The Vancouver Life Real Estate Podcast

The Vancouver Life podcast exists to educate, inspire, entertain, add value, challenge and ultimately provide guidance to its listeners when it comes to Vancouver Real Estate.

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Jul 6, 2024 • 35min

Canada’s Economic Slump: Rate Cuts, Housing Crisis, and What It Means for Your Wallet!

Weak GDP growth has been a critical factor influencing the Bank of Canada's decision to cut rates recently, with further cuts likely in 2024. In Q1 2023, GDP growth fell short of expectations at 1.7% compared to the forecasted 2.3%. Additionally, Q4 2022 GDP was revised down to flat, indicating zero growth for the latter half of 2023. On a per capita basis, GDP declined by 2.6% year-over-year, marking the steepest drop since the Global Financial Crisis. Employment rates have also plummeted, reaching lows not seen since the GFC and the 2016 Oil Crash, prompting markets to anticipate more rate cuts, with significant probabilities of cuts in July and September.While a 0.25% rate cut does little to improve affordability directly, it does positively affect market sentiment. The Real Estate Outlook index, reflecting confidence in the housing market, is higher than it was between 2015 and 2020, despite national home sales volumes hitting a 20-year low. Affordability has improved slightly, with the typical home payment decreasing by 10%, from $3,550 to $3,200 monthly. This improvement, coupled with a rise in housing inventory and a surge in building permits, especially in the multi-family segment, provides some hope for better affordability in the future.Mortgage delinquency in Ontario has topped $1 billion, although this figure is somewhat misleading as it includes total mortgage amounts rather than just missed payments. Ontario, however, has the lowest delinquency rate in the country at 0.13%. Nationwide, consumer debt has risen to $2.5 trillion, with the average Canadian holding $21,276 in non-mortgage debt. Historical trends suggest that delinquency rates will increase following rate cuts, indicating that arrears rates will likely rise in the coming months.Housing affordability continues to decline, exacerbated by high home prices and significant down payments. Insured mortgages, which were 55% of bank-held mortgage balances in 2015, have decreased to 27% by mid-2023. Raising the limits for insured mortgages could increase demand and push prices even higher, underlining the necessity of constructing more homes to address affordability issues.Canada's infrastructure has struggled to keep pace with population growth, with a notable decline in hospitals and hospital beds per capita since 1995. The number of hospitals per million people has fallen from 31 in 1995 to 18.5 in 2021, and hospital beds per 1,000 people have decreased from 7 in 1976 to 2.5 in 2021.The Canadian economy is either in or near a recession, with unemployment rising from 4.8% to 6.2%. Core inflation remains low, suggesting that the Bank of Canada might need to lower rates further to stimulate the economy.Investor behaviour in the real estate market has shifted, with many offloading condos, particularly in Toronto, due to a surge in completions and negative cash flow. The condo market is expected to see price drops as more units are completed in 2025 and 2026. Improved affordability and lower rates could eventually make investment properties appealing again, but not until they approach positive cash flow. _________________________________ Contact Us To Book Your Private Consultation: 📆 https://calendly.com/thevancouverlife Dan Wurtele, PREC, REIA 604.809.0834 dan@thevancouverlife.com Ryan Dash PREC 778.898.0089 ryan@thevancouverlife.com www.thevancouverlife.com

