Mortgage Professionals Canada and its Chief Economist Will Dunning produce monthly Housing Market Digests to provide a snapshot and trend analysis of the Canadian – and respective regional – housing markets, content that includes information around housing starts, the resale market, employment trends, interest rates, and more.

Here is the third quarter report for Manitoba:

Resale Market
The pandemic interrupted a strengthening trend in the province’s resale activity. The third quarter has now shown a strong rebound, with the annualized sales rate at a record of 19,100. The recent surge has more than fully offset the very weak activity that was seen during the second quarter, and combined sales for the second plus third quarters were 7% above average (in this calculation, the average sales rate has been adjusted for growth of the population). The provincial performance has been stronger than for all of Canada (combined second and third quarter sales in Canada were 5% below the population-adjusted average.)

Looking at the data in terms of sales per adult, activity in the third quarter was 29% above the long-term average. Extremely low interest rates and the re-opening of the economy have been very supportive for home buying. The flow of new listings into the market has failed to keep up with demand, which has caused the provincial sales-to-new-listings ratio (“SNLR”) to increase sharply. The SNLR has averaged 68% during the past six months, well above the threshold for a “balanced market”, which may be in the range of 58% -this is the level at which process are expected to rise by 2% per year. The emerging imbalance between supply and demand is no resulting in rapid price growth. CREA’s estimate of a typical “benchmark” house price for Winnipeg for the third quarter was 6% higher than a year ago.

Housing Starts
Housing starts fell during the third quarter, to a rate of 6,000, which is midrange in historic terms. The slowdown for starts is largely due to apartments. For low-rises (single-detached, semi-detached, and town homes) activity has varied from month-to-month, but there has been no discernible trend upwards or downwards during the past two years. Starts are occurring at a moderate rate in rural areas.

Employment Trends
Employment continues to recover, with the fifth consecutive large rise in September. Statistics Canada estimates that employment fell by 90,000 during March and April, but since then 78,000 jobs have been regained. As of September, total employment is estimated to be 12,000 (or 1.8%) lower than in February. For all of Canada, the current shortfall is 3.7%

At present, Dunning prefers to watch employment in terms of total hours worked. While there has been a strong rebound, as of September, hours worked in Manitoba were 2.0% lower than a year ago (for all of Canada, the figure is 6.6%)

The worst impacts have been seen in low wage service industries and for younger age groups. This implies that the damage within the housing market will be greater for the rental sector than for home buying. Canada Mortgage and Housing Corporation is currently conducting its annual survey of rental markets across Canada. Unfortunately, CMHC expects that it won’t release the results until January.

Interest Rates
Bond yields remain extremely low and are showing only very small movements. During the past month, the average yield for 5-year Government of Canada bonds has been just 0.36%. Mortgage interest rates have largely adjusted to the plunge in bond yields.

Dunning’s opinion-estimate of a typical advertised “special offer” mortgage interest rate (5-year fixed-rate, advertised by major lenders) is now just 1.9%, by far the lowest-ever (and even lower rates can be negotiated). The spread between mortgage rates and bonds has closed, and at 1.55 points is now below the long-term average of 1.8 points. However, it is similar to the average of 1.49 points for all of 2019. For variable rates, Dunning’s opinion estimate is now 1.8%.

Meanwhile, the mortgage stress test continues to use a ridiculous test rate of 4.79%

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Source – Will Dunning