Weekend Reading: Housing Market Crash Edition

Weekend Reading: Housing Market Crash Edition

Will we see a housing market crash in 2020 and beyond? The Canadian Mortgage and Housing Corporation (CMHC) published its housing market outlook this week and, well, their forecast for home sales and prices look pretty bleak.

Housing starts are expected to see a decline of between 51% to 75%, and not begin to recover until the second half of 2021. Existing home sales are likely to decline somewhere in the range of between 19% to 29% before a recovery in late 2020. And, finally, the forecast for existing home prices is a decline of between 9% and 18% before a recovery in the first half of 2021.

As real estate tends to be regional / local, the greatest expected decline will be felt in Alberta and Saskatchewan thanks to the negative impact of low oil prices. Ontario is expected to see larger declines in sales and prices this year than in BC and Quebec. The Atlantic provinces will see a more modest correction.

The average price for a home in Canada was $488,203 in April 2020 – down about 1.3% from a year ago. But national home sales fell by 56.8% from March to April this year, and the number of newly listed properties decreased by 55.7%.

The bottom line, according to the CMHC housing market outlook, is that the real estate market will feel the effect of COVID-19 until at least 2022.

You can download the CMHC housing market outlook report here.

Since the report’s release, CMHC’s president and CEO Evan Siddall has faced severe backlash from, you guessed it, real estate agents who claim the outlook was “panic-inducing and irresponsible.”

RE/MAX believes real estate prices across Canada will remain stable or experience a modest decline. In other news, your barber thinks you need a haircut, your investment advisor thinks you need to save more, and your insurance broker thinks you’re under-insured.

Evan Siddall defended CMHC’s position in a Tweet.

“They’re whistling past the graveyard and offering no analysis. Here’s ours. You decide.”

Siddall also encouraged readers to question the motives of anyone suggesting that house prices “always go up.”

Obviously forecasts are just that, a best guess as to what may happen in the future. Real estate advocates argue that even though housing starts and sales have plummeted, many sellers will simply wait out the pandemic until the housing market picks up again. They won’t accept an 18% decline in their asking price.

But housing prices have declined by as much (and more) before COVID-19, and this time some homeowners may not have the luxury of waiting.

More than one million homeowners applied to defer their mortgage payments. Eight million Canadians have applied for the Canada Emergency Response Benefit (CERB). Airbnb asked the federal government to bail out its hosts in Canada, a request that was dismissed with a one word response: “No.”

Something has to give, and many of these homeowners will be forced to accept whatever offers come their way.

This Week’s Recap:

No new posts from me this week, but I’m working on another retirement income case study that I hope you’ll enjoy. 

Over on Young & Thrifty I wrote about the difference between Canadian and U.S. listed ETFs.

Mutual funds with deferred sales charges (DSC) are being gradually phased out but many investors are still locked in to this insidious fee schedule. In this post from the archives, I argue that it’s probably best to rip off the band-aid and get rid of your DSC mutual funds.

What I’m Listening To, Reading, and Watching:

I won’t lie, I’ve watched a lot of television since the pandemic hit. We have a treadmill in our basement and when the weather is bad I watch TV while I run. I’m so glad we have Netflix and Crave to pass the time.

I’m catching up on some shows that I never got around to watching while they aired. I’m near the end of season three of The Wire, which has been excellent. My wife and I started also watching Westworld and finished season two. It’s a bit of a mind bender.

For podcasts, I’m thankful that my usual lineup of Animal Spirits, Rational Reminder, and Freakonomics have continued to put out new episodes weekly. Episode 100 of the Rational Reminder featured professor Ken French and is a must listen for investors.

The new season of Against The Rules with Michael Lewis is out. While the first season was about referees and fairness, this season is all about the rise of coaching. It’s probably my favourite podcast at the moment. You should check it out.

My book reading has been in a decline lately. I guess I’m secretly hoping that George R.R. Martin will finally finish Winds of Winter (wishful thinking, I know). If you have a good book recommendation please leave a comment.

Weekend Reading:

Credit Card Genius looks at travel rewards and expiration dates – how to avoid losing your points.

Are you booking or changing a flight? Erica Alini explains all the rules for major Canadian airlines.

Budget travel expert Barry Choi explains why credit card travel insurance may be overrated:

“I personally never rely on my credit card travel insurance for anything travel medical related.”

The Globe and Mail’s Rob Carrick finishes off an excellent series called Pandemic Personal Finance with a 10-point checklist of things you should have done by now to protect or improve your money situation.

One thing every investor should have is an investment policy statement to keep your portfolio in check in good times and bad. Maria at Handful of Thoughts shares her personal investment policy statement and what you need to know about creating your own.

Similarly, Gen Y Money shares how she’s investing during a pandemic

Million Dollar Journey offers a guide to Canadian investing taxes: dividends, interest and capital gains.

Finally, here’s Squawkfox Kerry Taylor with a sobering take on masks, money, and how COVID-19 is changing social norms.

Have a great weekend, everyone!

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  1. GYM on May 30, 2020 at 3:30 pm

    Thanks for the mention Robb!

    Have you watched Ozark on Netflix? We binge watched the most recent season, but it’s pretty dark.

    Yes it would be interesting to see what happens to Canadian housing. People get really fired up/ defensive/ non-objective/ emotional talking about housing prices here in Canada.