Jun 8, 2024 • 28min

Vancouver Real Estate Market Update for June 2024

The Bank of Canada's recent rate cut has been a significant event, widely appreciated by businesses and mortgage holders. This cut was expected by many who hoped for relief amid economic stress. While rate cuts generally indicate a weakening economy, they are crucial for easing monetary policy to support businesses and individuals. The Bank of Canada (BoC) aims to achieve an overnight rate of 2.75% by the end of next year, which means a substantial 200 basis points reduction over the next 18 months. The central bank's next decision is scheduled for July 24, and it has committed to ongoing data analysis before making further moves.The short-term implications of the rate cut are primarily on market sentiment. Optimism about the economy could spur consumer spending, and pre-approved buyers, previously on the sidelines, may start entering the market. However, with inventory at a four-year high, price increases may be limited in the short term. Lower borrowing costs will make loans more affordable, potentially increasing purchasing power and market activity over the next 6-9 months.In the long term, lower rates can stimulate economic activity by making credit more accessible, encouraging business investments, and reducing unemployment. If the BoC's rate cuts continue, the economy will begin to see a revival, but careful management is necessary to prevent inflation and supply chain pressures.A notable factor influencing the BoC's decision was the record $3.72 billion in quarterly net write-offs by the Big 6 banks, indicating significant financial strain. The majority of these write-offs were in personal loans and credit cards, highlighting consumer financial stress.Detailed May 2024 real estate statistics reveal that total sales were 2,733, down 20% year-over-year and 4% month-over-month. New listings were down 11% month-over-month but a 13% increase year-over-year. Inventory reached 12,908, marking a 7% month-over-month increase and a 39% year-over-year increase! The sales-to-active ratio has slid to 21%, the first drop in six months, indicating a cooling market. The ratio was 17% for detached homes, 29% for townhomes, and 23% for apartments. Prices continued to rise, with the HPI at $1,212,000, up 0.5% month-over-month and 2.3% year-over-year. The median price was $998,000, near its all-time high, while the average price hit a new ATH at $1,348,000.The summer market is expected to be dynamic, with potential opportunities for Buyers amid high inventory levels and lowering rates. However, significant price movements are unlikely until inventory tightens and further rate cuts materialize. Buyers may find a short-term window to act without intense competition, but overall market activity is anticipated to rise as borrowing becomes more affordable. _________________________________ Contact Us To Book Your Private Consultation: 📆 https://calendly.com/thevancouverlife Dan Wurtele, PREC, REIA 604.809.0834 dan@thevancouverlife.com Ryan Dash PREC 778.898.0089 ryan@thevancouverlife.com www.thevancouverlife.com

Jun 1, 2024 • 30min

People, and Money, Leaving Canada

Canada's population has surpassed 41 million, growing at a rate of approximately 4,000 people per day, equating to nearly 1.5 million per year according to StatCan's real-time tracker. This indicates a significant increase, with 480,000 people added in the past two months alone. If this growth rate persists, it will surpass the federal government’s 2024 target. Historically, a 1.2 million annual growth rate strained housing and infrastructure, and the current trend suggests even more rapid growth, potentially leading to further challenges.In March, building permits issued fell by 4% month-over-month, with a 7% decline in single-family homes. This trend undermines the federal goal of constructing 3.8 million homes over the next seven years. Although there is currently a strong pipeline of homes under construction, the decline in new permits suggests a potential future shortage, particularly in populous provinces like Ontario and British Columbia. New home completions are at a seven-year high, but the number of dwellings under construction is declining, indicating fewer new homes will be available in the coming years.Canada’s total active housing inventory rose 6.5% in April, with notable increases in British Columbia (43%) and Ontario (58%). Total available listings now stand at 160,000, up from a low of 90,000 in 2022, but still below the peak of 250,000 in 2015. Alberta, however, saw a 20-year low in inventory, contributing to record-high real estate prices. May's data will be crucial to determine if this inventory spike is an anomaly or the start of a new trend.A recent comment by Prime Minister Justin Trudeau highlighted the government's inclination to protect housing prices rather than making homes more affordable. This stance is seen as a strategy to maintain voter support and economic stability. Measures such as allowing homeowners to defer mortgage payments during the COVID crisis and extending amortizations during rate hikes illustrate this approach. The housing market is unlikely to see significant price reductions regardless of political changes, as no politician would risk campaigning on lowering home values but rather making them more accessible or affordable to buy.The next interest rate announcement on June 5th is highly anticipated. Markets expect a modest rate cut of 0.5% in 2024, starting in July, with a long-term outlook of rates decreasing to 3.5% by 2026 and 3% by 2028. A rate of 3% would stabilize the housing and investment landscape, avoiding extreme lows seen during the Global Financial Crisis and the COVID pandemic. The average and median home prices are currently at all-time highs, with the Home Price Index (HPI) at a two-year high. Despite low sales numbers, the market remains robust with 2,700 sales, marking the fifth-highest total over the past 24 months. _________________________________ Contact Us To Book Your Private Consultation: 📆 https://calendly.com/thevancouverlife Dan Wurtele, PREC, REIA 604.809.0834 dan@thevancouverlife.com Ryan Dash PREC 778.898.0089 ryan@thevancouverlife.com www.thevancouverlife.com

