Blog Issue No. 155
Storm Clouds Gathering?
The headline in today’s Globe and Mail “CMHC head defends tougher lending rules”. There’s been a push within the real estate industry to get the government and Canada Mortgage and Housing Corporation (CMHC) to relax the B-20 mortgage stress test rules. The Globe and Mail article reports that rising Canadian household debt levels have fueled the boom in the real estate market over the past few years.
Depending on who you listen to we are either in a bubble that is threatening to burst and take down the Canadian Economy or the government has over-reacted to a Vancouver-Toronto problem and has penalized the rest of the country. I’m not convinced it can be boiled down to this simple either or scenario.
There is no question the mortgage stress test and tougher qualification rules have made it more difficult for many buyers to gain a foothold in today’s real estate market. Quite frankly I’m on side with what Evan Siddel as the head of CMHC has done. The fear that people will take on more debt than can be managed is genuine and real. For the most part we tend to be over optimistic about what we can do or handle and really don’t prepare well for any adverse conditions.
Financial engineering and creative financing all designed to feed sales at all levels in the the finance world was the root cause of the last recession. The Canadian banking system is more risk adverse than that in the US and should remain that way in order to prevent the kind of damage we saw families endure in 2008. The consumer paid a heavy price and those that created the conditions essentially got away scott free.
Don’t get me wrong, I believe everyone should have the right to buy and own real estate. It’s the largest wealth building asset available to the average person. That said, I believe that sometimes people will get in over their head by being impatient and not having enough respect for the risk they are wanting to take on.
I can recall my parents talking about how difficult it was to get into the market back in the day when a little bungalow on Suffolk St. cost them $15,000 in 1965. They scrimped, saved and took on some part time work to make up the extra downpayment so they have the 25% as required. In those days, qualifying for a mortgage wasn’t easy by design.
I don’t believe the Guelph real estate market is in bubble territory. It is a strong seller’s market, no question, and affordability is becoming an issue. The mortgage stress test is part of the control process to help us avoid future problems.
The supply side of the equation needs to be addressed yet. That’s a full post/rant for another day.
Here’s how the Guelph Real Estate Market performed last week:
54 homes were sold, while 80 homes were listed. Of the 54 homes sold 22 or 46.7% sold at or above list price. Not as strong as last year, but 17% more homes sold than the same week in 2018.
The median details look like this:
House: 3 bedroom, 2 bath, 1,490 sq. ft. with a median list price of $582,450
The median sales price was $572,250 or $387.79 per sqft, took 18 days to sell, and home owners were getting 99.17% of their original list price.
Compared to the same week last year we reported 46 homes sold with a median sales price of $485,000 13 days on the market and a sales price/list price ratio of 100%. We had 58.7% of homes selling at or above list price that week.
Thank you for being a subscriber. You may have noticed we’ve made some changes over the past few weeks. Instead of a PDF online report on the sales in each neighbourhood, we’ve now provided a link that will bring up a thumbnail of the house sold. All the details including the sales price are there. There are some drop down buttons on the upper right corner that will allow you to change the view and information provided. We hope you enjoy the more detailed reports.
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Enjoy the weekend.
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