Oz Buzz #91: Inflation Is Up Again. Will Rates Follow?

January 16, 2024

“Selfishness is not living your life as you wish to live it. Selfishness is wanting others to live their lives as you wish them to.” –Oscar Wilde

RealEstateTalks: Ozzie Talks on Feb 3 and 4 get clarity: Interest rates, mortgage rates, presales … assignments: he talks about it here:  https://www.youtube.com/watch?v=8dbiSytiTuw

Buy YOUR World Outlook ticket here: https://mikesmoneytalks.ca/moneytalks-store/

RealEstateTalks Audio

Listen to all videos on Podcast on Apple cast, Amazon video, Spotify and Ozcast:
https://ozbuzz.ca/category/podcasts/

Listen to Ozbuzz in your car
Topics: On Airbnb, On SRT, On upsizing retirees, on UHT, on interest rates, on markets ahead
On November markets, On Edmonton, Surrey, Victora, Vancouver Island, On interest rates…

AGENDA

• INFLATION IS UP AGAIN. WILL RATES FOLLOW?
• CMHC PREDICTS FORECASTS AND PREDICTIONS
• INTEREST RATES. 
• THE NUMBERS, THE NUMBERS 
• RECESSION? IF SO, WHEN?

ALL OZBUZZ QUESTIONS WILL BE ANSWERED ON FRIDAY JAN. 19/24 YOUTUBE.COM/JUROCKVIDEO

THANK YOU, THANK YOU

I have seldom been felt so appreciated, even loved…(ok ok) with the outpouring on/for my last Ozbuzz (90). From the ‘best ever’ to ‘clarity in a fog’ to ‘nothing is perfect but you are close’…wow…blush. I lapped it up.

I felt so good, that I read it again…hmmm. Must have been my admonition to drink the Beautifuls” Whichever it is – the writer is basking in YOUR sun! 

THEEE CMHCCC MAKES PREDICTIONS

1) We need an additional 3.5 million units of housing in six years. However, CMHC predicts 2.3 million units of housing will be built by 2030. Actually, an additional 3.5 million units of housing are needed (for a total of 5.8 million) by 2030 to reach “affordable” costs of housing

2) What’s affordable? CMHC defines it as 30-44% of disposable household income. Currently in BC and Ontario a household needs to dedicate 60% of their household income to housing although Vancouver was ALWAYS over 60%.

3) That is: While having a 25 year low of construction workers.

4) That is: We are already 400,000 units of housing short from expectations in a mere 18 months. Who knows how short we will be in another four or five years?

5) Plus, housing starts are continuing to fall. November housing starts were down 22%.

6) We have record levels for immigration.

7) Canadians are waiting for rates to drop before buying. BMO poll found that 68% of Canadians are waiting for rates to drop before purchasing.

8) Fixed rates have dropped nearly 1% in the last 100 days.

9) The Bank of Canada is expected to cut rates multiple times in 2024, likely starting in the early spring market. A Deloitte study predicts three cuts in 2024, others predict more. 

Major Point: While being accused of being unfair to Government, I ask: We are not building. Kelowna developer takes two high-rises off the market – as are some others. Yet, we keep importing uncontrolled masses of immigrants plus we have fewer workers…WHO CAN BELIEVE ANY forecasted NUMBERS FROM our GOVERNMENTS. WHO? NO ONE … NOT EVEN ONE!

VICTORIA ALWAYS MAKES THE HEADLINES

First, no one will build multiple units on their lot when they read the regulations they have to adhere to. Also, the left hand does not know the right hand, etc….

From Times Colonist Jan 13: City Hall is rejecting a View Street Rental Development (with no parking) because some units are too small . . . yet these proposed View Street units are still larger than most JANION micro-units that they are forcing owners to rent yearly.

“There were also concerns about the livability of the small units proposed, which ranged from 314 to 523 square feet, and the fact there was no parking for the 266 units. This time, city staff wanted to decline the project again . . . . . There is still no parking and the units remain small”.

