Canadian Housing: Buy the Dip or Dead Cat Bounce?

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In an interview to a Quebec investment club, the Bank of Canada governor Tiff Macklim reaffirmed our central bank’s official stance that they were pretty much done with interest rate hikes, at least for now. Canadian economists breathed a collective sigh of relief, as it looked like the damage to our housing market caused by rapidly rising interest rates was coming to an end.

If new data are broadly in line with our forecast and inflation comes down as predicted, then we won’t need to raise rates further,” Macklem said in a speech to financial analysts in Quebec City. “Inflation is turning the corner. Monetary policy is working.”

Bank of Canada governor says no new rate hikes needed if economy develops as expected, FinancialPost.com

Predictably, house pumpers, eager to declare the housing correction over and done with, took this early sign of progress as an excuse to ring the all-clear bell and declare a market bottom, with RBC predicting that they were seeing “early signs the correction is approaching its final stage.”

“October offered another month’s worth of data indicating that the slowdown in Canadian housing markets is coming to an end,” said Shaun Cathcart, Senior Economist at CREA.

Canada Housing Market Forecast: Will Prices Drop in 2023?

I get it. In the face of economic uncertainty, it’s always tempting to ring the all-clear bell when things start to look up. But you have to remember that the people who are making these predictions are in the business of selling real estate. It’s not their job to help you make responsible decisions. It’s their job to trick as many people into buying as possible so they can keep up with their Audi payments.

And it’s easy to make that argument to the casual observer. If home price drops are caused by interest rate hikes, then a pause in interest rate hikes means that the drops should stop, right?

Well, not so fast.

Personally, I think if there is a temporary floor on housing prices, rather than a buying opportunity, we may be seeing a false bottom with further downside coming. As much as the Bank of Canada would like to keep interest rates where they are right now, there are factors that impact interest rates that they can’t control, like things that happen in other countries. Specifically, what’s happening south of the border.

Jobs Jobs Jobs

The January jobs report from the Bureau of Labour Statistics was massive. Economists were expecting some job growth, but in the range of 200,000 or less as the pace of the labour market had been gradually slowing over the second half of 2022. instead, this is what they got.

With 517,000 new jobs added in January 2023 and the unemployment rate at 3.4%, this is a blockbuster report demonstrating that the labor market is more like a bullet train

The US economy added a whopping 517,000 jobs in January, CNN

Their unemployment rate also fell to 3.4%, which is lower than at any point under the Trump administration. In fact, it’s the lowest it’s been in over 50 years!

In short, their economy is on fire!

Which is just…super confusing.

Remember at the beginning of the year, when everyone was 100% sure that a recession was just around the corner? The debate wasn’t over whether it would happen, but when and how bad it would be. Now? The general consensus among market watchers is “What recession?” These are the numbers that show up in economic expansions, not contractions!

So all that’s great news. The US is the world’s biggest economy, and if a significant portion of your portfolio is invested in the US economy (as it should be if you followed our Investment Workshop), then you should be nicely set up to benefit from the good times coming up ahead.

But what does this have to do with our housing market? Perversely, it might actually have the opposite effect. And it all has to do with interest rates.

Like I said above, Canada’s central bank has decided to stop raising the benchmark rate. Up here, there’s a lot of worry about balancing the central bank’s primary goal of taming inflation with not toppling over our housing market. Canadians have gone into so much debt buying up residential real estate that every rate increase has the danger of throwing thousands of people out of their homes and going bankrupt.

But in the US, Americans have learned their lesson after being burnt by 2008 and have kept their borrowing in check. We, on the other hand, learned the opposite lesson.

So now, with the US economy so red-hot and their household debt levels at much more reasonable levels, there’s really no reason for the US central bank to pause their rate hikes anytime soon.

The US federal reserve chair Jerome Powell has said as much, stating that he expects that rate hikes will continue well into next year.

“We didn’t expect it to be this strong,” Powell said of the January jobs report, which showed the US economy added 517,000 jobs. “It kind of shows you why we think that this will be a process that takes a significant period of time.”

