The Bank of Canada released its review of the financial system Thursday and warned that it was important to remain vigilant to the risk of household indebtedness.

The bank said that while the mortgage stress test and interest rate hikes have slowed household borrowing and improved credit quality, there are still high levels of indebtedness and a large portion is held by households that are highly indebted.

However, it noted that the share of Canadians falling behind with credit payments is low and steady.

“New measures have curbed borrowing, reduced speculative behaviour in housing markets and made the financial system more resilient. While the fundamentals in the housing sector remain solid overall and the sector should return to growth later this year, we continue to monitor these vulnerabilities closely,” said BoC governor Stephen Poloz.

Another risk to the system

Governor Poloz highlighted rising risk to the financial system from corporate debt, especially among lower-rated companies.

He also said that assessment is needed of the risk from climate change.

The most important risks to Canada’s financial system remain a severe nationwide recession, a large house price correction and a sharp repricing of risk in financial markets.

But the BoC says its recent stress tests found that Canadian banks are in good shape to deal with these scenarios.

“Global uncertainty is rising, and risks to financial stability have edged up in the past year. Still, confidence in the resilience of Canada’s financial system remains high, and we are seeing improvements in some of the key vulnerabilities we’ve been worried about for many years,” said Governor Poloz.

A new program the federal government has announced to subsidize first-time homebuyers isn’t likely to help the market but more likely to harm it.

And not only is it not going to help out the market, but it’s not going to help out new homeowners.

In its recently announced budget, the government is essentially putting the weight of turning around the market on the backs of people just entering the housing market.

Part of the problem with the plan is that we only know what’s happening on the front end. People buying their first home will be eligible for a 5% top up from the from the Canada Mortgage and Housing Corporation (CMHC) to the total cost of a home. That amount increases to 10% for new constructions. To qualify, a household must have a combined income of less than $120,000, and the CMHC will only pick up a maximum of $480,000.

In exchange for this, the housing corporation gets an equity share in your home.

While we know what the government will give new homebuyers, we don’t know what it’s going to cost them down the road. Believe it or not, there’s been no announcement on what interest rates will be offered on the loans, nor what the terms of repayment would be. Complete costing isn’t expected until at least the fall, likely after the federal election.

But the real problem at the heart of this is the measures won’t do anything to help the affordability of homes. It’s not going to decrease the price of housing, and it’s just going to put the burden of propping up the market on the backs of new entrants.

In RBC’s most recent housing affordability report, released in March, the bank said a softer housing market was making houses slightly more affordable, as their national affordability index dropped 0.7 percentage points to 51.9%. (The lower the score, the more affordable homes are.)

“The fourth-quarter relief barely made a dent in Vancouver and Toronto where affordability remains at crisis levels. Owning a home in both of these markets, as well as in Victoria and increasingly Montreal, is a huge stretch for ordinary buyers,” RBC said in a press release.

In Montreal, the bank’s score is 44.5%, and RBC said the situation is not critical just yet.

“Housing affordability is eroding gradually to levels that could potentially pinch buyers—though so far they haven’t shown any sign of balking,” they said.

But with this new CMHC policy, that gradual erosion is likely to turn critical when this new wave of homebuyers crashes into the market.

One of the potential risks with this scenario is called overhang. Essentially, because a new policy has been announced, but hasn’t come into force yet, many Canadians who are likely to qualify are going to decide to put off their purchases. For now, un-bought supply will build up. But as soon as this policy goes into effect, these first-time buyers are going to suck up huge swathes of the housing market, and prices are going to skyrocket.

The new federal program is designed to lower the monthly mortgage payments of new homeowners by what amounts to a few hundred dollars a month. That can make a huge difference in the budget of a young family, but to do this, the government is putting their hands in the pockets of new homeowners for an unspecified amount, while at the same time risking further unaffordability in the housing market.

They could have had the same effect—lowering monthly payments—by re-introducing 30-year amortizations. Instead, they’ve kept the limit for CMHC-insured mortgages set to 25 years.

