Rob is taking a much-deserved break this week. While he’s away, we’ve collected some of the top real estate stories by our investing and personal finance writers. Always a popular topic with our readers, we’ve seen growing interest as the housing market adjusts to rising rates and recessionary fears. – James Cowan, Investing Editor
Canada’s housing market could crash or soar, but there’s a more likely third option that nobody is talking about
“The most important force to watch is interest rates. The near-zero rates that have helped fuel the massive run-up in Canadian home prices over the past two years are finally on the verge of turning higher. If the Bank of Canada tightens policy as expected, today’s red-hot real estate prices could soon face the cooling impact of higher borrowing costs.
Everyone can spin a scenario about how this clash of forces will turn out. But one possibility that gets surprisingly little attention is the prospect that the market could do something it hasn’t done for a long time – sit still.”
Five signs Canada’s housing market is completely bonkers
“For more than a decade, the most pointless exercise in personal finance has been questioning the rise of house prices. In that time, we’ve had a global financial crisis and two years of a pandemic. Housing ate it all up.
We began 2022 with a new all-time high for average resale house prices that was built on double-digit increases from year-earlier levels. Does this extreme growth make sense?”
How far do housing prices need to fall before the Bank of Canada stops raising interest rates?
“The key, though, is what central bankers deem to be the greater danger – a potential recession or the risk that inflation could become embedded in the economy.
If the past year has taught us anything, it is that central bankers are struggling to stay ahead of inflation. In both Canada and the U.S., prices are rising at their fastest clip in decades.”
Here’s the income you need to afford rent in major Canadian cities
“With the average home price in Canada hitting a record $748,450 in January, Canadians in many parts of the country may find the math of buying versus renting makes for a compelling argument in favour of renting. But another part of the renting equation is likely stumping a growing share of tenants: the comparison between market rents and their own incomes.
In many major cities and even some smaller centres across the country, Canadians would need to make at least $70,000 to afford the average asking rent on a one-bedroom apartment without spending more than 30 per cent or more of their before-tax income on shelter costs, a Globe and Mail analysis found.”
‘It’s a dog-eat-dog world’ as Canada’s housing cool-down helps ignite rental market wars
“The average asking rate on vacant units available on Rentals.ca, a rental listings site, reached $1,888 a month in May. That was up more than 10 per cent from a year ago and nearly 4 per cent from April, the steepest monthly increase since May, 2019, according to a monthly analysis of Rentals.ca listings compiled by Bullpen Research & Consulting Inc.
In Vancouver, which topped the Rentals.ca ranking of most expensive rental markets, the going rate for a two-bedroom unit in June is $3,495, up 24 per cent from the same month last year. In Toronto, renting a two-bedroom unit now costs around $3,000 a month, up more than 21 per cent from a year ago.”
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ICYMI
What we’ve been writing about
- Students are struggling to secure housing in Canada’s overheated rental market
- Have soaring gas prices made summer road trips unaffordable? Here are some ways to save
- Couples should discuss the possibilities of a breakup to avert financial destruction
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Is the middle class dead for millennials and Gen Z? • Gas prices are soaring. Are electric vehicles an affordable solution? • Crypto is booming, but should you invest? • How are young Canadians dealing with soaring rents? • Inflation is squeezing our finances. What can we do about it? • Is a hot housing market squeezing Canadians out of their small towns?
- ✔️ The housing file: How bad is housing affordability? Even a crash won't help • Sell the family home to lock in profit and then rent? Better not • Why young adults can't afford houses: Hard work got you more in the past than it does now • Five reasons you should not buy a house till you're at least 30 • Now more than ever, owning a house is not a retirement plan
- 📈 Investing: The 2022 ETF buyer's guide: Best Canadian equity funds • The 2022 Globe and Mail digital broker ranking: Does the zero-commission revolution flip the script on who's best? • With bonds sinking, conservative investors are waking up to risks they never saw coming • A five-step plan for dealing with the sad fact that almost every investment is falling lately • The best financial advice in advance of retirement? Work on your marriage • One-year GICs are the best deal in town for safety seekers • What to do if the financial plan you paid thousands for disappoints
- 💰 Your money: Are you prepared for the pandemic wealth boom to blow up in our faces? • This hard-working 24-year-old is nailing it financially. But where's the happiness? • Who should and shouldn't worry about the wave of rate increases this year, and what every stressed-out borrower should do right now • Don't make this potentially costly assumption about the CPP Survivor's pension
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
Rob Carrick