{"id":13842,"date":"2019-10-07T11:11:27","date_gmt":"2019-10-07T18:11:27","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=13842"},"modified":"2019-10-06T19:49:56","modified_gmt":"2019-10-07T02:49:56","slug":"wealth-effect-home-price-trends-in-2020","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2019\/10\/wealth-effect-home-price-trends-in-2020\/","title":{"rendered":"Home Price Trends &#038; Wealth Effect in 2020"},"content":{"rendered":"<p style=\"text-align: justify;\">If current home price trends continue, Canadians are going to be feeling wealthier in the coming years. And when Canadians feel wealthier, consumer spending tends to rise leading to better country-wide economic performance.<\/p>\n<p style=\"text-align: justify;\">While this may seem like economics 101-style logic, TD senior economist Brian DePratto took a closer look at just how large an impact this straightforward dynamic has on the Canadian housing market and the country\u2019s broader economic performance.<\/p>\n<p style=\"text-align: justify;\">First, DePratto observes, in a note published Monday, that Canadian consumer spending growth has been dulled recently despite a number of encouraging market fundamentals \u2014 strong population growth, healthy labour markets and relatively low borrowing costs \u2014 that would typically result in robust growth numbers.<\/p>\n<p style=\"text-align: justify;\">There are a few reasons this spending isn\u2019t materializing, including weak consumer demand for automobiles, but the TD economist zeroes in on the country\u2019s housing market as a major contributing cause. Yes, the Canadian housing market has \u201ccome back to life\u201d over the past six months as DePratto puts it. But, this will not be enough to significantly boost consumer spending \u2014 at least not yet.<\/p>\n<p style=\"text-align: justify;\">Last month, another TD report noted that the Canadian housing market still had \u201croom to run\u201d in 2020 even after six straight months of growth. As of August 2019, home sales were up 13 percent compared to the same period last year. The average home sales price also rose by over six percent compared to 2018.<\/p>\n<p style=\"text-align: justify;\">After a tough 2018 and slow start to the year, the housing market is undeniably gaining momentum. And, as DePratto writes, there is an immediate positive economic benefit to more Canadians jumping into the market through consumer spending typically associated with homebuying, like new furniture.<\/p>\n<p style=\"text-align: justify;\">This is an important benefit, but it pales in comparison to the long term benefit of rising home values and a sustained boost in market activity.<\/p>\n<p style=\"text-align: justify;\">In economics, it\u2019s known as the wealth effect.<\/p>\n<p style=\"text-align: justify;\">\u201cMany estimates, including the Bank of Canada\u2019s suggest that each dollar of net housing wealth increases consumer spending by about five cents, roughly two years later,\u201d writes DePratto. \u201cThat may not sound like a lot, but it is important to remember that the effect occurs for all homeowners \u2014 not just those that have recently bought or sold \u2014 a sizeable base in a country with a nearly 70% homeownership rate.\u201d<\/p>\n<p style=\"text-align: justify;\">DePratto points out that, aside from some red hot markets in Quebec, housing wealth has been fairly flat across the country since 2018 as a result of government policy intervention meant to tamp down what was perceived to be a runaway housing market.<\/p>\n<p style=\"text-align: justify;\">Housing wealth is set to resume its upward march this quarter, but the effect of this trend will not be visible until later in 2020, writes DePratto.<\/p>\n<p style=\"text-align: justify;\">This is because of the roughly two-year lag time the economist says is a defining characteristic of the rise in housing wealth and the corresponding increase in consumer spending.<\/p>\n<p style=\"text-align: justify;\">All that is to say, the situation is looking a lot more encouraging down the line as Canadian consumer spending will likely shake off any remaining cobwebs thanks to a reinvigorated housing market.<\/p>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/www.livabl.com\/2019\/10\/canada-economy-wealth-effect-2020-home-values.html\" target=\"_blank\" rel=\"noopener noreferrer\">Canada&#8217;s Economy will Feel The &#8220;Wealth Effect&#8221; in 2020 Thanks to Rising Home Values<\/a> by Sean MacKay | Livabl<\/p>\n","protected":false},"excerpt":{"rendered":"<p>If current home price trends continue, Canadians are going to be feeling wealthier in the coming years. And when Canadians feel wealthier, consumer spending tends to rise leading to better &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2019\/10\/wealth-effect-home-price-trends-in-2020\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-13842","post","type-post","status-publish","format-standard","hentry","category-real-estate"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Home Price Trends &amp; Wealth Effect in 2020 &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2019\/10\/wealth-effect-home-price-trends-in-2020\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Home Price Trends &amp; Wealth Effect in 2020 &#8226; Rory C Real Estate | Oakwyn Realty\" \/>\n<meta name=\"twitter:description\" content=\"If current home price trends continue, Canadians are going to be feeling wealthier in the coming years. 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