Major Point: And yet micro units work and are wanted: Said Charan Sethi, Surrey Developer who built micro suites already 5 years ago: We could have sold the building twice.

YEAR-END THOUGHTS – loved by many (thanks): Learn to say “Commit – Perform – Measure” and hold yourself accountable. Note:

OZZIE OPINES – ALL QUESTIONS AND AMSWERS WILL BE ON YOUTUBE  NOW 

Q: I don’t understand your ‘debt clock’. Who runs it, who verifies it. Where is it? Where does it say it is 3 trillion higher in 2 years?
A: Hmm, you think I make this up? In a speech to one of Canada’s largest companies I showed this in March 2021 – compare to today…

Major Point: This as of January 13, 2024: It hit 34 trillion…all time high. It’s 4 trillion higher! Go look it up…every state is quoted as is bank interest owed and paid etc., etc.

Buy YOUR World Outlook tickets here: mikesmoneytalks.ca/moneytalks-store/

Q: I like your explanation of ‘monetary inflation/deflation’ creates ‘hard asset inflation’ and thus is a monetary event and commodity inflation/deflation is an economic event. But what is the CPI and the PPI counting?
A: Aha! You got it…Consumer Price Index is the government idea of what NOT to count (rent, house prices, oil, gas, flights, and a hundred others) – it counts what is left over. PPI is the Producers Price Index and slightly more accurate. If you buy our argument (Milton Friedman’s argument) look at the monetary inflation above…Bodes well for hard assets like real estate. On the 16^th we have been told the CPI is now at 3.4% (up from 3.1. in Nov).
Commodities crashed between 2014 to 2016 – Real Estate doubled….so the two are NOT related. Plus, neither is related to government core/headline/running/seasonal adjusted/ numbers.

INFLATION IN DECEMBER IS RISING

Canadian CPI rose 3.4 per cent on a year-over-year basis up from a 3.1% increase in November. Shelter costs continue to be a major driver of inflation, with mortgage interest costs up 28.6 per cent and rent up 7.7 per cent from last year in December. The Bank of Canada’s preferred measures of core inflation, which ‘strip out volatile components’ remained between 3.5 and 4 per cent year-over-year in December.

CPI is not coming down, still within the 3-4 percent range since roughly the spring. Shelter and food costs remain well above their pre-pandemic norms. Poor GDP growth, large scale layoffs , mortgage renewals – nay recession – will keep rates down.

But if we get continued high employment, actual economic growth (not likely) avoid a recession (not likely) in the first half of the year the rates could stay the same, not go up or down.

INTEREST RATES

Banks are fighting to get your *good credit rating* business and will CUT your rate down to 5% or even a tad lower…but not if you just had your car repossessed. It’s called a Whisper rate.

So, do NOT sign the banks ‘window rate’ that no one has to pay!

Even if rates head lower (Tiff Macklin says June) TD and BOM say April they will move 1/4% or half % down. But we will NOT see the low, low rates of yesteryear again.

Question, question

• There are condos with 5% down, a 5% rebate on price and getting a waiver on the 5% GST. Is that a good deal?
• Certainly, on the face of it … yes. But ask yourself why does the developer offer this? First and foremost, what is the developer’s reputation and experience. Check it out! Could be that he resold 58% of the units…but the bank wants him to sell 60% and insists. So, he blows out enough units to make up the difference. You could be the lucky guy/girl. But ask yourself – did you check the unit. Likely the best units won’t have the best deal. Study location, in building, floor, distance from noisy elevator, party rooms, garages, etc., etc.

Q: You recommend Edmonton, but prices have not moved in years. Why should they now?

A: You like Edmonton, you LIKE Gretzky. Well, he always shot the PUCK to where it was going to be, not where it was. Same with Edmonton…Where will it be? The residential sales market is well up, prices are up and listings down. Add to that massive inward migration. Add to this: Edmonton office leasing hit five-year high in 2023 as tenants returned. Values grow where people go and they go where the jobs are.