    • Robb Engen on June 6, 2020 at 2:34 pm

      Hi GYM, big fan of Ozark and I watched the new season as soon as it came out. Pretty dark is an understatement, but it’s so well done.

      Yes, people have strong opinions on housing prices and it will be interested to see how this plays out.

  2. Maria @ Handful of Thoughts on May 30, 2020 at 4:14 pm

    Thanks for the mention Robb.

    The housing market in Canada is so regional it’s tough to make a blanket statement for the whole country. That being said I think Alberta is in for a tough go for the next bit. As long term buy and hold real estate investor I’m not overly concerned because I have no intention on selling at the moment.

    We signed up for the free trail of Crave and have been binge watching Billions. I’m also enjoying rewatching old episodes of Seinfeld. I forgot how good and funny that show is.

    • Robb Engen on June 6, 2020 at 2:38 pm

      Hi Maria, make no mistake when we talk about housing it’s mostly about Toronto and a close second is Vancouver. Those markets will drive the national average up or down and those are the ones to watch in the coming months.

      Crave + HBO has been a lifesaver as we exhaust our Netflix library 🙂

  3. Julia on May 30, 2020 at 6:10 pm

    If you like biographies try Murdered Midas by Charlotte Gray. Fascinating read on Canada’s mining industry in its infancy and the characters involved.

    • Robb Engen on June 6, 2020 at 2:39 pm

      Many thanks for the tip, Julia!

  4. Dunger on May 30, 2020 at 6:28 pm

    I’m currently watching “the wire” as well. Great series.

    • Kerry (Squawkfox) on June 5, 2020 at 7:38 pm

      Hey you! Thank you so much for sharing my post. I’m watching more TV too. I’m loving Dead Like Me. Don’t judge. 😐 Give your better half a huge hug — I love following Lindsay on Insta. Big love!!!

      • Robb Engen on June 6, 2020 at 2:41 pm

        Hi Kerry, my pleasure. I hope you’re doing well. Hey, dark comedy is the best kind of comedy. I’ll pass along your comments to my better half 🙂

  5. Darby on May 30, 2020 at 7:32 pm

    In your weekly recap you said “I’m working on another retirement income case study that I hope you’ll enjoy.” Are you familiar with the blog ESI Money? It is written by a retired American. He started a series of retirement interviews with readers a while ago. They are excellent but the problem is they are all American interviews. I would love to hear stories from Canadian retirees. I have attached links to the first blog that introduced his idea of doing retirement interviews and the second link is to the first interview. In all so far there are 21 retirement interviews. Is this something that you might consider doing for Canadians?


  6. Alberta Greekgirl on May 30, 2020 at 10:21 pm

    Hi from Greece Robb!

    Really enjoyed this post and your honesty in calling out realtors who don’t want to face facts. Loved the analogy of the barber who thinks you need a haircut. So true. Happy I was able to sell my house privately and give that ridiculous RE commission to my buyer in the form of a price drop.

    I enjoyed learning about what you’re reading and watching too. We pay 25 euros a month here for the fastest broadband available to us here in rural Greece and at 12 Mbps (lol) we are able to stream to our smart tv so we will watch some of the shows you mentioned.

    I agree with the comments about interviewing Canadian retirees. Great idea!

    Thanks again for another great post Robb and also thanks for helping make our dream of an early retirement in Greece on a thin shoestring budget come true. Sooooo glad to be here during this pandemic too. We feel like we dodged a bullet.

    Best wishes.

    • Robb Engen on June 6, 2020 at 2:49 pm

      Hey Alberta Greekgirl, great to hear from you!

      I hope all is well in Greece and that you’re truly living your dream.

  7. Gin on May 31, 2020 at 2:39 pm

    Re a book recommendation. While this is not my typical read, I loved this book. Unique and a wonderful read that will inspire you to go on safari when it is feasible 🙂

    • O Rogers on June 1, 2020 at 10:08 am

      Houses still selling in Surrey BC at asking or above asking prices. But that may also be due to the sky train approvals. Let’s see, how property market reacts.

    • Robb Engen on June 6, 2020 at 2:49 pm

      Many thanks for the recommendation, Gin!

  8. Barry Knapp on May 31, 2020 at 6:07 pm

    Great work Robb. You are helping a lot of people wondering about moola in these challenging times, including myself.
    A funny series to get into is After Life. It is only 2 seasons and only 6 x 1/2 hour episodes each season so an easy commitment. That is if you like Ricky Gervais.

    • Robb Engen on June 6, 2020 at 2:50 pm

      Many thanks Barry, that means a lot! I’ve been meaning to check out After Life – I’ll give it a shot once I get through The Wire.

  9. Shiraz on July 10, 2020 at 11:53 am

    Just catching up on the blogs. Here is the simple math:
    Minimum New arrivals / Immigrants in Canada every year: 250000
    New housing starts every year in Canada: Approx 200000

    Now subtract the housing starts from New Arrivals and see how these new arrivals push up the rents, real estate price. I am not even factoring new births or deaths which might scare people further. Will the demand stop? yes only if supply = demand. Even in post covid era in Vancouver, the vacancy rate is less than 2%. I fear after covid many non american and emerging economies who are badly affected by COVID will look for a better fortune. Guess where they are arriving?

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