rate. Helping demand and inflation, Canada’s overnight interest rate currently stands at 1.5 percent. It’s still true. As a result, inflation is on the rise, is it ever on the rise. For the first time since 1983, the Consumer Price Index (CPI) grew at a 7.7% annual rate in May. Historically, the general consensus was that we would never again see interest rates this high under the leadership of modern, technologically advanced central banks. Higher-than-expected inflation now threatens to stifle growth. We’d utilize artificially low-interest rates all the time if there were no consequences. The problem is, that’s not the case at all. When demand exceeds supply, inflation occurs, resulting in higher but unproductive prices. Households often cut back on discretionary expenditure in order to pay for the additional costs. A family’s ability to afford groceries may be improved if they eat out less. The restaurant will have to reduce expenses as a result of the income reduction. In order for the economy to slow down, it has to start with one person. Because of this, Janzen believes that Canada’s central bank will have to raise interest rates even more aggressively in the near future since the CPI rose to 7.7 percent in May. In the same way, boosting interest rates can be used to reduce demand and thereby reduce inflation. As a result, interest payments consume more of a borrower’s discretionary income. There are of course a lot fewer debtors than currency holders. The path of least resistance is to raise the interest rate. As a result, Janzen expects the Fed to use higher interest rates to curb inflation. Bank of Canada (BoC) and US Federal Reserve (Fed) interest rate hikes are expected to pick up pace, according to RBC’s projection. According to these forecasts, the Bank of Canada will raise interest rates by 0.75 percentage points in July. This summer’s demise will be brought on by inflation or increased interest rates. An inflationary recession is less likely if the economy slows as a result of increasing interest rates. That’s a win in a sense. Related posts. Expert’s Reaction to the increasing rates by the Bank of Canada by admin123 Living in Main Floors- A Great matter of importance for Aging Canadians who want a Pleasant Life Ahead by admin123 National home prices historically higher, listings terribly low by admin123 Housing prices kicks off, stuck historically high, but trended lower in January by admin123 Soleil Condominiums by Mattamay to beam in Milton by admin123 As home prices rise, Ford wants to approve developments as soon as possible by admin123

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April witnessed an increase of 8% in Canada’s housing starts

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April witnessed an increase of 8% in Canada’s housing starts There was an increase of 8 percent in the number of homes that began being constructed in Canada last month, which is an indication that the housing sector in the country is heading in the right direction. According to the Canadian Mortgage and Housing Corporation (CMHC), the trend in housing started to increase to 257,846 units in April from 253,226 units in March, when they had decreased marginally from the previous month. When calculating the trend, a moving average of the monthly Seasonally Adjusted Annual Rates (SAAR) of housing starts is utilized as the key metric. This parameter is measured over a span of one year and one month. According to Bob Dugan, the Chief Economist of CMHC, “On a trend and monthly SAAR basis, the level of housing starts activity in Canada remains historically high, hovering well above 200,000 units since June 2020 and increased from March to April,” The Canadian Mortgage and Housing Corporation (CMHC) utilizes the trend measure as a supplement to the monthly SAAR of housing starts in order to account for noteworthy changes in monthly estimates and to provide a clearer picture of the anticipated new housing supply. However, extreme caution is required when carrying out the measure in question. The Canadian Mortgage and Housing Corporation (CMHC) issues a warning “In some situations, analyzing only SAAR data can be misleading, as the multi-unit segment largely drives the market and can vary significantly from one month to the next,” Among Montreal, Toronto, and Vancouver, Toronto was the only market to post a decrease in total SAAR starts, which was driven by lower multi-unit and single-detached starts.” This statement was made in reference to the fact that the level of housing starts activity in Canada has remained historically high. The level of housing starts activity in Canada remains at a historically high level, holding far above 200,000 units, according to both the trend and the monthly SAAR basis. The seasonally adjusted annual rate (SAAR) of the total house starts across all Canadian regions in April was 267,330 units, which reflects an increase of 8 percent in comparison to the totals seen in March. In April, the seasonally adjusted annual rate (SAAR) of total urban starts increased to 245,324 units, which was a ten percent increase from the previous month. While there was only a one percent increase in the number of urban starts for single-family detached homes, there was a 14 percent increase in the number of urban starts for multi-unit structures, which brought the total to 178,092 units. After taking into account the effects that seasonality has, it was estimated that rural beginnings will occur at an annual rate of 22,006 units. At a time when many people blame a lack of supply as the primary perpetrator behind the housing problem in Canada, this is some positive news for the market in Canada. Related posts. Expert’s Reaction to the increasing rates by the Bank of Canada by admin123 Living in Main Floors- A Great matter of importance for Aging Canadians who want a Pleasant Life Ahead by admin123 National home prices historically higher, listings terribly low by admin123 Housing prices kicks off, stuck historically high, but trended lower in January by admin123 Soleil Condominiums by Mattamay to beam in Milton by admin123 As home prices rise, Ford wants to approve developments as soon as possible by admin123