PS: My dear subscribers: 

READ THIS: Can’t handle all questions in writing, Will address any and all online at youtube.com/jurockvideo

As last month:

Love your participation: Lots of questions on EV comments (54!), solar panels comments. Weimar republic seminars. I will deal with ALL questions on the video channel …

Click on subscribe and the ‘thumbs up’ sign – you will be notified on latest updates.

READ THIS:

Yes, I am privileged to be hired to make motivational or business presentations. Next one Feb 3, at the Michael Cambell World Outlook Conference! 

Buy YOUR World Outlook ticket here: https://mikesmoneytalks.ca/moneytalks-store/

THE NUMBERS, THE NUMBERS

BRITISH COLUMBIA
73,109 residential unit sales were recorded in 2023, a 9 per cent decline from 80,506 units sold in 2022. The residential price in BC was $971,144, a 3 per cent decrease from $996,943 recorded the previous year. Total sales dollar volume was $71 billion, a 12 per cent decline from 2022.

“The highest mortgage rates in over 15 years led to the slowest sales in a decade for BC,” said BCREA Chief Economist Brendon Ogmundson.

Major Point: We are well down in sales from the 10-year average…look at the slide.

SNAPSHOT DECEMBER  2023 VANCOUVER AND FRASER VALLEY

We told you last year that, as we compare ourselves in 2023 to the same months in 2022, we will look great! The market collapsed last year – now it has recovered? Well against 2022, yes! BUT NOT AGAINST 2021 AND 2020.
Prices hanging in there compared to 2022. 

Vancouver and Fraser Valley

VANCOUVER 

While SF sales are a tad better, they are still below 32% of the 10-year average for DECEMBER. In fact, in DECEMBER 2023 we sold 377 SF homes. In 2021 we sold 794, in 2020 we sold 1,032 and 2019 pre covid we sold 603.
Vancouver SF and condominium new listings are up 9% and 14% respectively.

Here is a 5-year DECEMBER  2023 over DECEMBER  2022/2021/2020/2019 comparison. 

VANCOUVER – Single Family

Major Point:
Vancouver condo price best DECEMBER  in last 4 years!
But still behind highest monthly prices achieved in last 5 years (see summary above)

FRASER VALLEY – Single Family

Major Point: Fraser Valley – SF Sales are up 16% over 2022. Still, we are a third of sale of 2020 AND still 40% lower than 2019. New listings are up 8% in condos; also, up 19% in SF homes.

MAJOR, MAJOR POINT:

We said last month: Anecdotally, buyers are feeling better psychologically. We hear of full open houses and the odd multiple offer. The thought of possibly lower rates is a motivator. Actually, when the numbers come out end of January, you will see a stronger than anticipated month … because of FOMO again.

We also said last month: January will tell the story, more than any other January in the past.

Watch for psychological market shifts. This could be big. The buyers are there, the immigrants are there … the opportunities are mounting … all we need is a shift in psychology! And until Jan the new increasing inflation was reported … straight up…now wait and see. 

WANT TO PARTICIPATE?

Go to www.realestatetalks.com – Some 2,500 members (47,009 posts) talk real estate. Ozzie created this bulletin board in 1998!
If you are in a real estate related industry of any sort (realtor, appraiser, lawyer, home inspector, etc.) list yourself in Ozzie’s free British Columbia real estate directory at www.bcred.ca.

OZZIE’S YOUTUBE CHANNEL

You can watch all videos and podcasts on my YouTube channel at https://www.youtube.com/jurockvideo. It is a great way to check on what I said 10 years ago.

Moneytalks Podcast

Ozzie, Michael Campbell, Michael Levy and Victor Adair and guests are now on podcasts every week: https://omny.fm/shows/money-talks-with-michael-campbell (See Victor Adair’s Trading Desk notes! https://victoradair.ca/)

OZBUZZ.CA

Why subscribe if I can just go to the website at Ozbuzz.ca? Hot properties and the latest podcasts are DISTRIBUTED TO SUBSCRIBERS FIRST– posted 2 weeks later on website.

HAVE A QUESTION OR COMMENT?

You can reach me at info@ozbuzz.ca with all of your questions, comments and concerns regarding the Oz Buzz publication.