May 25, 2024 • 25min

Inflation Hits 3-Year Low. But Not Enough For Rate Cuts

Inflation has decreased to 2.7% this month, down from 2.9% the previous month. This marks the lowest inflation rate in over three years, specifically since March 2021. At that time, the overnight interest rate was 0.25%. Despite this improvement, shelter costs continue to drive inflation, with increases at 6.4%, up from 4.9% last year. Mortgage interest costs have surged by 24.5%, and rent has risen by 8.2% compared to April last year. When excluding shelter costs from the Consumer Price Index (CPI) basket, inflation would be just 1.2%.This decline in inflation could open the door for a potential interest rate cut at the upcoming June 5th announcement by the Bank of Canada (BoC). However, with the current inflation rate still above the 2% target, sustained reductions to the target level are preferred before any decisive action. The market is pricing in a 55% chance of a rate cut in June, but certainty remains low. The BoC’s approach is reactive, and it could be six months before inflation stabilizes at 2%.In April, the BoC slightly revised its neutral rate, which is now set at 2.25% to 3.25%, up from the previous 2-3% range. This revision, influenced by higher US neutral rates and domestic factors such as higher long-term labor input growth offset by lower productivity growth, suggests a relaxation of stringent economic requirements.The BoC’s updated assessment considers the impact of government debt and population growth on the neutral rate. Increased government debt and more generous public pensions put upward pressure on the neutral rate, suggesting prolonged higher taxes, ongoing inflationary pressure and overall higher prices.The Canada Revenue Agency (CRA) now requires tenants to withhold and remit 25% of their rent if their landlord is a non-resident. This is to ensure the CRA collects taxes owed by foreign property owners. Tenants must also file an NR4 tax form, and failure to comply can result in the tenant being held liable for unpaid taxes, penalties, and interest. This policy faces practical challenges due to the lack of a public beneficial ownership registry, making it difficult for tenants to verify if their landlord is a non-resident. Consequently, tenants could face eviction for not paying full rent if they withhold the 25%.RBC predicts significant interest rate cuts starting in 2024 and going through 2025, with a 25-basis point cut anticipated in June and a total of 200 basis points in cuts by the end of next year. They expect the Canadian dollar to weaken, impacting housing affordability and resale activity. Despite weak affordability, resale activity is expected to pick up mid-year as rates fall. Home prices, which were down 2.6% in 2023, are projected to decrease by another 1% in 2024 before rising by 3.1% in 2025.Active home listings have reached over 13,900, marking a five-year high since September 2019. While this increase in inventory might lead to better deals for buyers, it will take months to absorb this supply. A potential rate cut could temporarily stimulatebuyer activity, particularly in typically slow months like August when motivated sellers might offer better deals. _________________________________ Contact Us To Book Your Private Consultation: 📆 https://calendly.com/thevancouverlife Dan Wurtele, PREC, REIA 604.809.0834 dan@thevancouverlife.com Ryan Dash PREC 778.898.0089 ryan@thevancouverlife.com www.thevancouverlife.com

