But wait … many homebuyers were guaranteed when mortgage rates were much lower.
To Wolfrichter for Wolf Street..
Inflation in Canada surged from 5.7% in February to 6.7% in March. The Bank of Canada has raised its policy rate twice this year, including 50 basis points in April. QT announced that it will start on April 25th.. Bond yields on the Canadian government have skyrocketed. And homebuyers are now facing much higher mortgage rates after years of soaring home prices, causing the worst affordable price crisis ever. Home sales in March fell 16.3% from the previous year’s record, according to CREA. And the supply of homes for sale rose from a historic low to 1.8 months.
In relatively short-term Canada, such as two-year or five-year fixed rates, where the majority of mortgages are floating or fixed rates, short-term interest rates have a greater impact on the housing market than long-term interest rates.
Yield of spikes..
The two-year yield on Canadian government bonds has skyrocketed to 2.58%, the highest since 2008.
The Canadian government’s 10-year bond yield surged to 2.82%, rivaling its 2013 daily high. And after that one day, it will be 2011.
Wait a minute…
Many homebuyers still got the mortgage rates guaranteed when they first applied for a mortgage before the recent surge in interest rates. They are still buying at their lower rates. However, buyers who are currently applying for a mortgage to buy a home in the near future are facing these high mortgage rates.
The most amazing housing bubble..
You now have data on the March housing bubble from the Teranet-National Bank House Price Index. It represents the average closed sales for the three months of January, February and March. That is, from the end of last year, when mortgage rates were still much lower, to the beginning of this year, we are targeting sales where buyers had a guaranteed mortgage rate the previous month. The effects of these high mortgage rates have not yet emerged. But the impact will be apparent over the next few months.
Based on this negative criterion, house prices soared tremendously in some cities, rose in others, and fell in one of them.
HamiltonOntario, Canada’s finest housing bubble today, has hit Vancouver and Toronto in terms of price increases since 2002. Prices rose 3.2% from February to March, up 28.5% year-on-year. The index has risen 307% since January 2005.
Prices fell in late 2017 and remained flat until May 2020. At this time, the BoC’s money-printing orgy and interest rate restraints began, and the sharp rise in prices reignited, making it totally ridiculous.
Inflation of house prices.. The Terranet-National Bank Home Price Index is based on a “repeat sale” method that tracks the price of the same home each time it is sold over a long period of time. You can measure home price inflation by tracking the Canadian dollars it costs to buy the same home over time.
In Metro Vancouver, House prices rose 1.8% this month, up 16.7% year-on-year. Prices began to fall in mid-2018 and the market remained soft until BoC’s miraculous handicraft rescued it in the spring of 2020.
Greater Toronto Area, Home prices surged 3.1% that month, 22.3% year-on-year. In 2017, prices began to fall and leveled off until BoC’s reckless monetary policy miraculously.
In VictoriaHouse prices rose 1.2% that month, up 22.8% year-on-year. Prices were flat from mid-2018 until the BoC’s money printing reignited.
At Winnipeg, House prices rose 0.8% monthly and 11.9% year-on-year. Again, the BoC miracle was able to boost home prices, which had been rocking for seven years.
In montrealHouse prices rose 0.7% monthly and 14.6% year-on-year.
In Ottawa, Home prices rose 2.3% after falling for 6 months. Compared to the previous year, prices increased by 14.6%:
In Halifax Home prices rose ridiculously 5.0% that month, up 34.7% year-on-year. This is the 11th month in a row of year-on-year increases of more than about 30%.
In Quebec City, Home prices fell 0.6% that month, falling for the third straight month. As a result, the year-on-year rate of increase decreased to 6.6%.
In CalgaryHouse prices were almost flat from 2007 to the start of money printing in the spring of 2020, but the index rose 0.5% monthly and 7.9% year-on-year. At this point, the index is slightly above the peak levels of the oil boom 14 years ago.
In Edmonton House prices rose 0.3% monthly and 5.3% year-on-year, but below the 2007 oil boom highs.
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