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Growth in Canadian real estate prices may stall within the next three months

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Growth in Canadian real estate prices may stall within the next three months After being derailed by higher rates, the record run of the Canadian real estate market is quickly coming to an end. According to a recent research note published by BMO, the national sales to new listings ratio (SNLR) decreased in the month of April. This indicator acts as a leading price indicator by measuring supply in relation to demand. According to BMO, the real estate market in Canada can anticipate prices to compete with those in the country’s largest market, which may see price growth disappear within the next three months. Inventory Levels in Canadian Real Estate Markets Are Almost at a Balanced Level The sale to new listings ratio, also known as the SNLR, is a method for evaluating the relative levels of inventory. It is the proportion of homes that have been sold relative to the total number of homes that have been recently listed for sale. When the SNLR is higher, it indicates that there is less space for inventory in comparison to the amount of buying activity. The Canadian Real Estate Association (CREA) has collected data that demonstrates an abrupt decline in the ratio. In April, the SNLR came in at 66 percent, which is significantly lower than the average of 76 percent seen over the course of the previous year. According to BMO, the market is on the verge of becoming balanced as a result of this healthy decline. At the national level, there has been a sudden transition from a hot market to a balanced market. However, the Greater Toronto Area market has the lowest ratio of any market in the country. Surprisingly, Canada has the weakest relative demand for real estate despite having one of the largest real estate bubbles in the world. The Real Estate Market in Toronto Is the Biggest in Canada, but It’s Beginning to Level Off According to BMO, one of the most important real estate markets to keep an eye on is Greater Toronto. The seasonally adjusted national listing ratio (SNLR) for Canada’s largest real estate market dropped to just 45 percent in April, putting it dangerously close to the bottom of a balanced market and inching closer to a seller’s market. According to the findings of the bank’s study, the regional SNLR has been on average 70 percent over the course of the past year. The disappearance of the Home price growth in 3 months The industry utilizes SNLR to measure the price growth in homes and this measure is mainly confirmed by the BMO. “Decades of history show that this ratio is an excellent leading indicator for average transaction prices, leading prices by about three months,” said BMO chief economist Douglas Porter. “…what the ratio is now telling us is that prices are about to go from 20%+ gains to a sudden stall. And that’s assuming the sales/listings ratio doesn’t fall further in coming months.” As interest rate hikes have only gotten us halfway to neutral, it is likely that the SNLR will fall even further. At the beginning of this week, economists from a number of different financial institutions issued a warning to investors that the slowdown in the market is just getting started. Related posts. Expert’s Reaction to the increasing rates by the Bank of Canada by admin123 Living in Main Floors- A Great matter of importance for Aging Canadians who want a Pleasant Life Ahead by admin123 National home prices historically higher, listings terribly low by admin123 Housing prices kicks off, stuck historically high, but trended lower in January by admin123 Soleil Condominiums by Mattamay to beam in Milton by admin123 As home prices rise, Ford wants to approve developments as soon as possible by admin123

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Central banks blamed for majority of global real estate price increase

