REAL PRICE of HOUSING of Vancouver, Toronto and Calgary Single Family Detached and the Bank of Canada $CAD Commodity Index & 5 Year Fixed Mortgage
CLICK CHART TO ENLARGE
The chart above shows the "real price" of Vancouver, Toronto & Calgary SFDs when looked at from the point of view of the BoC Canadian Commodity Index (CCI) and Borrowing Costs (retail 5yr Mortgage) which are the main input costs apart from operating expenses and tax.
|
In September 2017 the Toronto data plots found some near term support while the Vancouver bulls continue to blow up the charts. In Calgary, although prices look rational, the pending seasonal slowdown in the energy sector could bring those prices down even more.
|
|
The commodity index (CCI solid black line) had been rising since the spring of 2016 and broke out above the March 2009 Pit of Gloom bottom but well below the July 2008 oil peak. Now it's slowing down with the seasonal shift to lower commodity prices with copper leading the way and oil sliding into its seasonal nadir.
The CCI train wreck into the March 2009 Pit of Gloom saw a 44% crash in just 7 months. Oil is slippery, CMHC is worried, and so is the Department of Finance Canada (DEC 2016). The oil majors are moving out of Alberta.
There should be no more surprise BoC rate cuts if the federal government mandate plan is to use their fiscal powers, but as we know, the government can surprise us at any time, eg: the new Mortgage Stress Test, the CMHC credit tightening and offloading of risk onto the retail lenders; the threat of new chilling tax and CRA penalties and of course policy flip flops by the federal government like its reversal on electoral reform.
The last 8.5 years of ZIRP & NIRP monetary policy combined with CMHC's out-of-control insurance scheme (also add in the BC Gov't Sub Prime Cash give-away) has been a terrible social experiment that has replaced affordable housing with indentured mania. Is there a better way?
The CCI train wreck into the March 2009 Pit of Gloom saw a 44% crash in just 7 months. Oil is slippery, CMHC is worried, and so is the Department of Finance Canada (DEC 2016). The oil majors are moving out of Alberta.
There should be no more surprise BoC rate cuts if the federal government mandate plan is to use their fiscal powers, but as we know, the government can surprise us at any time, eg: the new Mortgage Stress Test, the CMHC credit tightening and offloading of risk onto the retail lenders; the threat of new chilling tax and CRA penalties and of course policy flip flops by the federal government like its reversal on electoral reform.
The last 8.5 years of ZIRP & NIRP monetary policy combined with CMHC's out-of-control insurance scheme (also add in the BC Gov't Sub Prime Cash give-away) has been a terrible social experiment that has replaced affordable housing with indentured mania. Is there a better way?
In a commodity crash, producers lose pricing power as international competitors drop finished prices neutralizing any gains for Canadian exporters from a withering CAD/USD while the +/- 70% of Canadian employees working in the consumer and service sectors look for ways to leverage their deflating earnings at the supermarket and or job fair.
The other major cost input, the retail 5 year fixed mortgage rate (aqua dotted plot line) and last July it moved up off its outstanding record low of 4.64% to 4.84% and this month again to 4.89%, although street vendors are still pushing sub 3% short term mortgages while the stress test weeds out the weak hands.
The fire sale mortgage rates are coming to an end as the major banks push their rates up which forces the real cost of housing (dotted city plot lines) relative to those rates to turn down.
Calgarians are wary of the Trumpster who vows to unleash energy supply 2.0. And when credit is a lifestyle employer as it continues to be in Canada, appraisers will eventually be in demand again.
