The rate of rising home prices in Canada’s largest city slowed slightly in May as a new tax on foreign buyers – one of 16 new measures meant to cool the country’s white-hot housing market – failed to cool the Toronto housing market despite a dramatic rise in new listings, Reuters reported, citing data from the Toronto Real Estate Board.
Authored by Wolf Richter via WolfStreet.com,
“It’s fear.”
During the first two weeks in May, according to preliminary data from Toronto Real Estate Board, home listings surged 47% from the same period last year even as sales plunged 16%. The average selling price dropped 3.3% from April – and this, after a 33% year-over-year spike in home prices in March and a 25% surge in April. Something is happening to Toronto’s blistering house price bubble.
As discussed first thing this morning, the fate of Canada's largest alternative mortgage lender, Home Capital Group, appears to have been decided over the weekend, when in the span of just one week, over 70% of the company's deposit base had been withdrawn, effectively mothballing the business, leaving just a sale or liquidation as the two possible outcomes even as a $2 billion emergency line of credit keeps the company afloat, at least until HCG's $12.8 billion in GICS mature some time over the next 30 to 60 days.
After two years of recurring warnings (both on this website and elsewhere) that Canada's largest alternative (i.e., non-bank) mortgage lender is fundamentally insolvent, kept alive only courtesy of the Canadian housing bubble which until last week had managed to lift all boats, Home Capital Group suffered a spectacular spectacular implosion last week when its stock price crashed by the most on record after HCG revealed that it had taken out an emergency $2 billion line of credit from an unnamed counterparty with an effective rate as high as 22.5%, indicative of a business model on the verge
With Canada's housing bubble popping amid the collapse of the country's largest mortgage lender, it was no surprise that a bailout had been orchestrated, and now we know the source of the $1.5 billion 'loan' - 321,000 retired healthcare workers in Ontario.