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Central banks blamed for majority of global real estate price increase What factors are contributing to the rise in global property prices? Well, it’s all about the money. This is a condensed version of the findings from the study conducted by the Bank of International Settlements (BIS). The Bank for International Settlements (BIS), which is known as the central bank for central banks, recently issued a warning the risks to global home prices are being formed. According to the findings of their researchers, the majority of the progress made since 2020 can be attributed to monetary policy. A synchronization risk was created as a result of countries adopting policies that were similar to one another. These risks have the potential to become a significant threat to the economy if higher interest rates and less leverage are not implemented. Gains in Global Real Estate Price are Unusual It appears that the majority of people are under the impression that real estate prices go up when interest rates go down. When the first signs of a recession appeared, it was obvious that this was an excellent time to purchase a house. Before the most recent economic downturn, this was never the situation at all. In the past forty years, when the economy has entered a recession, home prices have followed suit and fallen. The researchers discovered that this decrease, which follows an economic shock, typically lasts for four quarters. Home prices shot up during the pandemic and completely disregarded the slump that was occurring at the same time. The researchers wrote that there was not even a temporary drop, and the tone of their writing almost sounds shocked. In addition, a phenomenon known as credit contraction took place during this most recent economic downturn. Or, more specifically, an insufficient amount of credit contraction. In times of economic hardship, individuals typically cut back on the amount of debt they are carrying. However, rather than taking a step back, central banks poured massive amounts of liquidity into the market. They flooded the market with cheap credit, which led to an increase in the number of liabilities being carried. It’s possible that this was the only recession in history from which households emerged even more financially stretched than before. It would be understating the extent of how unusual this path was for home prices during a recession. Global Home Prices Surged As Easy Money and Investors Flooded The Market According to the study, global real estate prices increased for several reasons. After the caused recession, economies recovered far faster than projected. There were few opportunities to spend your spare money, therefore household savings surged. The financial aid was helpful, but its overuse may have produced a moral hazard. Supply chain constraints are real, and they might contribute to inflation. Even so, none of these factors had much of an impact on housing values when compared to… anyone? Bueller? Bueller? That’s correct, it’s easy money. The idea essentially consisted of flooding the financial sector with cheap and easy debt. Some people made educated guesses at first and didn’t make any modifications until two years afterward. To call it imprecise would be an understatement. Housing demand soared in most Western economies as a result of the cheap money. “Above all, exceptionally easy financing conditions have boosted demand for housing further amid the strong liquid asset positions of households and support from other factors,” the researchers wrote. “Households looking to be owner-occupiers can borrow at historically low nominal and real interest rates. In addition, gross rental yields are well above bond market returns in AEs, turning dwellings into attractive assets, including in the buy-to-let segment,” explains the researchers Cheap loans didn’t merely stimulate owner-occupied home sales, as per the narration. Investors recognized an arbitrage opportunity to take a loan at low rates and transform it into rental yield. It’s an element of yield hunting, a practice that skyrocketed in growth during the Global Financial Crisis (GFC) (GFC). Due to low market bond rates, investors were obliged to convert Millennial rent payments into regular payments. Following the 2020 Rate Cut Extravaganza, the investor tendency accelerated. Investors now account for more than a quarter of house sales in countries like Canada. A quick search on TikTok reveals a plethora of popular accounts detailing how to make real estate investments. How could they leave this chance? “The inflation-hedging features of housing may also have had a role,” the BIS says. In the late 1970s and early 1980s, this was a popular housing strategy. Some people were fortunate in escaping rising inflation and interest rates. Normalization of inflation quickly turned the bubble into a disaster. Let us now turn our attention to dangers. Synchronization of global real estate prices is usually bad news. Global synchronization of property prices was detected by BIS analysts, which is never a good omen. We’ve discussed synchronization previously, but the point is that it occurs when assets begin to behave similarly. It’s characterized by a non-productive economy with plenty of cash but inadequate parking spaces. Everything inflates when there is so much money that can’t be navigated properly. In this situation, it makes no difference if the home is in a suburb or a city, Vancouver or Poughkeepsie, because values are growing. When it comes to financing, synchronization nearly always equals increased risk. When assets share the same driver, they tend to behave similarly. It’s the polar opposite of diversification, which spreads risk and reduces damage. Synchronization converts an asset group into a cascade of dominoes, each one waiting for the next to fall. “… the international synchronization of house prices has strengthened. More than 60% of house price movements can now be explained by a common global factor. One reason for this much higher synchronization is that the pandemic has been truly global, thus inducing similar policy reactions and flattening yield curves worldwide,” wrote the researchers. In other words, property values in these areas were driven by monetary policy. It wasn’t local characteristics that created

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A hint on change in Canada’s ‘stress test’ rules before year’s end