The shorter amortizations coupled with the continuation of the strict stress-testing rules, covered extensively in recent North East Mortgages blog posts, puts pressure on people on the lower end of the market. The stress test makes sure you can’t just handle the rate you’re signing on for, but makes sure you can handle an additional 2 percentage on top of it.

The rules the government has passed in the last few years have made it more difficult for new buyers and established buyers alike. They’ve also made it hard for people to refinance their more toxic debt, putting them into situations far riskier than the relative rarity of mortgage default.

Adjusting those rules would have a wider effect and give more people the step up they need to enter the housing market.

If the government really wanted to help with the affordability of homes, they have plenty of better options. This narrow measure is going to end up causing more harm than good.

Busy lives and the changing trends in how we get around is driving greater demand for homes close to good transit links.

In a new survey released Tuesday, 28% of ‘modern family’ homeowners in major Canadian metros said that transit-friendliness is one of their top 3 homebuying criteria.

Sotheby’s International Realty Canada and Mustel Group’s Modern Family Home Ownership Trends Report: Neighbourhoods “in Transit” shows that transit links are more important than car-friendliness (17%) with cycle-friendly neighbourhoods trailing on 4%.

“Transportation and housing have always been inextricably linked. Investments into any transportation infrastracture, whether rapid transit, bus lines, roads, or bikelanes, not only have a direct impact on a community’s quality of life, but often, real estate values,” says Brad Henderson, President and CEO, Sotheby’s International Realty Canada.

In Toronto and Vancouver, the importance of transit-friendly neighbourhoods was a priority for around 3 in 10 homebuyers, far outpacing the 13% in Vancouver and 17% in Toronto who rank car-friendliness as a leading location factor.

“The importance that many of today’s young families are placing on neighbourhood public transit access when home buying reflects changing attitudes and values, the strains of cost of living, as well as improvements to transit infrastructure made to date. These priorities also point to what this influential group of buyers will deem prime real estate locations in the future,” added Henderson.

Cutting the commute
As work-life balance becomes increasingly important, living closer to work is a priority for modern families.

More than half (57%) of survey respondents said they had bought a home within 30 minutes commute of their work or school; 15% live within 10 minutes and 42% live 10-29 minutes away.

Those in Calgary (69%) are most likely to live within half an hour of their work or school while this is true for around 6 in 10 in Vancouver, Montreal, and Toronto.

Young urban families living in Toronto and Vancouver are the most likely to have purchased a home with a commute time of over an hour, at rates of 12% and 13% respectively.

Staying safe

Safety remains the top priority for homebuyers across all regions and overall 48% said safety was a top 3 location factor.

This rises to 45% of modern families in Vancouver, 50% in Calgary, 51% in Toronto and 46% in Montreal.

“Metropolitan areas across Canada have been grappling with balancing the needs of growing populations, and various priorities in transportation, ” says Josh O’Neill, General Manager of Mustel Group. “This report sheds light on the specific needs and priorities of young urban families when it comes to the neighbourhoods in which they live and buy real estate, with findings that highlight the importance of the issue of transportation for this cohort.”

The full report can be found at mustelgroup.com

The Fraser Valley continues to be a slower-than-usual housing market but there are some positives.

Sales in April were down 19% year-over-year to 1,383, although that was an increase of 13.3% from March according to MLS data from the Fraser Valley Real Estate Board.

While it was the second-slowest April in 10 years, consumers’ demand for housing is strong despite weakened purchase power compared to before the mortgage stress test.

Darin Germyn, President of the Board, says that certain housing types are performing better than others.

“Detached homes under one million dollars and attached homes – ranging from $400,000 to $700,000 – continue to attract buyers in the Fraser Valley. Townhome sales in Abbotsford increased by almost 60% compared to March and were on par with last year’s April sales,” he said.

Active listings increased 38.9% year-over-year and 12.3% month-over-month to 7,870 by the end of April and there were 3,391 new listings during the month, an 18.1% increase compared to March but down 1.1% compared to April of last year.

“A slower, stable market has had a positive impact on affordability in our region. Prices of typical residential homes in the Fraser Valley have decreased between 5 and 6 per cent in the last year. In the last three months, benchmark prices have either plateaued or have experienced a small recovery,” added Germyn.

