It’s Not Only The American Dream That’s Dead - InvestingChannel

It’s Not Only The American Dream That’s Dead

Proprietary Data Insights

Top Canadian Bank Stock Searches This Month

#1Toronto Dominion Bank9,688
#2Royal Bank of Canada8,012
#3Bank of Nova Scotia6,503
#4Bank of Montreal5,201
#5Canadian Imperial Bank of Commerce3,649
#ad Subscriber Exclusive: Free Q1 Report On Top Stocks

It’s Not Only The American Dream That’s Dead

Here at The Juice, we are on top of two scary American stories.  

The cost of housing and increasing, potentially on the way to unsustainable consumer debt

However, we sometimes have to remind ourselves that these two things aren’t wholly American problems. Sean Hannity’s wildly entertaining  interview with California Governor Gavin Newsom on Fox News reminded us of this. 

When Hannity pushed Newsom and blamed Joe Biden for inflation, Newsom reminded Hannity that inflation is a global problem. That’s an objective fact. He also implied that you can blame a strong economy (that benefits at least some people) for rising prices. 

Not quite as flat objective, however there is a case to be made that prices rise on consumer goods and housing as people continue to create demand and pay a premium for these things. Whether or not this rising tide at the top will lift all boats in the middle and lower rungs of the economy is debatable, but certainly, to some degree, within the world of possibility. 

Setting the rest of the world aside, this dynamic we summarized today and write about regularly exists in almost the exact same way in Canada as it does in the United States. 

Consider the following points:

  • Canadian magazine Macleans recently did a very long piece on “the end of home ownership” in Canada. It’s worth your time. 
  • Among the many illuminating tidbits in the article, the typical property in Metro Vancouver went for $638,000 in 2012. Today, it’ll run you $1.2 million
  • Nationally, “the benchmark property price across Canada more than doubled between 2015 and 2022, from $409,000 to $861,000.”
  • Average wages only increased by 23% during that period, not accounting for inflation

Sounds familiar, eh? 

Then, there’s this: 

  • In a separate story from The Globe and Mail last week, we see that delinquency rates on credit cards and auto loans have hit pre-pandemic levels in Canada. 

The article goes on to notre that mortgage delinquencies remain at record lows in Canada…

… thanks to the extraordinary steps lenders have taken to shield borrowers from the pain of higher rates, such as allowing homeowners to add unpaid interest to a loan’s principal or stop paying down the principal altogether. But both measures extend the amortization period of a mortgage, creating risks down the road.

In other words, you can only put off financial strain and pain for so long before the bottom falls out. This also sounds familiar. 

Mortgage interest rates are on the rise in Canada as well. The increase the country experienced just the week before last means that new homeowners will pay a minimum of $11 more each month for every $100,000 financed. So, on that $861,000 property, we’re talking a monthly mortgage payment of around $100 more today than it was just a couple weeks ago. 

With the 30-year mortgage interest rate in the United State stubbornly hanging out around 7%, this also… sounds familiar. 

The Bottom Line: Misery loves company. And a global – or at least two-thirds’ worth of a continental – perspective. Things in Canada are just as bad (and some might say worse) on housing and debt than they are in the United States. 

If you’re interested in all things Canadian, subscribe to our sister newsletter, The Bacon. Three times a week we deliver a set of news and insights curated for Canadian investors culled from our more than 100 financial media partners.

Want to get content like this directly to your inbox? Then we urge you to sign up for our newsletter here

Related posts

Advisors in Focus- January 6, 2021

Gavin Maguire

Advisors in Focus- February 15, 2021

Gavin Maguire

Advisors in Focus- February 22, 2021

Gavin Maguire

Advisors in Focus- February 28, 2021

Gavin Maguire

Advisors in Focus- March 18, 2021

Gavin Maguire

Advisors in Focus- March 21, 2021

Gavin Maguire