Real estate, mortgage debt to income ratio improve

Mortgage to income ratio

The ratio has gone from 115% to 105% despite the ongoing pandemic.

This is because of unprecedented government CERB support to the tune of $50
bn

Hotels in NY at risk

4 out of 5 hotels are at risk according to a Bloomberg report.

Restaurants in Canada are also at risk with defaults up 50%. This
foreshadows problems in 2021.

Immigration to play in 2021

Trudeau announced targets of 400,000 immigrants in 2021.

Immigrants typically buy homes within 2 years of arrival. This will put
upward price pressure on Canadian housing.

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Informative Real Estate Articles

REAL ESTATE

An inflection point reached? Record low five-year fixed mortgage rates suddenly in danger of rising
( G&M - Robert Mclister) - Public Policy Issues

For months, we’ve watched lenders slash five-year fixed mortgage rates to levels never seen before. But, we may have come to an inflection point.

Culture change needed to mitigate condo losses: Aviva exec
(Canadian Underwriter - Adam Malik) - Governance

Underwriters are becoming more selective when it comes to the condo business they’re willing to assess and accept, said Lindsey Bellinger, assistant vice president of commercial lines underwriting at Aviva Canada. They’re trying to balance out the mix of business and are very much aware of how much risk they’re accumulating.

Why debt is still a four-letter word for housing markets
(FP - Haider Morranis) - Attitude and Preference Issues

The CMHC report also noted that changes in mortgage debt levels are not explained by the decline in employment. The three cities reporting the highest increase in mortgage debt levels also reported higher-than-average declines in employment growth. This led CMHC to conclude that “changes in employment were not a clear factor in the changes in mortgage debt since the onset of the COVID-19 pandemic.”

Canadian Existing Home Sales (September 2020)
(TD - Rishi Sondhi) - Financial Services Industry Structural Issues

Sales activity was mixed across provinces, with the strongest gains observed in B.C. (+8.0% m/m) and Alberta (+5.7% m/m). In contrast, relatively steep declines were recorded in PEI (-12.2% m/m) and Manitoba (-7.2% m/m). Meanwhile, activity was flat in Ontario.

Bank Of Canada Ended The Mortgage Program That Inflated Prices… Kind Of
(Better Dwelling) - Public Policy Issues

The balance of CMBs held by the BoC is still rising fairly fast, even post “end” of program. The balance held reached $9.722 billion on Nov 11, up 3.45% from a month before. The increase works out to a 1,748.10% rise from the same week last year. If that sounds like an absurdly large increase, that’s because it is.

Canadian Housing Market Gets Reality Check With Drop in Sales
( Bloomberg - Shelly Hagan) - Financial Services Industry Structural Issues

National homes sales declined 0.7% in October from a month earlier, the Canadian Real Estate Association reported Monday. Benchmark prices rose 1% from September, bringing the gain since April to 7%.

CMHC Finds Toronto And Vancouver Mortgage Debt Ratios Fall, But Not As It Seems
(Better Dwelling - Stephen Punwasi) - Financial Services Industry Structural Issues

The CMHC notes under normal circumstances, a falling ratio would mean an improvement. However, during the pandemic, this indicator is a little broken. Currently the ratio is falling in most cities, while primary income has decreased. The state-owned insurer found primary income fell 7.4% in Q2 2020, while mortgage debt was rising. This would normally lead to a rising ratio. Government transfers change this ratio dramatically though.

Canadian Real Estate Sales Slow For The First Time Since The Beginning Of Pandemic
(Better Dwelling - Daniel Wong) - Financial Services Industry Structural Issues

Canadian real estate sales are showing some signs pent-up demand is catching up. CREA data shows 56,186 seasonally adjusted sales in October, down 0.7% from the month before. Unadjusted, there were 59,159 sales in the month, up 32.1% from the same month last year. CREA notes sales “edged back” on the seasonally adjusted count, falling from all-time highs. On the unadjusted numbers, we can see sales are strong. They do seem much stronger due to the shifted comparison period though.

Immigration rebound, low interest rates will shape Canada’s housing market in 2021
(Livabl - Livabl) - Financial Services Industry Structural Issues

In late October, the federal government announced its plans to bring 1.2 million new immigrants to Canada over the next three years to make up for the newcomer shortfall as a result of COVID-19. Mass explains that while economic stimulus by immigration isn’t a new concept, Canada’s 2021-2023 immigration commitment will provide a strong foundation for further growth in the housing market.

Housing affordability is one more thing the COVID-19 pandemic is making worse, and not just in Toronto and Vancouver
( G&M - Rob Carrick) - Financial Services Industry Structural Issues

As the pandemic worsened last month, the housing market put on a display of chunky double-digit price increases in cities across the country.

New York’s hotel crisis puts pressure on $4bn mortgage bond sector
(FT - Joe Rennison) - Risk Management Issues

New York’s hotel industry is in crisis, with four out of five properties underpinning commercial mortgage bonds now showing strain under the weight of coronavirus and investors worrying whether hoteliers will be able to make good on their loans.