Remember all those pessimists who were calling for a housing bubble or collapse?
If you listened to them and rented for the past eight years, how much would you have lost? How much would your rent have increased since then? And would you still be able to rent that condo or house… or would your landlord possibly have plans to sell it and leave you out in the cold?
We used to expect an economic slowdown or recession every five years. But something happened after the last big recession in 1990. Since then, there has really only been one recession: in 2009.
This came off the heels of the infamous US subprime mortgage crisis that crippled most of the world’s economies for years. Yet, in Canada, we got off relatively easy. Our slowdown lasted less than a year.
Some want to give credit to our strong banking system or strict government regulations. But the truth is, we are – and have always been – around five years behind the US. The truth is, we only started to try out those subprime mortgages when the sky fell on the global financial markets in 2009.
We need to understand that what happens in the US will ultimately impact Canada in some way. And so, with that in mind, let’s look at what has been happening in the US, its economic forecast and how this will impact Canada.
The longest sustained period of growth in the US with no recession was from 1991 to 2001. A full 10 years. The second-longest period of sustained economic expansion is now. From 2009 to…? That’s nine years and counting.
The natural conclusion would be to assume a recession is due or just around the corner. (I’m sure the pessimists would love to hear that.) This is where the message is different. But don’t just take my word for it!
A few weeks ago, I had the honour of enjoying one of my favourite economists – Benjamin Tal – again. He was presenting at the annual national Mortgage Professionals Canada conference.
Benjamin Tal contradicted history in his latest presentation!
His presentation was called “Normalizing the Abnormal”. If we follow the data and history, it would be natural to assume that a recession is due, perhaps even overdue.
But Tal looked deeper. A closer examination of the data shows that, while we’re in the midst of the second-longest positive economic cycle without a recession, we’re only in the midst of the second-strongest bull market economy without a recession in history.
In other words, our economy has not grown all that much. Slow and steady, as they say. Makes me think of that children’s book, The Tortoise and the Hare. Slow and steady won the race. The hare should have won, but the straight-focused tortoise took home the victory. This is true with real estate and mortgages. Stay focused. Don’t get distracted.
I’m sure many of you have noticed Canada has not had as strong a stock market performance as our neighbours to the South have enjoyed over the past two years. While President Trump is taking all the credit, it has more to do with his tax cuts and increased spending. Tal said this is bound to catch up with the US.
The US has a staggering $21 trillion national debt coupled with a $1.2 trillion annual budget deficit, meaning they’re spending $1.2 trillion annually more than the taxes they’re collecting. WOW!
Canada isn’t doing much better. Our national debt has ballooned to $1.5 trillion with an $18 billion annual budget deficit.
LOWEST UNEMPLOYMENT LEVELS IN DECADES…
Unemployment is reported to be below 6% in Canada and at 4% in the US. These are the lowest levels in the past 20-30 years.
While this is welcome news, the data is somewhat skewed. A closer look reveals some troubling stats: In Canada, from 2009 to 2017, the workforce has been aging. And this older group (aged 55+) is working fewer hours (32.2 hours per week) and earning less total annual income.
So, we have lower unemployment levels, but there is less work, which results in lower income. As well, more part-time and quasi full-time jobs are being created. Overall, wages aren’t rising.
Conclusion: The economy has remained steady for the last 10 years with no big peaks or dips. Actually, somewhat boring (yawn). But boring is good when talking about money and the economy. Boring is predictable. It’s also why we’ve had low mortgage rates for so long. And it’s also why home prices are expected to remain healthy.
This was our third property purchase and we have been using Harry’s expertise on all occasions with our mortgage needs. We have found Harry very professional, very thorough and when needed very discreet. He was able to put in action a plan that enabled us to improve our situation. He is non-judgmental and is able to make you feel comfortable and confident. He was very accurate with his paperwork and most importantly he did what he promised at all times.
Thank you again, Harry & Simran, you went above & beyond to help my parents and sister to secure a mortgage at an incredibly low rate. Your knowledge, along with your compassion and patience is above & beyond anyone else. Thank you, thank you, thank you.
Harry is outstanding. He was responsive to our needs, he worked hard & fast on a time-crunch! We live in Shelburne and getting the paperwork to them and having to deal with the over the phone was extremely easy and he even came to a place of our convenience to get the paperwork signed. He got us an excellent rate and we are very pleased. If you are looking for someone to help with your mortgage he is your guy!
I am very pleased to write this note in appreciation of what Harry did for me recently. He struck me as a professional who is very knowledgeable and very resourceful. He was very helpful right from the time of our initial contact. I was having difficulty getting a mortgage due to my bruised credit but he reassured me that there is always a way. He’s very warm and friendly and this combined with his professionalism made me very comfortable and less anxious. The mortgage was approved without any difficulty or obstacles. During the process, he was always there, available 24/7 for any questions. Harry is a one-stop shop for anyone shopping for a mortgage.
Harry’s expertise, professionalism and exceptional customer service made my refinancing process timely and efficient. I had a fairly new job and had a challenging credit, Harry consistently provided me great advice on how I can bring up my score. Even after all this he made the deal happen with an A lender! I believe anyone who uses his services will quickly see the value he provides to his customers.