May 18, 2024 • 28min

Real Estate Market Resilient As Economy Worsens

Despite growing concerns about Canada's economy, including a meager increase in GDP and dwindling consumer confidence, the Bank of Canada (BOC) has yet to implement a rate cut. The lack-luster GDP rise of 0.2% in February fell short of the projected 0.4%, with early data for March indicating stagnation. As a result, Q1 GDP growth is expected to reach only 0.6%, marking the sixth consecutive quarterly decline and a 2% annual contraction in per capita GDP.Despite these troubling indicators, the real estate market in Canada is surprisingly resilient. The Real Estate Outlook Index is at its highest level since rate hikes began two years ago, with record-high prices recorded in provinces such as Alberta, Saskatchewan, Quebec (particularly in Montreal), New Brunswick, Nova Scotia, and Newfoundland/Labrador. This buoyancy is fuelled in part by low per capita home sales in recent years, which are expected to rebound even amidst economic softening. Additionally, a significant portion of potential buyers are waiting for a rate cut before making a move, further propping up sentiment.However, ominous signs persist. Insolvencies in key sectors such as construction, finance/real estate, retail, and accommodation/food services are at their highest levels in a decade. Despite this, market odds of a rate cut in June have fallen to just 35%, down from 80% eight weeks earlier.Mortgage delinquency rates remain relatively low, particularly in Ontario and British Columbia, signaling stability in the residential real estate sector. Yet, this stability could deter the BOC from implementing rate cuts, despite mounting economic challenges.In the U.S., while inflation has shown signs of easing, concerns over consumer spending habits persist. With previous government stimulus savings (over 2.1 trillion dollars) are now exhausted and retailers reporting reduced consumer spending, fears of rising insolvencies and delinquencies loom large.Historical analysis suggests that a rate cut may be overdue, with previous cycles seeing cuts around the 27-month mark. However, there are many policies and decisions that are still contributing to elevated levels of inflation. Trudeau's ambitious plan to increase housing construction faces big obstacles, as housing starts decline despite high demand and the promises that have been made to build 3.9 million homes by 2030.While the market may see opportunities for buyers amid increasing inventory, the average home price in the Greater Vancouver Regional District (GVRD) has reached a new all-time high, despite sustained higher interest rates. This is the case in many different provinces and cities throughout Canada. Overall, while there are indications of economic challenges ahead, slowing GDP, including rising insolvencies and declining consumer spending, factors such as stable real estate markets and historical rate cycle comparisons make the timing of a rate cut more uncertain than they've ever been. _________________________________ Contact Us To Book Your Private Consultation: 📆 https://calendly.com/thevancouverlife Dan Wurtele, PREC, REIA 604.809.0834 dan@thevancouverlife.com Ryan Dash PREC 778.898.0089 ryan@thevancouverlife.com www.thevancouverlife.com

May 11, 2024 • 26min

70% Of Buyers Are Waiting For Interest Rate Cuts

In our discussion with the number 1 mortgage specialist across the country for the Bank of Montreal, we're diving into the heart of the economic landscape, starting with the elephant in the room: interest rates. We discuss the divergence in policy between the US and Canada how it sets the stage for a nuanced debate on balancing growth and while combating inflation. While the US hesitates to lower rates, Canada faces mounting pressure to stimulate its economy. However, the fear of triggering inflationary pressures looms large if the value of the loonie drops, potentially complicating the decision-making process for central banks.Shifting our focus to the real estate market, we begin by scrutinizing key indicators like mortgage pre-approvals and new originations. These metrics provide valuable insights into buyer sentiment and seller confidence, especially at a time when we've seen large shifts in the amount of supply hitting the market. As listings surge and inventory levels rise, the impending question for Vancouver homebuyers becomes whether to wait for potential rate cuts or to act swiftly in a market known for rapid shifts.We also extend into the realm of mortgage choices, where buyers grapple with the decision between fixed and variable rates and what the best path forward looks like. Understanding buyer preferences in this regard is crucial, especially given the evolving interest rate environment and its implications for long-term financial planning.Examining the 5-year Canadian bond yields, we uncover vital clues about where to look at the future of mortgage rates. The recent fluctuations in bond yields offer a glimpse into potential rate adjustments by major banks. However, the uncertainty surrounding the June rate announcement adds another layer of complexity to the discussion, especially as Canada has just revealed it added 90,000 jobs to the economy.The prolonged inversion of the US Treasury yield curve serves as a stark reminder of looming economic uncertainties. Historically, such inversions have often preceded every single recession except one, raising concerns about the broader economic outlook and investor sentiment.In the midst of these macroeconomic discussions, we're also delving into buyer behavior and affordability challenges. As home prices continue to hold at very high levels, buyers are becoming increasingly price-sensitive. Yet, intergenerational wealth transfers and shifting attitudes towards homeownership continue to shape the market dynamics, highlighting the resilience of demand despite affordability constraints.By exploring these interconnected themes, we aim to gain a holistic understanding of the current economic landscape and its implications for the real estate market. Through informed discussions and strategic insights, we can navigate the uncertainties and capitalize on emerging opportunities in this ever-evolving environment. _________________________________ Contact Us To Book Your Private Consultation: 📆 https://calendly.com/thevancouverlife Dan Wurtele, PREC, REIA 604.809.0834 dan@thevancouverlife.com Ryan Dash PREC 778.898.0089 ryan@thevancouverlife.com www.thevancouverlife.com

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