The number of mortgage approvals by Canadian banks are at 2000s levels. Why?
Fewer sales & less refinancing
• Less refinancing: Relatively high mortgage rates discourage refinancing.
• Fewer sales: Large bid-ask gaps in some real estate markets, such as Ontario, have decreased liquidity.
🔹Buyers' bids are based on real incomes.
🔹Sellers' asks are driven by the "home prices always rise" myth.
While buyers' bids are determined by the maximum possible monthly payments based on their incomes, many sellers' asks are more psychological than based on economic facts.
However, low liquidity may eventually push more sellers to cut their asking price, especially those who need to sell.
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