Fed Chair Powell: Inflation fight will take ‘a significant period of time’, CNN

So now we have a situation where Canada’s central bank has paused their interest rate hikes out of concern for our housing market, while the US central bank is still going to be keeping its foot on the gas for the foreseeable future. And while you might be tempted to think “So what? What does their interest rate level have to do with us?”

Well, it does have an effect. And that’s because of…

The CAD/USD Exchange Rate

When interest rates start to differ between countries, their currencies get caught in the crossfire. Interest rates affect not just mortgages, but investment returns as well, and if you could make more by simply holding a currency in a savings account risk-free, you’re more likely to want to buy that currency.

This is why Canada’s central bank tries not to deviate their interest rate levels too much from the American one. If the two diverge too much, it messes up the CAD/USD exchange rate, and if that relationship gets too out of whack, it causes a whole lot of problems that impacts the rest of our economy.

Canada’s economy is designed around the CAD/USD exchange rate operating in a range of about $1.20 and $1.40 CAD to USD. We basically sell natural resources like lumber and oil because we have so much of it, and buy food because so much of our beautiful country is, you know, a frozen wasteland for half the damned year. If the Canadian dollar got too strong, our exports would become too expensive. And if our dollar got too weak, the cost of our imported goods would skyrocket. So we can’t allow the exchange rate to fall outside this $1.20-$1.40 range for too long.

Which, I fear, is exactly what’s going to happen. If we pause our interest rates while the Americans keep hiking ours, their currency is going to get more and more attractive relative to ours, and that’s going to weaken the Canadian dollar. And while that might be good news for certain sectors like border towns that rely on American tourists, it’s bad for our economy as a whole because it spikes the cost of our imports.

More Inflation, More Interest Rate Hikes

And that’s going to make our inflation worse. How could it not? We import too much of our food, and that makes our food supply chain dependent on external factors beyond our control. That’s why food prices spiked when Russia invaded Ukraine and drove up the price of oil. That increased cost of gas made the act of importing food more expensive.

A smoking-hot USD would have a similar effect.

As of the time of this writing, the CAD/USD exchange rate is $1.34. We can probably withstand that ticking up for a while, but if that number hits $1.40 our politicians are going to start panicking. Because at that point, they will be forced to choose between the needs of homeowners who are already being hurt by high mortgage rates, and the needs of people who enjoy eating food, which is *check notes* everybody.

And that’s not really a choice. They have the pick the smaller group. Which means raising interest rates even if if causes devastation in the housing market.

Conclusion

Now, don’t get me wrong. I’m not saying this will definitely happen. If the next couple jobs reports out of the US suck, then none of this will happen. But I do want to caution people that just because the Bank of Canada is telegraphing that they’re done with interest rate hikes doesn’t mean that the housing market has found a bottom. Their hand may be forced by factors outside their control.

What do you think? Do you think the Canadian housing market will find a bottom this year? Or is there more pain ahead? Let’s hear what you think in the comments below!


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42 thoughts on “Canadian Housing: Buy the Dip or Dead Cat Bounce?”

  1. Hi team, as we all know, real estate is local, meaning Toronto is it’s own market, Vancouver is it’s own market, etc. and what happens in a specific city has a lot to do with municipal zoning, politics, and so on. Let’s look at what’s driving TO’s insane housing:

    1. Zoning. Green belt and impossible zoning requirements, and the city’s plan to densify housing. TO’s permitting process is slow, very costly, and designed to create denser neighbourhoods (which means detached house permits are really, really, hard to get). The Green Belt ensures that there is a further hard limit on development, particularly for detached homes.

    2. Immigration. TO gets about 100,000 new immigrants on average every year, new people needing new houses. We’re not building anything like 100,000 new detached houses here every year. Immigration drives population growth, about 50% of people who live in TO were born somewhere else so it’s a huge demand push for housing.

    3. Ultralow interest rates: the period 2010 to 2021 had the lowest real interest rates in history, literally, in history. In real terms you could argue the cost of money was negative, meaning borrowing as much as possible was the easiest it ever has been, which meant assets got pushed up to insane valuations.

