Kingsmill's Investment Miscellanea: Friday December 17th, 2021

December 17, 2021 | Joshua Kingsmill


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On Thursday, January 26th, I’m going to host a seminar looking at the housing market in Canada. Once I have all the details, I will forward: I’ve got a really thoughtful speaker that will present and am looking forward to it.

 

I’m often asked what I think is going to happen to the housing market. I always tend to be on the more cautious side regarding its prospects going forward, and am always wrong! The year isn’t over yet but housing sales in Canada have already surpassed the total sales registered in 2020, once again proving forecasts of a housing bust to be grossly overstated, if not outright wrong.

 

At the onset of the pandemic in 2020, many housing market forecasts painted doom and gloom by projecting the rate of sales and prices to decline. But the reverse has happened, and record high sales and prices are a familiar fixture of most regional housing markets.

 

 

It’s always easier to look back and say: “well of course this was obvious”. We do it all the time when investing in stocks (as some like to call me out on as well!). Real-estate is no different, in terms of looking back and understanding why the ominous predictions were wrong: First, governments globally decided not to let the pandemic kill the economy and responded with unprecedented stimuli, collectively injecting trillions of dollars into the economy. Canada was no exception. Income support programs, mortgage, and rent relief during the early stages of the pandemic really helped the residential real estate sector.

 

Ultra-low mortgage rates also made monthly mortgage payments very affordable even as housing prices climbed. As a result, new homebuyers rushed in, and existing homeowners traded up.

 

Someone pointed out that there is an even easier explanation: housing means much more now than it did before. As I type this in my home-office, housing has become an extension of one’s workplace. It’s also where children do a lot of their learning. Much more of our leisure time is spent at home.

 

We will go into this at length during my presentation, but the strength and resilience of the Canadian housing market is generally a good thing. Still, and for understandable reasons, many are dismayed by the rapid increase in housing prices over the past 20 months.

 

The disconnect between incomes and housing prices has been a source of great resentment for many. This has to be balanced with what would have been a disaster had housing values plummeted as many predicted, for the close to 70% of Canadians who are home owners, (who for most, their home is their largest investment and the preferred channel for savings).

 

So stayed tuned for more details in the upcoming weeks, and keep Wednesday January 26th open @ 4 for this talk.

 

No big predictions this week, although with the reductions in capacity at sporting attendance upcoming, finally the Leafs will be able to have “sold-out” crowds…