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A senior economist at BMO Nesbitt Burns recently put together a chart on housing that some people view as sign of impending apocalypse. Other are thrilled about what they see.
Displayed under the headline Your House Makes More Than You Do, the chart tracks house prices in the town of Woodstock, Ont., since the mid-2000s The interesting part comes right at the end – an almost vertical line showing a 31.7 per cent increase in prices in the past year. According to a survey by the human resources consulting firm Morneau Shepell, salaries this year will increase by 1.9 per cent.
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The Canadian Real Estate Association/Haver Analytics/Handout
The chart is like a Rorschach Test of housing in that people see different things when they look at it. I found that out after attaching the chart to a tweet recently. “Yup,” one enthusiastic Twitter user commented. “And, don’t forget it’s tax-free.”
Others are worried. “It’s all out of balance,” one Twitter user said. “Looks like a bitcoin [chart],” said another. “Probably just as sustainable, too.”
The economist behind the chart, Sal Guatieri of BMO Capital Markets, said asset prices normally start to raise red flags when they consistently come in ahead of growth in incomes. But that’s exactly what’s happening in cities across Canada, notably in Ontario. “Draw your own conclusions,” Mr. Guatieri said.
My conclusion is that, thanks in large part to the pandemic, housing prices have come too far, too fast. The pandemic gave us low mortgage rates and a hunger to move to bigger homes with bigger yards. In an abnormal time, we have an abnormal housing market
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Rob’s personal finance reading list
Ten big money mistakes
The internet is packed with lists about money mistakes – this is one of the few with anything new or interesting to offer. Smart takes on saving, spending and earning.
Left the city and never looked back
Seven city dwellers talk about relocating to smaller communities in the pandemic. Read this to better understand the flow of people out of downtowns across the country. These people seem happier. Now for the results of a recent poll suggesting that close to 30 per cent of Canadians would like to move to a smaller community. Finally, some thoughts on how careers might be affected when people move out of the city and close proximity to their place of employment.
Cheap housing does exist, sort of
A listing of housing markets across the country that are above and below the national average price. Below average sounds good until you realize that the January national average resale price was $621,525, up 22.8 per cent over the same month last year.
The people have spoken – food inflation is a thing
Some real life comments from people on their grocery costs following a report from Statistics Canada that food inflation overall rose just 1 per cent in January on a year over year basis.
Ask Rob
Q: I have a question about the lack of a credit score number on my free Equifax report.
A: Your credit report, which you can get for free from credit monitoring companies like Equifax and TransUnion, summarizes your history as a borrower. It’s separate from your credit score, a number on a scale to 900 that reflects how responsible you’ve been in repaying what you owe. Credit scores are increasingly available at no cost from banks, credit card companies and sellers of financial products. Here’s a rundown on credit reports and credit scores from the federal Financial Consumer Agency of Canada.
Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
The Responsible Investment Association offers this screening tool to help connect people with socially responsible investment products.
The money-free zone
A small slice of loveliness – Magnolia, by J.J. Cale.
ICYMI
What I’ve been writing about
- The failure of online brokers in serving retirees goes beyond clogged phone lines (for Globe Unlimited subscribers)
- Today’s freakishly low mortgage rates can’t last. What will pandemic home buyers do when they rise? (for Globe Unlimited subscribers)
- Four ways to make a last-minute RRSP contribution if the stock market is making you nervous … and three to avoid (for Globe Unlimited subscribers)
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: How to survive the gig economy • How to get out of debt • Is now the right time to buy a house? • Crisis-proof your finances • Does investing change during a pandemic? • Can you afford to live downtown? • The cost of kids • Should you move back in with your parents?
- ✔️ A 10-point pandemic personal finance checklist: Create a "wartime" family budget; stop worrying about bank deposits; clean out your big-bank savings account; get relief on car payments; get preapproved for a mortgage; WFH? Save $1,000 a month; save, save, save; build resilience by not anxiety-buying; consider the cost of mortgage deferrals; get ready for the second wave of financial distress.
- 📈 Investing: The case for a tight portfolio of big blue chips dividend stocks; robo-advisers beat human advisors (and they’re thriving), why online banks that are better than the branch; is it time to invest your 2020 TFSA; don’t get your mortgage at a bank; why it’s so hard to invest in preferred shares; stock up on stocks to retire early; and are you following the 10-year rule with your investments?
- 💰 Saving: Food waste is wasted money; why you might regret that SUV and find out if CAA is worth it; juice your PC Optimum points; how an ex-Bay Street lawyer got out of debt; blindly easy tweak to your retirement investments to survive economic downturn; should you buy that latte?
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.