    4. Speculation. Given 1 – 3, speculation eventually takes over and further adds fuel to the fire. Once you can borrow $1M for virtually free, then make big gains in housing and be rewarded for it, speculation is a profitable business and everyone jumps in the game starting a feedback loop which pushes prices even higher.

    All the metrics for household income, debt:GDP, square foot price etc. are at all time highs in TO. Doesn’t that mean there’s a correction coming? No, not unless several of the factors change. Consider: political situation isn’t going to suddenly allow more development, reduce immigration targets or get rid of the Green Belt. Speculation comes and goes, but it’s always right there ready to start again. Interest rates (monetary policy) is set for national price levels and includes a basket of goods and isn’t targeted towards TO (or Vancouver’s) detached house prices per se, and at these rates it’s still incredibly cheap to borrow in real terms. So, no, there’s no reason to think that this trend stops because the market is not a free market, it’s been created through various policies.

    Various attempts have been made to try to dent the housing market in TO but none of them worked (Wynn’s Fair Housing Act) because they do not take a coordinated government approach (federal, provincial and municipal) and just make a few piecemeal changes which, if anything, only distort the market further (e.g. rent control, the co-ownership plan, both of which either further reduce supply or further increase demand, the exact opposite of what needs to happen). So there’s no real plan to address this housing crisis, nor is there any policy I’ve ever seen yet that will change it.

    So, we’re stuck with this unless there is a serious push from voters to implement real, significant, coordinated policy changes to reduce demand and open up supply. We are a democracy so it can be done but some political party needs to coordinate and champion this, why nobody has made this crisis front and center of their appeal to voters is beyond me, I’d vote for any party with a serious plan. Until then, we are stuck for the foreseeable future with higher and higher prices and less and less affordability.

    1. Thus is a very good analysis. The details vary, but broadly speaking, the same set of dynamics has been happening in California for the last 40 years (Impossible or expensive to build, band aids like rent control, open to immigration). People don’t seem to understand the dynamics behind why real estate is so expensive.

      1. Oh yes, San Francisco is like this exactly. 1. Supply is severely limited through NIBMYism, strict limits on heights of buildings, excessive permitting and zoning restrictions, basically local politics. 2. What interventions in supply have been made have all been to further distort the market, i.e. rent control, which ensures that in the long run the supply of rental buildings in SF will be too low (same thing in every city with rent control, it ensures no profit margin for the builders and so no buildings. Whole seperate post on this). 2. Demand has been stimulated through high paying tech jobs and the same structurally-ultralow interest rates in the US. 3. Speculation takes care of the rest.

        The ‘solutions’ all involve further market distortions through policy, which just end up worsening the problem in the long run by preventing supply from coming on.

        1. I wish the typical person would understand what you are saying. On some level, I think the NIMBYs do, but they don’t care. They’re very selfish, but very passive aggressive about it. They cloak NIMBY-ism in environmentalist garb.

          1. I think NIMBYism persists because lower housing density seems to be more conducive to harmonious human co-existence. The more people you pack into an area the more noise and disputes arise. And most people’s ultimate goal is a single family home. If you pay high rent your whole life you can’t build any wealth.

            1. While single family detached homes may be the ideal in the modern world, they’re certainly not the norm historically, or in many places around the world, even today.

              I’m not one of those advocates who believes everyone should live in an apartment building, but in many places the NIMBYs are against single family detached houses as well. Yet many of these same NIMBYs love to wring their hands about the income and wealth divides. Yet they ignore that housing is most people’s biggest expense and the policies they advocate make it hardest on the very people they purport to care so much about.