Fraser Valley home prices

HPI® Benchmark Price Activity:

• Single Family Detached: At $964,600, the Benchmark price for a single family detached home in the Fraser Valley increased 0.2% compared to March 2019 and decreased 4.8% compared to April 2018.
• Townhomes: At $521,800 the Benchmark price for a townhome in the Fraser Valley in the Fraser Valley increased 0.9% compared to March 2019 and decreased 5.1% compared to April 2018.
• Apartments: At $420,700, the Benchmark price for apartments/condos in the Fraser Valley increased 0.6% compared to March 2019 and decreased 6% compared to April 2018.

Saturday & Sunday
May, 4th & 5th from 2 pm to 4 pm
Bouncy Castle, Lawn Games & Balloons
Desserts & Refreshments

Brand New Award Winning Homes Offering
Luxury, Quality & Style In Ocean Bluff

14149 & 14139 16 Avenue, South Surrey
Back Lane Access
Offered At $1,888,000

Ocean Bluff. Lane Access! Steps to Bayridge, Semiahmoo Schools & beach. Beautifully design crafted ocean view exudes luxury, quality & style. Built by Castleview Homes: 2019 Havan Building Ovation Award Finalist, Homebuilders Association Vancouver, with several letters of reference. 5,040 sq. ft. Main floor 10 ft. ceilings, parlour, cross hall dining room, office & ensuited bdrm, 3 upper level bdrms & view flex room. Ground level daylight 2 bdrm legal suite, plus games room, wine room & guest bdrm. Extensive mill work, gourmet wok kitchen, hardy board siding, concrete between floors, lawn sprinklers, speakers in/out, video security, air conditioning. 6,149 sq. ft. lot. Nicely landscaped, expansive covered back deck. Interiors by Simran Inspirational Interior.

Built by trusted and experienced builders Castleview Homes known for quality and sophistication.
Interiors by Simran Arora, Inspirational Interiors.

The latest reading of Canada’s economy brings both good and bad news for the housing market.

While growth slowed in February – to just 0.1% following a 0.3% rise in January – the weakness will almost certainly rule out any interest rate increases this year.

Statistics Canada’s GDP figures released Tuesday show a near-even split between gains and losses among the 20 main industrial sectors. Among the declining sectors were mining, quarrying, and oil & gas extraction; and the manufacturing sector.

“After roaring out of the gate at the start of the year, growth in the Canadian economy slipped in February. With economic growth remaining subdued, so too will price pressures and this will keep the Bank of Canada on the sidelines into next year,” commented Conference Board of Canada’s Principal Economist Alicia Macdonald.

He added that the data was in line with the Conference Board’s most recent forecast that expects economic growth to remain soft in the first quarter.

The winners and losers
Finance and insurance declined 0.6%, offsetting increases in the previous two months.

Construction was up 0.2%, marking a second gain following seven consecutive decreases. This was driven by increases in residential and industrial building activities.

Real estate, rental and leasing declined 0.2%, the first decrease since February 2018.

This was impacted by activity at offices of real estate agents and brokers which was down 6.6%, the fourth decline in five months due to lower housing resale activity in Ontario, Quebec, and British Columbia.

Retail sales were also up in February, posting their largest gain since last May although the increase was not enough to offset the sectors large decline in January, suggesting that growth in consumer purchases of goods will remain soft in the first quarter.

17th Annual Neighborhood Garage Sale
Sponsored By The Walker Real Estate Team
Saturday, April 27 @ 9:00am

Bell Park:
13896 19A Ave. – fishing poles and tools
13836 19A Ave.- Stoke baby crib and attachments, Boon high chair, play pen, Thule toddler bike seat,
toddler bikes/helmets/toys and much more
1983 138 Str. – household items
13669 19A Ave.- lawn chairs, household items, kid stuff
13651 19 Ave. – small household items, bikes, sporting equipment and furniture
1874 136A Str. – house hold items, books, lamps, ladies clothing, kitchen dishes
13701 18A Ave. – fishing poles and tackle
13768 18A Ave. – household items, bar fridge and tools
13885 18A Ave. – ikea child white desk chair, Norco mountain bike, outdoor shrubs and perennials, household items, large artificial fig tree

