Housonomix: Steady Rates, Soaring Rents, and Toronto’s Condo Conundrum 📈🏠📊

Rate Watch: Latest Interest Rates in a Holding Pattern 📈🏠

• The latest interest rates are up in our rate chart above and as you can see they haven’t moved much from earlier this month.

• Bank of Canada’s interest rate decreases were barely making their way through the lenders when this week’s higher-than-expected inflation numbers put a spoke right through them. On seeing the CPI print, bond yields shot right up.

• However, the mortgage rates haven’t increased as a result. For now, we’re seeing slightly decreased discretionary pricing by banks in the last few days.

• If you’re in the market for a purchase it’s always best to lock rates early - as you’re affected by a later increase, but a decrease can be passed on to you.

As always, the exact rates applicable to you, if you’re in the market for a mortgage are heavily customized based on your profile and your situation. To get the best possible rates (and rest assured, we usually can get the lowest rates available in Canada) please reach out to us directly at www.ronmortgages.com

📊 Real Estate Radar: Update on the Canadian Rental Market using May 2024 Rental Data🏘️

In this edition, we’re taking a quick look at the rental situation across Canada and major cities in Ontario. 🏠🇨🇦

Overview:

• 📈 Average asking rents for all residential property types in Canada hit an all-time high of $2,202 in May, surpassing the $2,200 mark for the first time.

• 📊 Annual rent growth stood at 9.3% in May, consistent with the average annual growth rate of 9.1% over the past three years.

• 📉 If you factor in the rent declines during 2020 and 2021, the 5-year average annual growth of rents was 4.7%.

• 🌐 Provincially, Ontario and BC rent increases were comparatively at 0.6% and 2.3% on an annual basis. In other provinces, rents are galloping away with SK recording a 21.4% increase year on year.

Ontario Key Cities Highlights:

• 🏙 Toronto:

  • 1-bedroom: $2,479 (down 2.3% year-over-year)

  • 2-bedroom: $3,284 (down 0.1% year-over-year)

  • Total average rent: $2,784 (down 1% year-over-year)

• 🏢 Mississauga:

  • 1-bedroom: $2,339 (up 1.2% year-over-year)

  • 2-bedroom: $2,702 (down 0.9% year-over-year)

  • Total average rent: $2,610 (up 1% year-over-year)

• 🏘 Burlington:

  • 1-bedroom: $2,196 (down 2.2% year-over-year)

  • 2-bedroom: $2,615 (up 4.0% year-over-year)

• 🏡 Brampton:

  • 1-bedroom: $2,116 (up 7.4% year-over-year)

  • 2-bedroom: $2,415 (down 2.2% year-over-year)

• 🏠 Oshawa:

  • 1-bedroom: $1,884 (up 2.6% year-over-year)

  • 2-bedroom: $2,223 (up 6.8% year-over-year)

Key Takeaways for Ontario:

• 🔍 Despite a slight overall increase, some Ontario cities saw declines in one-bedroom and two-bedroom rents.

• 📈 Cities like Mississauga and Ottawa are experiencing modest rent growth.

• 📉 Guelph and Hamilton saw some of the largest declines in rental rates within the province.

Despite a worsening economy and low affordability among people, the main reason rents are not coming down is the record-high immigration that continues to put a huge strain on housing. 🌍📈 Coupled with high mortgage rates which is forcing buyers to pause their home buying, it’s no wonder that rents are shooting up. 🚀

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🍁 Maple Pulse: 📊 Inflation Spikes, Bold Rate Bets, and Condo Conundrums 🏠

• Canada's Inflation Rises to 2.9%, Dimming Chances of July Rate Cut:

  Canada's inflation rate unexpectedly surged to 2.9% in May, up from 2.7% in April, driven by rising mortgage interest costs and rent. This increase, surpassing economists' forecasts, complicates the Bank of Canada's decision on whether to cut interest rates in July. Traders now see a lower likelihood of a rate cut next month. With mortgage costs up 23% and rents rising nearly 9%, policymakers face a challenging environment as they aim to control inflation without derailing economic stability. (Ron’s take: After this CPI print, Bank of Canada is going to be very nervous about continuing with its rate cut, at least in July. However, we’re still not ruling it out as the Canadian economy is already in a much worse shape than most realize, which puts the BoC in a tight spot.)

• Bold Bets on 300 Basis Points of Fed Cuts by March: Traders in the US rates options market are betting on the Federal Reserve slashing rates by 3 percentage points by early 2025, anticipating a policy rate as low as 2.25%. This contrasts sharply with Fed officials' forecast of just one 0.25% cut this year. This aggressive wager reflects traders hedging against a possible sudden recession. Despite recent inflation concerns, the majority of market participants expect a more measured pace of rate reductions, making these bets particularly bold. (Ron’s take: The US Fed movements are important to us as the Bank of Canada will try and match Fed moves as much as possible and needed. Now, a 300 bps cut by the Fed by March is a tall order. But know this - the US economy has been doing spectacularly well in large part due to Govt. spending and that is almost running out of steam. So expect to start seeing moderating US economic output news soon, which raises the possibility of rate cuts by the Fed.)