          2. Couldn’t agree more. There’s a whole other blog post worth about this. Here’s the basic issue: once you’ve bought the detached house of your dreams, your incentives reverse – now you don’t want development near you because that reduces your view, puts more cars on your street and maybe noisy neighbours, puts more people in your local park, etc. Density will reduce your value, everyone gets that, and so the minute you end up getting the house you switch to opposing anything density and any development – but you cannot say “I’m against allowing housing to be built” so, like the stories in the report, you say “This new apartment building will impact the environment” or “it will create more traffic congestion” or “I want to preserve the ‘character’ of the neighbourhood’, but really you just want to block development to protect your house value.

            That’s understandable that people don’t want huge development to change their neighbourhood, but the real problem isn’t the NIMBYs, although they definitely contribute to the problem, the real problem is (1) too much immigration means simply too many new people competing for limited supply of housing, every new family needs somewhere to live, which pushes us all into conflict with one another and (2) permitting which chokes the supply of housing so that the newly arrived family is forced into conflict with someone, somewhere, because they have to live somewhere.

            The same thing happened in San Francisco (e.g. look what happened when the tech sector took off and internal immigration started from other states in the US, loads of new programmers need to live somewhere) and lots of other cities with the same politics, the problem is political (Toronto has lots of land to build on, if you gave the permits) and the only solution is political as well, but unfortunately there’s no coordinated effort to change anything so prices will just keep rising.

            1. That’s certainly all true and very well said. But it seems to me that people of previous generations viewed housing as a human need and not as a speculative investment or a commodity. These days there is more talk than ever about housing being a human right but less action than ever. Previous generations talked less and acted more.

      2. The author needs to dig a little deeper in the analysis. 2.5 million of the added jobs in the US in Jan were due to an adjustment in the calculations. Absent that, jobs way lower. The conclusion by the author is probably bad. Does anyone not remember all the announced layoffs????

        1. It’s my understanding that the job count from previous months was also revised upward. Who knows if the government data is accurate, but that does lend credence to the claim that the recent jobs report was strong.

  2. Now that I’m fired up about this, I can’t stop: consider the latest report, The Housing Affordability Task Force and it’s conclusions for TO, which explains, yet again and in detail, why supply is choked through policy (for a tragicomic laugh, read the crazy NIMBYism stories that slow any development to a crawl in TO).

    In case you think ‘well, at least someone is taking this issue seriously’, remember (1) that these issues are well known for decades now but the political logjam at city hall and in the federal government means no policies will ever change, ask Kathleen Wynne about her experience here, and (2) the task force was given a ridiculously short time to write the report (“Our Task Force was struck in December 2021 and mandated to deliver a final report to the Minister by the end of January 2022.”). That’s right, they asked the task force to produce the entire housing report policy recommendations in 8 weeks over THE CHRISTMAS HOLIDAY. Seriously.

    https://files.ontario.ca/mmah-housing-affordability-task-force-report-en-2022-02-07-v2.pdf

  3. What crosses my mind is that, even if the Bank of Canada stops raising rates, they are likely going to stay high longer than initially anticipated. While the average homeowner can likely withstand higher mortgage payments for a short period, a lengthier period will result in higher rates of defaults and the housing market could be in for quite the ride.

    1. Just my view: people hold out hope for interest rate hikes to cool TO’s market off, it won’t happen (you get a dip and then right back to rising again, see 2016-2017 period which, combined with Fair Housing Act and OSFI B20 barely affected prices). Reason is beacuse virtually nobody will sell their primary residence and downsize unless they were completely in over their heads to begin with, they just refinance and reduce other spending. Without getting into a long post on it, real interest rates just are structurally too low right now, you would need much bigger rate hikes to overcome the other supply:demand imbalances.

  4. OK, last comment, sorry for the long posts folks but we’re all victims of this (particularly if you were born after 1980’s). No change will come until supply is opened up considerably (meaning Green Belt has to go, development has to be greatly streamlined, brownfield has to be opened up) AND demand has to be decreased (immigration targets have to go down at a Federal level because most new people move to TO and GVA, monetary policy has to become much tighter for much longer, mortgage rules have to be tighter than B20) etc.