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A hint on change in Canada’s ‘stress test’ rules before year’s end Mortgage brokers argue that given the slowdown in the housing market, the Canadian banking regulator should relax its “stress test” qualifying rate for mortgages and make it easier to qualify for a mortgage. This week, the Office of the Superintendent of Financial Institutions issued a statement in which it alluded to the possibility that it might make “adjustments” to its qualifying rate before the end of the year. A review of the qualifying rate is performed by the regulator and then communicated to the general public every December, in advance of the hectic spring housing season that follows the following year. This week, however, the office, which is an independent federal agency that is responsible for supervising hundreds of financial institutions and over a thousand pension plans in Canada, suggested that an announcement may be forthcoming before the end of this year. According to a statement released by the regulatory body on Thursday,“Throughout the rest of the year, OSFI continually monitors the Canadian housing market and mortgage practices, and may make adjustments at any point if necessary for the health of the Canadian lending industry.” Some people working in the real estate industry see this as a sign that the office ought to take action and, in all likelihood, will do so given the rise in interest rates that has occurred this year and the resulting decrease in home sales. The most recent statistics released by the Toronto Regional Real Estate Board indicate that the housing market in the region reached its highest point in the month of February when houses and condos sold for an average of $1.33 million. The average price in the region dropped to $1.25 million as a result of a number of factors, including the Bank of Canada’s decision to raise interest rates in April and the expectation that they will do so again soon. Despite this, prices are still 15% higher than they were at this time last year. “The market is softening, prices are coming down. They (OSFI) did the stress test to cool the market. They don’t need any cooling of the market anymore. It’s already there now,” said mortgage broker Kim Gibbons. In order to avoid having to pay for mortgage insurance, homebuyers are required by the rules to demonstrate that they are able to afford mortgage payments at an interest rate of 5.25 percent or their mortgage contract rate plus two percent, whichever is higher. Homebuyers who have made a minimum down payment of 20 percent are exempt from this requirement. They were implemented in 2016 and 2017 with the goal of reducing overall market activity and preventing buyers from feeling overly pressured by rising interest rates. According to comments made by mortgage brokers in Thursday’s edition of the Star, the current average interest rate for mortgages with fixed terms of five years ranges from 4.19 to 4.25 percent. A borrower would need to demonstrate that they are capable of paying an interest rate that is as high as 6.25 percent in order to qualify for a loan with the requirement of a two percent plus contract. Gibbons believes that this is unreasonable and that it “doesn’t make sense” given the current state of affairs. “As things stand now they have got to do something,” Gibbons added. “Clients are going to alternative sources of lenders, credit unions where you don’t have to do two percent above the contract rate to qualify. People can qualify with credit unions much easier,” she said. “The stress test takes away about 20 percent of your purchasing power. Not always, but that’s kind of the rule.”Mortgage broker True North Mortgage, headquartered in Toronto, and its chief executive officer Dan Eisner are both of the opinions that the Office of the Superintendent of Financial Institutions will step in before the end of the year. According to Eisner if the “If the current housing market continues on a downward trend in home prices, that will give a lot of headroom to OSFI to reduce the stress test rate and requirements for the contract rate plus two percent before the end of the year.” ”I wouldn’t be surprised if they just eliminate the contract rate plus a two percent portion of the stress test; it’s a bit too aggressive. It doesn’t make sense when the fixed rates are in the four percent levels,” Eisner said. Related posts. Expert’s Reaction to the increasing rates by the Bank of Canada by admin123 Living in Main Floors- A Great matter of importance for Aging Canadians who want a Pleasant Life Ahead by admin123 National home prices historically higher, listings terribly low by admin123 Housing prices kicks off, stuck historically high, but trended lower in January by admin123 Soleil Condominiums by Mattamay to beam in Milton by admin123 As home prices rise, Ford wants to approve developments as soon as possible by admin123

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BMO concerned about the collapes in Canadian real estate