Bell Park South:
13826 18 Ave. – power and handle tools for work working and construction, 2 large dog carry crates, beach and surf toys
1722 137A Str. – furniture, women’s clothing, x box, electronics and household items
1729 137A Str. – 3 sets near new tires, adult mountain bikes,1972 Chevy truck parts, tools
1743 137A Str. – 3 family sale, decorative planters, fit bit, copper cookware, china, canner, toys

Chantrell Park Estates:
2061 139 Str. – small household items, lululemon and name brand clothing, 2000 Toyota Corolla VE, 18,000 kms, $1800, motorized scooter and perennial plants
2086 139 Str. – smaller household items and garden plants, computer parts, hardware, books, stationery/office supplies, clothing & some small furniture, stuff for guys like tools, Lots of unique items

Elgin:
2988 141 Str. – tools, camping and marine items, household goodies, lazy boy chair
14099 31A Ave. – renovation items, black 4 burner gas cook top, stainless steel microwave with trim kit, single beds, cloths, small appliances, toys

Morgan Creek:
3263 Crosscreek Crt. – 4 bike: bike rack, electronics, 35 ml camera and lenses, household kitchen items, name brand men’s (x-tall) clothing, ladies clothing size 10-12, teaching materials (books, games, craft items and theme decorations)
3432 Canterbury Dr. – house hold items
16029 Morgan Creek Cres. – folding table with 4 chairs, dog kennels

Ocean Park:
12622 & 12647 19A Ave. – stroller, child rain coat, rain shoes, hockey gear, kitchen stuff, toys and books
13550 14A Ave. – shoes and clothing (new and used), new prom dress with tag, toys, black/white board, kitchen supplies: bread maker, fryer, plates, bowls. Evenflo high chair, bags/handbags, school supplies, various musical instruments, and related supplies/musical books, speakers, antique bike, jewellery phone cases
1955 138 Street – sofas, outdoor tables and chairs, garden tools, kitchen utensils, wine sets, small appliances, bedding, decorations, ornaments

Forest Edge:
14074 24 Ave. – baby products, coffee pots, cups, clothes, shoes, baking utensils, bird cages, chairs, lighting

Meridian By The Sea:
14977 22 Ave. – garden water pipe, sprinkler equipment, ski dryer, baby bed

Morgan Creek:
3608 Sommerset Cres. – car seat, kid bicycle, skate shoes, scooter, bed mattress, iron pot, kettle, piano, stuffed toys, toy speaking tom cat, toy blocks, shopkins, toy train and wood tracks, toy cars, toy bracelets

Dave, Cindy, Amanda and Kimberly Walker
June Cong
22 Year Emerald Master Medallion Winners
HomeLife Benchmark Realty
1 1920 152 Street, South Surrey, B.C. V4N 4N6
604-889-5004
www.WalkerRealEstate.ca

Cindy and Kimberly Walker
Dominion Lending Centres
Valley Financial Specialists
604-889-5004
www.WalkerMortgages.ca

The likelihood of a Bank of Canada interest rate increase appears to be getting pushed further and further beyond the horizon.

The Bank is expected to remain on the sidelines again this week when it makes its scheduled rate announcement on Wednesday.

A recent survey by Reuters suggests economists have had a significant change of heart about the Bank’s plans. Just last month forecasters were calling for quarter-point increase in the third quarter with another hike next year. Now the betting is for no change until early 2020. There is virtually no expectation there will any rate cut before the end of next year.

The findings put the Bank of Canada in line with the U.S. Federal Reserve and other major central banks. World economies have hit a soft spot largely due to trade uncertainties between China and the United States. Canada is also being affected by depressed oil prices and a slowdown in the housing market.

Market watchers will be paying close attention to the Monetary Policy Report that comes with this week’s BoC rate setting. Realtors and mortgage lenders have been pressuring for some loosening of the B20 stress test to allow some life back into the market. The odds are against the Bank advocating for any easing. Canadian households are still carrying record high debt loads and there are growing expectations of a recession within the next two years.