    As far as federal level policy changes, no way I can see that happening those are all sacred cows, monetary policy is it’s own category but it’s too focused on national metrics for that to help Millenials in TO much, don’t wait for that to help you. So, it’s all municipal and provincial which means the only real way supply and demand can begin to come into balance is to have a Premier and Mayor with a sweeping mandate to reduce house prices, not to ‘improve affordability’ (a mushy, catchall phrase, that means anything you want it to mean and includes counterproductive policies like rent control and co-ownership which only worse the distortions in the long run). ‘Improving affordability’ deserves its own post, but I won’t get into it here.

    If you see the solution, you realize it’s next to impossible to get anyone running for premier or mayor to bluntly say what needs to be said: that prices are too high and need to come down for younger people to have a decent quality of life. So it’s really unlikely to happen. Honestly, if you are young, consider living somewhere else than GTA or GVA, I mean that sincerely.

    1. I don’t live in Canada, but the stuff you are saying is practically exactly the same kind of stuff I heard in my 27 years of living in California. They love talking about housing affordability and housing being a right in California. And they’re totally fine with letting people come in (even if they don’t do so legally). Yet they refuse to admit the biggest way to make housing more affordable is to build more of it–a lot more.

  5. Great article. What really shocks me is that BOC Governor with his $5000 suits and all his highly paid associates with tax payer funded pensions overseeing government departments with huge budgets were not able to predict what was going to happen with inflation and prevent this crisis from happening. But if they were able to then they have been deliberately lying and telling untruths.
    But I agree, Canada will be in for a world of hurt, the day of reckoning is here. Something will give either interest rates will increase more and the housing market tank or there will be massive inflation in Canada as Canada has to import products with a declining Canadian dollar. Moral of the story is to not have 35% of your country’s GDP linked to housing and real estate

    1. “with tax payer funded pensions”: I must be missing something here as I can’t see the connection between how a pension plan is funded and the effectiveness of someone predicting what will happen with inflation.

      1. LOL. Well if you’re paying an entire government department and it’s governor top dollar and a pension to predict the economic future of your country and they lie, obfuscate or can’t do it, then you’re not getting your money’s worth now are you?

        1. Again, envy and jealousy are not becoming. You sound like one of those cray cray soccer or hockey parents jeering from the stands at the coach and players. Seems like that’s their only talent. Yours as well?

    2. If he wants to spend his personal disposable income on $5000 suits, why is that a problem? Lots of fools out there overspending on their cars/trucks/houses/other discretionary toys. How is that any different? You can pick up a bespoke suit for $1500 to $2000 (I know because I have). If the guy makes a proportionate income, buying a costly suit for even $5000 is nothing relative to disposable income after taxes.

      You sound jealous. Envy is not becoming.

      For the rest of what you said, there may be some truth to it but you lose credibility when you want to criticize how people spend their personal income. That’s their business, not yours. Says more about you than the BOC governor.

  6. As I commented before when you predicted a housing cost decline, our government simply won’t let that happen.

    Your analysis over the years has been very, well, analytical and logical, as expected of engineers. You consider all the factors that economists will, but it always sounds like the traditional departments of economics.

    What you fail to include is the behavioural and political sides. And understandably so. Those are way harder to analyze and predict.

    So, I have always agreed with your cold numbers analysis. But the problem is that government policy is not driven by such factors alone. It is driven by needing to balance those cold calculations with giving the voters what they want.

    And what the voters want is for home owners, for the price to go up, and for new buyers to be able to buy a house.

    How do you get both those contradictory needs?
    With government policy of course. Like the new Home Buyers Plan. And more can be introduced.

    Those will keep propping up the housing market no matter what the economical reality is around. We basically bend reality with government intervention.

    Bottom line is: you have provided very good logical analysis of housing for close to a decade now. Your analysis is indeed in line with all known economical theory. Yet your predictions have been wrong. You need to adjust your methodology to include more variables. That’s what good engineers do when their model isn’t providing a good predictive power.

    1. You’re right, so Canada has chosen the only path open to it and that is to inflate itself out of the situation. Expect massive inflation in Canada and recession and job losses. If you inflate yourself out then companies won’t have the capital to keep employees. Best thing you can hope for is a government job in Canada.