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BMO concerned about the collapes in Canadian real estate Everyone is interested in determining how low real estate prices can go in Canada now that the real estate bubble there has finally started to deflate. Over the course of the weekend, BMO Capital Markets provided clients with an analysis of the topic, including models and historical context. Increasing interest rates will undoubtedly bring about a correction because they will eliminate excessive leverage. Simply to account for the higher borrowing rates, prices will need to fall by a large amount. Concerning how long it will take for the market to recover, the only prior housing bubble in Canada that was nearly this magnitude took 15 years for the market to recover from. Historically, Canadian real estate prices have always adjusted to fundamentals Since the 1980s, BMO Research discovered that the cost of housing in Canada has climbed by approximately 3% annually. This is roughly a reflection of inflation, growth in real wages, and lowering interest rates. Remember that low-interest rates handled the majority of the heavy work, so don’t be surprised if it seems like a sharp slope for salaries. Housing often trades at a price that is in line with its liquidity, with the exception of when it’s in the midst of a bubble. People will only pay for something that makes sense to them, to put it in more eloquent terms. This has a direct bearing on the use of leverage in mortgage transactions. The conventional wisdom holds that a reduction in interest rates will make housing more affordable. On the surface, it makes perfect sense: paying less interest means more money can go toward paying down the debt. In point of fact, a decrease in interest rates results in an increase in the amount of leverage available to a buyer. The ability of purchasers to more readily tolerate price increases results in prices rising even more quickly. This is a point that has been emphasised in recent times by the Bank of Canada (BoC), but it appears that many people have ignored it. This will require a more in-depth discussion at another time, but it is essential to comprehend pricing adjustments. The rate of inflation is currently at an all-time high, while mortgage rates have recently fallen to an all-time low. Both of these factors contribute to a faster increase in leverage, which ultimately drives up housing prices. However, according to BMO, a third of today’s housing prices are the result of price fluctuations that have occurred during the past two years alone. That is far higher than low rates, and it is approximately ten times the historic average rate of growth. “We’ve long maintained that demographic and supply-side fundamentals have driven price gains, even in the early stages of COVID-19 alongside some economic adjustments. But, as we warned early last year, more recent price behavior has been driven by excess demand, market psychology and froth,” explained Robert Kavcic, a senior economist at BMO. Increasing interest rates will reduce some of that excess, which is already dampening the enthusiasm of speculators.  “So, when we speak of a housing correction, it’s not a question of if, but where, how much, and for how long?” he said. Canadian Real Estate Is 38 Percent Overpriced And Requires A Substantial Decline Just To Accommodate Interest Rates How much will the market for Canadian real estate eventually correct? Home prices are approximately 38 percent overvalued, according to BMO’s estimations; the bank does not have a crystal ball. That does not necessarily mean that a correction of 38 percent is on the horizon. However, the level of overvaluation is so high that prices need to reduce in order to maintain the same level of affordability. Raised interest rates are nearly invariably the method that is used to eliminate excess price gains in housing bubbles. “After leaving policy too loose for too long, psychology and affordability have already been tested by just 75 bps of Bank of Canada tightening, and we expect another 125 bps by year-end,” warns BMO. In addition to putting a stop to speculative thinking, a rise in interest rates alters the perspective of buyers and investors. According to BMO, housing prices for purchasers go from being priced with mortgages at 1.5 percent to being priced with mortgages between 3.75 percent and 5.4 percent. In the event that housing prices remain flat and incomes continue to rise, prices will need to fall by between 10 and 20 percent for affordability to remain at its current level. That level may not have been able to be maintained over the long term, which would have meant that prices would have to go further lower. Investors face an additional challenge in the form of a reduction in attractiveness when there are higher financing expenses. According to projections provided by BMO, cap rates, often known as the rent collected from being a landlord, would need to increase to between 4 and 5 percent. That is a situation that investors encounter more frequently than not. At the moment, a significant number of investor landlords are not even receiving sufficient income to meet their expenses. They wind up increasing their rents out of their own pocket in exchange for the rise in the value of their home. Up until this point, it has been successful since prices have gone up, but if interest rates were to go down, this wouldn’t be the case. A twenty percent drop in price is necessary in order to bring cap rates back to reasonable levels if there are no gains. At the national level, a market breakdown, of course, varies greatly from place to place. Comparatively speaking, markets such as Alberta have values that aren’t as stretched as those in Ontario. Real Estate Corrections In Canada Took Up To 15 Years To Recover The length of time that a decline in housing prices lasted was extremely variable due to the absence of any predetermined guidelines regarding the matter. In order to

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