Canadian home buyers continue to accept and adjust to the new realities of the market, but that doesn’t mean they are happy about it.

A home ownership survey conducted earlier this year suggests nearly 40% of homeowners see themselves as being (or having been) “house poor”. That means they are spending more than 30% of their total income on housing; mortgage, taxes, utilities and maintenance. More than 90% of the respondents say that kind of money stress could have mental health effects. While 51% say they would not put themselves in that position, just about all of the other half, 47%, say it would be worth the sacrifice.

This represents an opportunity for brokers who can provide practical advice, tailored to the needs of their clients. Being available and providing information in real time goes a long way to easing anxiety and tensions for a home buyer.

The survey also shows signs that home buyers may be polarizing between those who believe they can go it alone and those who feel they are going to require financial help. The number of buyers who feel they can go solo is 32%. The number planning to get help from family is 28%. The traditional model of buying a home with a partner or spouse has seen a decline, down to 42% compared to 49% in 2017.

The survey finds a full two-thirds of Canadians believe it is better to own than to rent.

The spring season is a mixed one for Canada’s housing markets with some showing gains while others remain under pressure.

More than a year on from the introduction of mortgage stress tests, the impacts are still being felt and new measures to help buyers have not yet taken effect.

Despite some positive economic conditions, the Canadian Real Estate Association reports that activity remains at some of the lowest levels in years.

Home sales via Canadian MLS® Systems edged up 0.9% in March 2019 following a sharp drop in February while actual (not seasonally adjusted) sales activity fell 4.6% year-over-year to the weakest level for the month since 2013; and was also almost 12% below the 10-year average for March.

“March results suggest local market trends are largely in a holding pattern,” said Gregory Klump, CREA’s Chief Economist. “While the mortgage stress test has made access to home financing more challenging, the good news is that continuing job growth remains supportive for housing demand and should eventually translate into stronger home sales activity pending a reduction in household indebtedness.”

Mixed markets
There are some areas where things are improving.

While sales in British Columbia, Alberta and Saskatchewan were more than 20% below their 10-year average for March, activity is running well above-average in Quebec and New Brunswick.

New listings rose 2.1% in March with new supply increasing in about two-thirds of all local markets, led by Winnipeg, Regina, Victoria and elsewhere on Vancouver Island. New listings declined in the GTA, Ottawa and Halifax-Dartmouth.

There were 5.6 months of inventory on a national basis at the end of March 2019.

The national sales-to-new listings ratio eased to 54.2% from 54.9% in February.

Prices are down
The Aggregate Composite MLS Home Price Index declined by 0.5% year-over-year in March, the first decline of that size since September 2009.

In British Columbia, prices were down on a y-o-y basis in Greater Vancouver (-7.7%) the Fraser Valley (-3.9%), and the Okanagan Valley (-0.8%). By contrast, prices rose by 1% in Victoria and by 6.4% elsewhere on Vancouver Island.

For the Greater Golden Horseshoe housing markets tracked by the index, benchmark home prices were up from year-ago levels in Guelph (+6.6%), the Niagara Region (+6.0%), Hamilton-Burlington (+3.7%) the GTA (+2.6%) and Oakville-Milton (+2.3%); but fell in Barrie and District and remained below year-ago levels (-6.1%).

Across the Prairies, supply remains historically elevated relative to sales and home prices remain below year-ago levels. Benchmark prices were down by 4.9% in Calgary, 4.4% in Edmonton, 4.6% in Regina and 2.7% in Saskatoon. The home pricing environment will likely remain weak in these cities until demand and supply become more balanced.

Home prices rose 7.6% y-o-y in Ottawa (led by a 10.4% increase in townhouse/row unit prices), 6.3% in Greater Montreal (led by an 8.1% increase in apartment unit prices) and 2.1% in Greater Moncton (led by a 12.9% increase in apartment unit prices).

Sidelined buyers
“It will be some time before policy measures announced in the recent Federal Budget designed to help first-time homebuyers take effect,” said Jason Stephen, CREA’s President. “In the meantime, many prospective homebuyers remain sidelined by the mortgage stress-test to varying degrees depending on where they are looking to buy.