Economy Snapshot by Rebecca Awram – February, 2021
Economy Snapshot by Rebecca Awram
RATES
Rates continue to stay low, with the sharpest of them going to high ratio insured purchases. Most lenders end up in pretty much the same place over time. For the same mortgage of course (you can’t compare an insured high ratio purchase to a conventional 30 year refinance). They just don’t all move on the same day. Chasing a rate is usually a waste of your time. Seek a solid mortgage from an awesome lender, with great terms, and you’ll never go wrong. Or, as I like to say to my clients, “Do you want the lowest rate or do you want to pay the least amount of interest?”
CANADIAN ECONOMY
One of my favourite economists that I’ve been following for a long time, Benjamin Tal of CIBC, has commented this week that a post-pandemic population boom will inflame demand for rental units and long term housing. The current weakness in rentals he views as healthy, because the speculation that drove the feverish growth has dissipated. The significant driver of demand is going to be Canadians returning from the US and Hong Kong, and increased immigration targets.
He also comments on the move-up and move-over buyers that we’re currently watching accelerate the housing market. He feels that the trend has been around for awhile, and while the pandemic has expedited it, he does not think it will last. He feels that a huge amount of labour will go back to the office. Not sure I agree, but this guy is rarely wrong, so I’m giving it credence.
A surprising side effect of the pandemic is the largest cash hoard in history. Given the poor track record of Canadian households when it comes to over-borrowing and under-saving, this wasn’t what anyone predicted or expected when covid struck. Yet our household savings rate has hit an all-time high, and by a huge margin, as the savings bubble is staggering in size. It will likely rise to $200 billion when the final quarter is tallied. Curbing spending is good for savings accounts, but not so good for the broader economy that relies on consumers to open their wallets. So it’s a mixed blessing.
US AND GLOBAL ECONOMY
Markets are up around the globe, but have started to calm down. There is a pervasive undercurrent of fear despite the markets’ near all-time highs. The covid peak appears to have passed. Crude prices have trended up on an impressive run, as crude inventories in the US are now below their five year average and nationwide inventories continue to slump. Chinese demand is up also, so thesee are good signs from the world’s two largest energy markets. Gold pricing is little changed, but a big rally this week in the spot price of silver. Tech stocks leading the way in the market.
Like Canada, US personal savings are at a record high, more than double its average since 2000. The US economy already looks to be improving following the large aid package and virus rates are starting to tick down. China is stockpiling chips and chip-making machines to protect itself from a widening US technology ban.
RECENTLY FUNDED CHIP FULLY OPEN MORTGAGE
– mid 70s couple with a $1.3M home
– found ideal downsize home for $600K and needed to act asap
– CHIP Open over both properties to get them the $600k they needed without a subject-to-sale
– Purchase easily completed with no stress of monthly payments
– they transition to the new home, get the previous home ready to list, and sell on their own terms
The clients were able to write on their purchase with no subject to sale clause and have the winning offer! And best of all, they were able to move at their own pace, not pay for storage, and list an empty home that their realtor staged beautifully, probably increasing their sales value also.