  7. Another important difference with US home market is they can have a fixed rate for 20 or 25 years (as in Europe)!!! So when US people bought a house in 2015 or 2020 with a fixed rate like 2,5%, they will not have bankruptcy like Canadian people if the rates keep going rise. Moreover, they can deduct the interest of their loan. It’s a lot more predictable and confortable when you buy your home….

  8. Before taking off and travel for the experience and the gain of understanding the millions of lives beyond the comfort of the United States, this is the advice for my own college graduated twenties something kids who just starting out the rats’ race…
    1. Use CASH whenever possible
    2. Buy your first fixer upper
    3. Max out your employer saving plan (401k etc.…)
    4. Open an online brokerage account and compete for your piece of pie on wall street

    Here is a little more detail in the conversation with regard to item #2…
    Unless the wars between United States, China and/or Russia is inevitable, be prepare to put down your “HOME” foundation in 2023. This economic train will slow down a little for you to jump on. Build assets into this fixer upper and enjoy the CREATION of your very own family.

    As far as Canadians, just so you are aware from the macro-economic level, United and Canada moves in the same direction up or down.

  9. After posting I thought about what Millennial Revolution has been saying and how this fits into the structural house price crisis in Toronto. MR’s basic strategy is to exit the TO/Vancouver/SF etc. rat race by building up enough assets to become financially independent at a very young age (mid 30’s). This is 100% correct, I’ll even elaborate: TO housing prices create inflation that eats away at your earning power, consider that in the 1980’s my father on a single income owned a house in a suburb here that I’ll never be able to afford with TWO incomes, this is brutal inflation taking it’s toll – jobs simply pay a lot less now than they did in the 1980’s relative to the cost of housing.

    So when you choose to live in TO or the other coastal cities, you are making a choice to enter a rat race with an income that is a LOT less than it was for the previous generation, as any Millennial can tell you the game is stacked against you like that. Unless you are very, very financially successful by your mid-30’s there’s basically no way to ‘win’ the housing market here, you can only spend a huge percent of your net worth to buy a place to live, yes, the price won’t go down, but the value you get for $1,000/sqf is so bad that you’ve ‘won’ the auction for a structurally bad deal, which is exactly what MR has been saying all along.

    So what can Millenials do?

    (1) Try to beat the game by being really successful financially really early, like early 30’s seven figure net worth, but how many people can realistically do this? Almost nobody.

    or

    (2) FIRE and live a nice life somewhere outside the sphere of OECD big coastal city politics. This is much more achievable for 99% of Millennials. We should do a podcast about this, our views do not differ really!

    1. J…

      You seem like a decent and intelligent Millennial so I am going give you a brain teaser for your FIRE journey.

      1. Walk toward FIRE not RUN, very, very and very few FIRE walkers succeed in the 30’s and 40’s (Economic Constraint Rule). The very few, very and very few that crossed the FIRE mile marker, discovered that the destination is not what they have expected, so they change the FIRE goal post hoping fill the void within them.
      2. Build a family (have children if medically possible) along the way and enjoy your very own CREATION
      3. Keep on learning and have a curiosity of the ever-evolving world around you

      Good luck kid!

    2. Yes, great post, once again.

      I really do think there needs to be a push to build more housing in these big global metro areas. Call me a conspiracy theorist, but it looks like the ‘Hunger Games’ movies are playing out in real life right under our noses.

  10. Sweden has a similar housing and interest rate problem. Most households here prefer moving rates on a 3-month basis than fixed rates. So when the interest rate from Riksbanken goes up, it hits household quicker here than the average western country. From 0% to now 3% rate in under a year with an average of +2% on loans (5% in total soon) has put swedish households on high alert with focus on costcutting (banks lend with a must be able to handle 7% interest rate in mind, but not many households budget for that type of interest rate).

    Also the demographics is that most houses was bought in the crisis of 1990 here by people born in the 1960´s and the buyers are now millenials and Gen Z who have bought higher and higher because the have (and could) borrow more and more at lower and lower rates.

