I pre-apologize for the coming alarm bells in this newsletter but sadly we need to talk about the elephant in the room. Tis the season to discuss the seriousness of consumer debt which has hit all time high of 176% debt-to-income. The third quarter numbers are high and unfortunately Equifax has also reported that delinquency rates are on the rise on the unsecured debt up 10% – this doesn’t include mortgages however, consumer spending is up and is tempting to go further down the rabbit hole during Christmas/Boxing sales season.
Here are two unfortunately alarming statistics:
- 11,935 consumers filed for insolvency in September, up 19% from 2018
- 102,203 consumer insolvencies as of Sept 2019, second most for the first nine months of a year record dating back to 1987
If you or anyone you know has let on that they are getting behind or having a bit of trouble they really must action immediately (by way of Mortgage Refinance ideally to avoid sale) so they don’t get behind on their mortgage. A missed credit card is not the end of the world. A missed mortgage payment is though and needs to be treated that way. Let’s also discuss the potential of lower rates as some consumers are still paying in the high 3% close to 4% mortgage rates that were around a couple years ago. Happy to help out, this is nothing to be embarrassed about or avoided. Life happens and debt pay down must again be a focus as we enter what looks like a slowing economic market heading in the new year. More details below…..
It’s lengthy – but important as we chat 2020 market for housing and interest rates. There are opposing forces at work as globally we are seeing major slowdowns happening again in major cities real estate markets but here in the major Canadian market cities – Vancouver/Toronto – we are seeing prices back on the rise and inventory levels shrinking. Many media channels are using language like “surging markets” “slowdown seems to be over”. All nice news of course, and I have seen this since around June this year. We’re very fortunate to be in an isolated in BC and let’s be honest – savings rates if I’m to put my money in the bank are TERRIBLE. Real estate, now back on the upswing, is still providing great returns for the average Vancouverite/Lower Mainlander. But….
There are key indicators coming out of the US that are causing my cautious tale of 2020 only because of looming words like “US recession coming next year”. The US trade wars results are reporting to drop GDP by 0.8% this year and up to 1.4% next. The rippling cause and effect is a further slow down in their housing sector and harder emphasis on their fading job growth statistics. They are calling for a flat/declining in some cities housing market even with a lack of inventory. Globally, 29 countries have gone into negative interest rates if you factor in subtracting their average inflation rate. Alberta and Saskatchewan, accordingly to a number of lenders we work with, is “a mess” right now with the abundance of new construction properties on the market sitting empty and unable to sell. There has been a surging investor flight to gold, probably the single biggest indication that caution is in the wind.
So. While we are optimistic here in GVR & Fraser Valley, and are expecting a strong market in 2020, just, please be cautious, do not stretch. Not even over stretch. Like I mean don’t stretch at all. Pay debts down as fast as humanly possible in 2020 – try as hard as you can to save money and make wise decisions with taxes/corporate structures/write offs etc – it’s not the year for big risks. We are at unprecedented levels of Government/Corporate/Personal debt levels and the scary thing is because we’ve been at these levels for years now many people/institutions are starting to pop (referencing above delinquency rates) It’s like debt from government, corporate and personal has been normalized. If and when we see another recession happen in the coming year or two (12-13 years after 2008, typically recessions are every decade or so) there will be carnage.
Rates are expected to remain flat through the year and if Bank of Canada needs to step in and lower rates, they have created the room to do so with their three increases from a year ago. For now, they are fighting tooth and nail to hold steady.
Flip side!! We could very well see a strong market in 2020 due to one major. It’s election year in the US and you absolutely know that Trump, as part of his re-election campaign, is going to “save the world” with a trade deal with China. He’s set the stage for a phase 1 deal, and that alone could make markets rally. He is going to do something; you just know his ego can’t avoid it! If that happens, my worries of a recession will dissipate. There will be opportunities to scoop up properties and there are great buys out there right now, especially if you’re ok with a bit of a commute to Vancouver. Save money, pay down mortgages, and get ready to buy up some properties if the opportunity arises. Feel free to forward this to colleagues/friends/family and if you would like to discuss your mortgage(s) and real estate goals directly please reply! We have the capacity for more mortgages under management.
Happy Holidays, speak to you next year.