14 Mar 2023
Week 158: Two US Banks Imploded. Should Canadians Care?
Week 158: Two US Banks Imploded. Should Canadians Care?
2008 all over again?
What an insane weekend of bank implosions. I gave a brief overview of what happened and how it affects us here in Canada on my Instagram. Go look (or see below if I can figure out how to embed it here).
View this post on Instagram
In the short term, when something like this happens, it creates fear in the market. When people are scared, they move their money into safer investments.
Like government bonds.
And that drives the price of these bonds up.
As the bonds increase in price, their yield is reduced.
Our fixed-rate mortgages are tied to bond yields.
As they come down, so do fixed mortgage rates. Of course, only if the lower yields are sustained.
So this could mean that we’ll see some lower fixed-rate mortgage products offered this week. Or not, but we’ll have to wait and see.
Anyway, back to the bank implosion.
Long story short, a few prominent Venture capitalists warned the businesses they’re invested in to pull their funds from Silicon Valley Bank (SVB) because of some huge losses ($1.8B) they just took and a stock issue to cover those losses that devalued their org by nearly 60%. So much more than that, but this is a real estate blog, not the Financial Times.
That meant that many of the major tech companies would be at risk of being unable to meet payroll obligations, so it doesn’t take a genius to figure out how terrible this could be.
But of course, the Government saved every penny of the deposits held at the bank by Monday morning, so business as usual for most of those companies.
No trickle-down effect of defaults.
But is this just the beginning?
Will there be a run on banks which pretty much guarantees another major economic disaster? A disaster similar to 2008?
I mean, that’s not totally impossible, considering all of the regulations that were rolled back during the former US administration. Under the guise of “helping the little guy,” aka regional banks, the Trump administration rolled back the requirement to have any bank with $50B or more in assets be heavily regulated like the big banks.
He increased that to $250B, essentially removing any regulations to protect consumers after the 2008 financial crisis and making every regional bank, like SVB, a completely unregulated entity.
Nice eh?
We’re in economic uncertainty and serious instability today, but that doesn’t seem to bother too many Torontonians.
Toronto buyers are out in full force as if nothing is happening. But that’s what we do here. It’s not that hard to see how our city will react when things like this happen.
I did a deep dive at the beginning of Covid, which accurately predicted how our real estate market would respond as we progressed through another “unprecedented event.” Have a look at that here.
SVB is not the only bank that was affected. Another one focussed on crypto investments, Signature bank, also tanked. And there will be more.
But if history has anything to say about it, Toronto will ride out this storm just like we did in 2008. This time, the event is not as unprecedented.
The US FED just released their CPI numbers this morning, which showed that they’re still on a deflationary path, but as this Investing.com article points out, many of the core prices continue to rise from food to shelter. So although the US inflation numbers look to have decreased from 6.4% to 6%, many of the day-to-day living costs have increased, so we may be going sideways vs. down. Time will tell. But 6% is definitely in the right direction considering the US was t 9% in June.
The pandemic has changed everything, so we’re now seeing the results of the craziness of 2020-2022. Things won’t ever be the same, but I can tell you one thing: consumers are smarter and more intentional about everything.
From where they live to where they spend their time and money.
Cities like Toronto are even more in demand today than a year ago.
Toronto has arrived on the world stage and isn’t going anywhere.
We have too many good jobs, attractions, schools, and millions of amazing humans.
So to those that want to warn you about Toronto Real Estate and tell you that everything is going to shit, please ignore them and keep your eye on the long-term prize.
Repeat after me: You cannot day trade real estate. Good investors are always looking for smart buying opportunities. And the average homeowner isn’t buying as an investment; they’re making lifestyle decisions that are a great long-term investment.
Keep that in mind, and everything will be fine. You have time!
Have a wonderful day, and I’ll see you next week. Don’t forget to subscribe to the blog so you get this in your inbox asap, and we’ll see you on Youtube!
(please subscribe to the YouTube Channel here, where I go over all of these reports in more detail)
Continue scrolling for charts and numbers for all communities below 🙂
Urban Markets: Downtown & Surrounding Areas
House Average Price: $1,672,600
House Median Price: $1,444,250
346 Active Listings
48 Firm Sales This Week
Months of Inventory (MoI) ~ 1.38 (up from 1.22 last month)
Average Days on Market ~ 10.65
Condo Average Price: $859,339
Condo Median Price: $726,000
1373 Active Listings
99 Firm Sales This Week
MoI ~ 2.41 (up from 2.16 last month)
Average Days on Market (DOM) ~ 25.67
Urban North: Rosedale, Deer Park, Moore Park, Forest Hill, & Lawrence Park
House Average Price: $2,210,000
House Median Price: $2,720,000
104 Active Listings
3 Firm Sales This Week
MoI ~ 2.20 (up from 1.84 last month)
Average Days on Market ~ 4.3
Condo Average Price: $1,590,050
Condo Median Price: $1,187,500
192 Active Listings
10 Firm Sales This Week
MoI ~ 3.17 (up from 2.85 last month)
Average Days on Market ~ 50.5
Leaside, Davisville, Yonge & Eglinton
House Average Price: $2,069,580
House Median Price: $1,710,000
25 Active Listings
9 Firm Sales This Week
MoI ~ 1.05 (down from 1.11)
Average Days on Market ~15.78
Condo Average Price: $789,500
Condo Median Price: $710,000
122 Active Listings
9 Firm Sales This Week
MoI ~ 2.43 (up from 2.01 last mth)
Average Days on Market ~ 17
Birch Cliff
House Average Price: $887,500
House Median Price: $865,000
14 Active Listings
4 Firm Sales This Week
Months of Inventory (MoI) ~ 1.02 (up from 0.74)
Average Days on Market ~ 28
Kingston Rd Corridor to Highland Creek
House Average Price: $1,559,583
House Median Price: $1,380,000
51 Active Listings
7 Firm Sales This Week
Months of Inventory (MoI) ~ 1.16 (up from 0.74)
Average Days on Market ~ 12
Condo Average Price: $603,333
Condo Median Price: $550,000
47 Active Listings
3 Firm Sales This Week
MoI ~ 2.29 (up from 1.81)
Average Days on Market ~ 28.3
