Much of my speaking and writing intends to empower people. All of it relates to lifestyle in some way. This month I’m desperate to share my speculation of how the economic impact of COVID-19 in 2020 – 2021 could affect the value of your real estate holdings. I believe residential and commercial real estate prices could see a change by Fall 2020.
Since my specialty is a lifestyle, how and where we live, I am focused on the residential real estate market. Information is very powerful. My experience has been that people who pivot when change is imminent, are forever grateful for their bold decisions. In my opinion, it’s bold decision time.
Statistics Canada reports a record high unemployment rate of 13.7%, topping the previous high of 13.1% set in December 1982. Three million jobs were lost, and about 2.5 million more had their work hours slashed in March and April. Employment declines stop in May, as 289,600 jobs are added with businesses starting to re-open. (1) In the US, it is reported that in May the unemployment rate started to decline from 14.7% now down to 13.3%. This is significant to us of course because the US is our neighbour and biggest trading partner and employs many Canadian citizens.
Data pictures from Statistics Canada don’t lie – the pattern is clear – we will see some kind of recession and the question will be how soon, how severe, and how long-lasting. This focuses me on my clients and prospective clients that were, or should be, intending to sell and move in the next 12 months.
The Consumer Price Index (CPI) fell 0.2% in April, down from a 0.9% gain in March. This was the first year-over-year decline in the CPI since September 2009.
The Market Watch by the Numbers as reported by TRREB for May 2020 shows that the number of sales (activity) in our area is down almost 54% over the same time last year, but that the activity seasonally adjusted has increased by 10% since April – so we are on the uptick for activity (number of sales).
The Selling Price is up 3% year over year, and seasonally adjusted it is up 4.6% compared to April. Again, this is a very positive trend as we come out of COVID-19 – at least for what might only be round one. But what happens a few months from now as the global economic impact of job and business loss hits us? What will be the impact of economic loss on our Selling Prices of residential real estate?
Individual wealth is under attack by a macroeconomic situation. There is a small window of opportunity in real estate to protect your position. My motivation is to empower you. Your motivation to act now, and not wait, is personal. Where you live, and how much money you have to live are at this moment very closely tied to change. Which side of the game change will you be on in September?
On June 5, 2020, CMHC announced they will tighten lending criteria around certain programs (like self-employed) and cited “vulnerabilities in the economy”. CMHC underwrites mortgages, but while this government based insurer is making this move, the others like Genworth Financial, are not making any changes at this time. The mortgage lenders are not making any changes at this time. The sky is not falling…yet.
However, what happens in September may be entirely different as it is the final quarter of the year and our economic reality of the previous 6 months is likely to catch up with us. In September you may have heard, the 6-month mortgage deferral period ends. It’s been dubbed in the media as the “deferral cliff” – a rather ominous choice of words.
Every situation is different, every client is different, therefore every real estate strategy will be a very personal decision. Especially when your real estate investment is also your home. So while I feel compelled to say, in my opinion, we could see an impact in housing prices due to macroeconomics, I am speculating. Yet control is the operative word here – I am giving you information so you can choose what you control, in a macro situation over which you have no control. You may weigh the emotional cost of moving sooner against the chance to realize the best price on real estate assets by acting now.
I am mobilizing my business to cater to people that want to make a bold move this summer. Part of that plan is to ensure people get the information they need for their own situation. So you always have me – I encourage you to call and I’ll help you evaluate the pros and cons of your situation so you can make an informed GO – NO GO decision. PLUS – I bring you experts in many related fields.
Adam Stapley, mortgage advisor extraordinaire jumped on the phone on June 5th to make sure I was updated and knew that the sky is not falling. But, at the same time if you have a mortgage renewal upcoming, or should be listing your home now and not waiting for the Fall, on this we both agree. Now is the time to act, and act boldly.
Both of us excel at acting boldly so I offer you his contact information here so you can have a one-on-one advisory consultation – and since he watches, interprets, and eloquently explains the shifting mortgage and mortgage insurance markets, he is fast becoming my Go-To mortgage broker.
Adam Stapley adamstapley@capitiallend.ca 416-435-7210.
FOOTNOTES
(1) Canadian Economic Dashboard and COVID-19 at http://canada.ca
