Mortgage 101 – Real estate markets across Canada | October 2022 Part 2

In this episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on CityNews 95.7 and CityNews 101.1, the guys bring on special guest Chris Turcotte to talk about the state of real estate markets across Canada right now. The three dive into what the demand is like across the country, mortgage default rates, and discuss the differences between a real estate investment vs the right a to shelter

Mortgage 101 with Clinton Wilkins & Todd Veinotte: What are real estate markets like across Canada?

Don’t feel like watching the video? Check out the transcript below.

Transcript:

We have a special guest this segment

Todd Veinotte: [00:00:00:01] Welcome back to Mortgage 101: Your Guide to Homeownership. We’re happy to be on the air on CityNews in Halifax and CityNews in Ottawa. And we have lots to talk about.

Just a reminder, our third segment, our next segment after this one, we’re going to talk about inflation and the Bank of Canada. And then we’re going to wrap up the show talking about first time home buyers. Clinton, that’s exciting and you said there’s some controversy again in the some of your comments about first time home buyers.

Clinton Wilkins: [00:00:27:17] I mean, I like to be controversial. I think you need to have a line, you know, like you need to basically know where you stand and you need to stick by it. So.

Todd Veinotte: [00:00:35:08] Right.

Clinton Wilkins: [00:00:36:12] You know, we’re all good.

Todd Veinotte: [00:00:38:02] And we have a guest, from what I understand. Is that correct?

Clinton Wilkins: [00:00:40:22] We do have a guest.

Todd Veinotte: [00:00:42:17] You getting the guest on the line?

Clinton Wilkins: [00:00:43:27] I have the guest on the line as we speak.

Todd Veinotte: [00:00:46:04] Why don’t you introduce the guest.

Clinton Wilkins: [00:00:47:09] Yeah, it is Chris Turcotte, president from CENTUM Financial Group. I think Chris should be here with us.

Todd Veinotte: [00:00:54:26] Chris, How you doing?

Chris Turcotte, president of CENTUM Financial Group

Chris Turcotte: [00:00:55:16] Hey, guys, can you hear me?

Todd Veinotte: [00:00:56:19] We got ya.

Chris Turcotte: [00:00:57:01] Can you hear me okay?

Todd Veinotte: [00:00:58:12] Yeah, we got you. Can you hear us?

Chris Turcotte: [00:01:01:04] Yeah. Todd, we’ve done this face to face haven’t we?

Todd Veinotte: [00:01:03:20] We have. We had the opportunity to meet. Does anybody ever call you la Présidente, by the way?

Chris Turcotte: [00:01:10:03] They have. They have. But I got to say, buddy, we’ve met a few times, Todd, and doing this strictly over the phone line, I got to tell you, you’ve never looked better.

Todd Veinotte: [00:01:19:02] Oh, there you go. Rim shot.

Clinton Wilkins: [00:01:21:28] I mean, who doesn’t like a good zinger? Let’s be honest.

Todd Veinotte: [00:01:25:15] All right.

Chris Turcotte: [00:01:25:28] That’s coming from the guy that’s calling the shots today. Todd, great to be with you. Clinton, thanks for the opportunity.

Todd Veinotte: [00:01:32:04] Right on. We’re happy to have you. I’m going to let Clinton kind of kind of lead this one, because Clinton, you’ve got some questions in the chamber ready to go.

What are real estate markets like across Canada?

Clinton Wilkins: [00:01:40:02] Yeah. As our listeners know, we are just back fresh from Vancouver. Chris actually lives and works in Vancouver and he oversees what’s going on really across this country. You know I can speak to what’s going on here in the market in Halifax, but really what I want Chris’s insight for is what’s going on across this country, because obviously, Chris, you know, you’re in all kinds of markets.

You’re talking to mortgage professionals and involved with the real estate business as well from across this country. So we really want to kind of give you the floor a little bit and you can give us a little update on what’s going on with the real estate market. I know it’s a bit soft here in Halifax, but how is the rest of the country looking?

Chris Turcotte: [00:02:22:12] Yeah, thanks for listening. And it’s a great question that has kind of a two prong answer, right? Like obviously the media does what it does best. And let’s face it, talking about all the strengths at a time like this doesn’t sell papers and doesn’t make us tune in. So while there is a lot of doom and gloom, what we’re seeing is that if you’re a homeowner and you’re in a variable rate product, obviously your costs are potentially going up and that’s causing a little bit of nervousness. And I’ll be the first to hop on a soapbox and echo anything.

Clinton, I’m quite certain Clinton said in the past, and it’s more important than ever that you have an unbiased approach to what you should do for your mortgage. Going to the bank that you’re currently with and asking for advice, you got to appreciate the fact almost empathetically. But we’re not going to start feeling sorry for the banks just yet. But you’ve got to remember that the banks are going to look out for their best interest first and foremost at a time like this. So I just want to preface it by saying if you have, if you’re owning a home right now and you’re in a variable rate product, yeah, there’s probably a little bit of nervousness.

But the market overall, aside of what we’re reading in the headlines and I can kind of say coast to coast, the market is still healthy and strong. No, I’m not saying we’re hitting record numbers. Obviously we’re not. But I think people kind of look past and they overlook the fact that and I’m biased and I’m obviously a proud Canadian.

