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.
I would've given six stars if I could but this thing only let's me give 5 stars. Excellent brokerage in town Harry gives you the right advice, you can count on him for all your financing needs.
Exceptional customer service. Very friendly and caring people to work with. They reaiect your time and your hard earned money so you will be getting honest advise that protects you and your wealth.
Working with Harry was an absolute pleasure. Our mortgage approval was a bit of a process, as we were selling our present home and then using it as our down payment. But unfortunately, the market didn’t allow us to do so and Harry helped us through all of it. He went above and beyond to answer any questions we might have. What we appreciated the most was how hard he worked for us and made our purchase happen.
In today’s market not a lot of brokers can work on a deal like ours. We did our homework to find originators of our debts, but it was a daunting task and we were just going in circles until we called Harry at Majestic Mortgage. Harry answered all our questions in a professional and prompt manner and worked on our debts, he was focused 100% on providing us the best solution. Thanks Harry for all the effort and making the process quick and painless. We couldn't be happier with the service we received, and will definitely be returning to Harry.
-A. Baliswadi & K. Mahabir
It was great to have Harry Saund as our mortgage broker as first time buyers. He was very professional and everything went very smoothly with him. I would definitely recommend him to people looking to get a mortgage.