• Government's Capital Gains Tax Changes Take Effect Despite Opposition: The Federal government's new capital gains tax measures took effect earlier this week, increasing the taxable portion of capital gains from 50% to two-thirds for amounts over $250,000. Despite opposition from business and physicians' groups, Finance Minister Chrystia Freeland defended the changes as necessary for generational fairness and funding priorities like housing. The government estimates raising $19.4 billion over five years, affecting only 0.13% of Canadians annually. To support entrepreneurship, a reduced inclusion rate is proposed for eligible capital gains up to $2 million. (Ron’s take: We’ve covered this before, the repeated Federal Govt’s 0.13%-Canadians-only-affected-by-capital-gains-hike figure is pure fiction. The only reason we’ve added this story here is to let readers know that this tax is now in effect.)

• Toronto's Condo Market Faces Record Listings Amid Housing Crisis: Toronto's condo market is flooded with a record 8,183 units for sale, many of which are small, investor-owned properties. Despite the housing crisis, these units remain unsold, even after price cuts. The oversupply highlights a failure in housing policies, favouring developers and investors over affordable housing solutions. With homelessness rising, city officials criticize provincial strategies that have exacerbated the imbalance in the housing market, leaving many without homes and empty condos dominating the market. (Ron’s take: If you build match box sized condos that no person, let alone a family want to live-in, and then overprice them, it’s no wonder that despite a housing crisis, they don’t sell. CBC news had a great story about it. Check it out. ) 

• How to Avoid Mortgage-Induced Financial Stress: Stretching budgets for larger mortgages can lead to severe financial stress, with one-third of mortgagors regretting their mortgage size, up 27% from last year. High home prices and optimistic price expectations drive this trend. To mitigate risks, ensure a 5% post-expense buffer and maintain six months of living expenses in savings. Diversify investments for long-term security, and use lines of credit wisely as backup. Don't rely on lenders to set your borrowing limits—plan cautiously to avoid financial strain. (Ron’s take: Very sensible advice here. Canadian mortgage rules are already very conservative in terms of how much mortgage you should take based on income, downpayment etc. It is highly recommended to not stretch even to that extent, and keep a buffer when buying a property. ) 

Mortgage Mastery: Understanding Default and Foreclosure 🏡💼

Defaults/Foreclosures are not a comfortable topic to cover but they are essential to understand by anyone who’s a homeowner or planning to be one regardless of how remote the possibility of it happening is. Just to put things in perspective as per the most recent numbers published by CMHC, at the end of 2023, only 0.13% of mortgages in Ontario were delinquent. With that being said, let’s understand what this process actually entails.

As you can imagine defaulting on mortgage payments can lead to severe consequences, including foreclosure, which can significantly impact your financial stability and credit rating. A borrower is considered in default if they miss one or more mortgage payments and a mortgage is considered delinquent if dues are past 90 days or more. Here’s what you need to know:

• Grace Period: Lenders typically provide a grace period to catch up on missed payments.

• Foreclosure Proceedings: If payments are not made, the lender may initiate foreclosure proceedings.

Foreclosure is the legal process through which a lender takes possession of a property due to the borrower’s inability to meet the mortgage obligations. In Ontario, there are two primary methods of foreclosure:

• Power of Sale: This is more common and allows the lender to sell the property without court involvement, typically resulting in a faster resolution. 🔄

• Judicial Foreclosure: Involves court proceedings and can be more time-consuming and costly. ⚖️

The consequences of foreclosure extend beyond losing your home. Key impacts include:

• Credit Score Damage: Significantly damages your credit score, making it difficult to secure future loans or credit. 📉

• Liability for Shortfall: If the sale of the property does not cover the outstanding mortgage balance, the borrower may be liable for the shortfall. 💸

To avoid foreclosure:

• Communicate with Your Lender: At the first sign of financial trouble, reach out to your lender. 📞

• Explore Options: Look into loan modification, refinancing, or government assistance programs to manage payments. 🛠️

Understanding the implications of default and foreclosure is essential for maintaining financial health and securing your future. If you're struggling with mortgage payments, reach out to us at www.ronmortgages.com to explore your options and protect your home. 🏠

Stay informed and proactive to safeguard your home and financial well-being!

🌞 Real Estate Creativity: Meet the Solar-Powered Wardrobe Spa! 🏡😂

Just like a well-grounded tree, staying informed and prepared empowers you to face any financial storm with resilience and strength.