Media headlines created a hysteria over RBC chief economist Robert Hogue’s comments from a couple of weeks ago. The Globe and Mail headlines went viral, touting “RBC economist says correction in Canada’s housing market is over”. The story, which was stuffed behind a paywall, pulled commentary from Hogue’s most recent research which suggested the worst is behind us.
“The July sales numbers from the Canadian Real Estate Association prove it”, he says, after the organization reported that sales rose 3.5% from June’s level.
“Canada’s housing market correction is over and the recovery is on. Slumping markets out west— including Vancouver, Calgary, and Edmonton—are now in early stages of a turnaround. Things are back on track in Toronto.” Adding, “Still, interest rates remain stimulative and healthy population growth via stepped-up immigration will likely continue to put a floor under housing market activity for the next several years.“
Hogue wasn’t the only economist quoted in the article. Senior Canada economist Stephen Brown believes “the Bank of Canada will reduce its key interest rate twice before the end of 2019”.
Regardless of what the Bank of Canada decides to do, Canadian households have already reaped the benefits of easing financial conditions. The recent plunge in bond yields has eased mortgage costs across the nation.
Mortgage credit growth has accelerated for five consecutive months, growing at 3.8% year-over-year. This has helped provide a floor under the housing market, particularly in Vancouver where sales activity on an annual basis has increased for two consecutive months and prices are showing signs of moderation.
Never one to miss out on the action, it appears CIBC has emerged from hibernation. After hammering the brakes this past year and contracting the bank’s domestic mortgage book in each quarter this year, CIBC’s Chief Executive Officer Victor Dodig suggested those days are behind them. “Candidly, I think we went too far left in slowing things down, put the brakes on too hard, and we’re re-adjusting for that.” Dodig added, “We are now looking to create a more robust presence in the mortgage landscape.”
If you have been on the sidelines for the past 18 months and are noticing that prices haven’t come off all that much or you may be in the final stages of saving for a down payment for your principal residence or investment property, now is a great time to wade into the market. To do so, you will need to get pre-approved for a mortgage first.
The Vancouver market is very resilient and we are seeing an uptick in activity, especially in starter level detached homes which we didn’t see a year ago. Using the equity built up in their current home, Vancouver homeowners are moving upmarket from a 2 or 3-bed condo or townhouse into their first detached home.