But if you look at the actual fundamentals of our market, we still have high demand. And I’m sure you guys have covered this before, there’s people that just are begging to get into the market. They didn’t have the opportunity when the market was crazy. So we still have high demand.

What is the real estate demand like right now?

Clinton Wilkins: [00:04:05:14] Would you say it’s at 2019 levels? Would you say it’s at 2019 levels, Chris? Like where is the demand compared to where it’s been the last couple of years? You know, it’s been like a breakneck amount of volume in 2020 and 2021. And really leading up to this time in 2022. Like, do you think it’s back to like a 2019 type level? Is that what you’re seeing?

Chris Turcotte: [00:04:25:08] Well, what makes it interesting, I think what makes the demand so interesting is the other side of the coin, which we have incredibly low supply right now. So, well, while the demand might not be as high, the supply is uniquely low. So I think that’s the thing: demand is still strong for those looking into the market and the supply is still low.

Labour shortages and increasing wages in the labour market is always a good sign. We still have an incredibly low national employment rate and there’s still a high demand in immigration, right? So things are all looking super positive. But of course, you know, you’ve got to be smart, you’ve got to be conservative. And I think we’re still going to see a price correction because it doesn’t matter.

Despite all these things I’ve just said about an optimistic market, it doesn’t change the fact that if rates have doubled, the prices must come down. But I still think that there’s still people eagerly waiting to get into the market.

Real estate investment vs a right a to shelter

Todd Veinotte: [00:05:25:08] Now, Chris, when it comes to housing, this issue is big in general. We know what at a premium housing is just across the country. So how is the real estate market, I guess, dealing with just so that people can have a place to live? I mean, this is a, there’s this kind of, a bit of a controversy now about a house as an investment.

And there’s that with the juxtaposition of it should fundamentally be a right for people. So how does the industry kind of balance out or does it balance it or is it maximise profit at all costs? What can you tell us about that, if that question makes sense to you?

Chris Turcotte: [00:06:07:09] Yeah, it does. I think there’s a couple of different ways to come out of it. I think first and foremost, we know now is not the time you’re going to exit the market and get that record cash out. You know, I think that ship I think that ship is obviously has obviously sailed.

Where it gets most interesting, and in the limited time we have here today, you know, I think the biggest thing we all have to be thinking about is a couple of fun facts are 78% of Canadians currently have a mortgage with an interest rate under 3%. And it’s no secret that the I think we’re looking at least two more rate increases. Right? So rates are going to get quite high and that’s not going to correct overnight.

So I think there’s still, not to create some doom and gloom, but things that people need to be conscious of is I think there’s going to be some real pain from payment increases. Right? And it’s not going to be corrected in the short term. So as you have 78% of homeowners in interest rates below 3%, well, guess what? Unfortunately, you’ve got to reduce.

People need to know their options and what they can afford

Chris Turcotte: [00:07:16:24] And you’re going to have to renew. There’s a very good chance that you’re going to renew into a higher than normal rate. And that’s where things really, really get interesting. And then you combine that with the rising cost of living and inflation, that is absolutely relentless. So I think what you’re going to see is obviously the cautionary tale.

“I am less concerned about customers and an adjustable rate mortgage”

Again, circling back to a mortgage professional, making sure you understand your options, because I think a lot of people don’t appreciate the fact that they’re going to come up for renewal and they may not qualify under their traditional terms. I think you’re going to see some unique products come out into the marketplace. I think you’re going to see a 40 year amortisation again.

I think banks will have no choice but to potentially offer a 40 year amortisation upon renewal. I think you’re going to see some creative purchasing products to re-stimulate the market again. Yeah, I don’t know if that exactly answers the question, but I think that yeah, I just think people need to be prepared for what this means to them as kind of a go forward.

Clinton Wilkins: [00:08:20:20] Yeah, and honestly, Chris, you hit on a really good point there. I am less concerned about customers and an adjustable rate mortgage because I think they do know that at some point we’re going to be in a recession type situation and the rates will soften.

Who I’m really concerned about are these people that are in these ultra low fixed rates that are coming up for renewal in the next 12 to 18 months. So I think you kind of hit the nail in the coffin. Chris, we’re going to let you have the last word. I’m less concerned about what’s going on in here in Halifax based on rates

I think that maybe we’re a little bit more conservative here and we don’t have these uber high mortgage amounts like our average mortgage, you know, in Halifax is under $400,000. But what are you hearing and seeing in Toronto and Vancouver? They must be having tough times. We have only a few seconds left here.

Mortgage default rates are still low

Chris Turcotte: [00:09:09:04] Yeah, totally. I think there’s a lot of concern there. We have to remember, the default rate is still incredibly low, like even last quarter. And so we all expect those large markets are going to crash first and there’s going to be defaults and everything else. In Canada, we’re still 0.16 of the default rate in Canada. Over the last decade, we’ve never been over 0.4.

And just to put that in perspective for everyone in our closing seconds here, even if we got 10 times worse, which would be the end of days, 10 times worse, we would still not be at the current delinquency rate in the States that is currently 1.96. So, I’d ask people to get out of the headlines, zoom out, take a breath, call a professional.

Todd Veinotte: [00:09:56:21] All right. Thanks, Chris. Appreciate it. Good stuff.

If you have any questions, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.

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