    Over a weekend in 1990 the Riksbank rate was 500%. We went from pegged to the dollar to moving exchange rate (sry, I´m more accustomed to the Swedish terms than the english terms but everythings the same). But that is why house prices has gone up in Sweden, cheaper and cheaper loans. Our national debt has gone under 35% so we have since the crisis of 1990 gone from high national debt and no peronal, to high personal debt and low national debt.

    I´m a renter. FIRE, but chicken so working on margin of safety XD. Love the site. Keep up the good work.

  11. According to Statistics Canada, in 2019, Canada imported approximately 17% of its total food supply. This means that 83% of the food consumed in Canada was produced domestically, while the remaining 17% was imported from other countries. It’s worth noting that while Canada is a significant producer of food, it also relies on imports to meet the demands of its diverse population, especially for certain products that are not produced in large quantities domestically, such as tropical fruits and specialty items.
    I don’t have a detailed breakdown for those 17% imports. However, some of the top sources of food imports for Canada include the United States, Mexico, China, and Italy, according to data from the Canadian government.
    That’s mean US is not supplying all the food that we eat it also means that the US/CAD FX rate will have some influence, but it won’t be as significant as portrayed in this article.

    The things that are likely to be most negatively affected by a rising exchange rate would be consumer goods, such as cars and light trucks, telephones and related equipment, automotive parts and accessories, electric machinery and equipment, and plastics. Since Canadians import tons of it from the US.

    This dynamic can be seen over here:
    https://oec.world/en/profile/country/can?yearlyTradeFlowSelector=flow1

  12. Many feng shui masters say property is not viable for investment anymore. It was prosperous in the previous 2 guas, i.e. 40 years period, but for the next 20 years performance will be lackluster.

    Neutral if you buy to stay. Negative if you buy for investment.

  13. I think I’m done with this blog. It always comes back to the fact that these two regret or weren’t able to afford real estate and now they are priced out. It’s getting old guys. Time to move on.

      1. Yes, it is the single biggest issue for Millennials in GTA, GVA and most coastal cities in the OECD. The cost of housing, rental or owning, drives up the cost of living and affects every other part of your life (what job you have, how long you work, what you can afford to buy, when you have children, retirement age…).

    1. Assuming the annual personal net worth info they provide once a year is accurate, they’re in a much better position to afford real estate in TO than most people, so I really don’t think that’s it.

  14. As an early retiree, I’m ecstatic about the jobs report. I recently learned that I’m a “NILF” (Not In Labor Force) !! …. I’m a “prime age man” who is not working, nor am I seeking work !! For all you folks out there who are job hopping, you owe a debt of gratitude to people like me who are responsible for creating the labor shortage that is getting you massive pay raises, thus getting you to FIRE faster. As more and more of us FIRE and exit the workforce, salary increases should accelerate, thus allowing more people to FIRE sooner.

    ..to the last working person, don’t forget to turn the lights out.

  15. What do you think will happen to the housing market once the Baby Boomers homes are up for sale because they have all passed away? Will that cause the supply of housing to increase and the prices to drop?

  16. The average mortgage debt in Ontario (Q3-2022) was 154 962$. An average increase of 4% on mortgage rates imply a 6 198$ additional annual cost for home borrowers, or 516$ per month. That’s a lot, but nothing that would prompt a wave of bankruptcies and foreclusures and a crash in the housing market …
    https://www150.statcan.gc.ca/t1/tbl1/fr/tv.action?pid=3610066101&pickMembers%5B0%5D=1.8&pickMembers%5B1%5D=2.3&pickMembers%5B2%5D=3.1&cubeTimeFrame.startMonth=01&cubeTimeFrame.startYear=2021&cubeTimeFrame.endMonth=10&cubeTimeFrame.endYear=2022&referencePeriods=20210101,20221001

    So, my prediction is : we will be in an inflationary environment in Canada and the US for the foreseeable future. This means prices will go higher over time, even if they will go up and down during short periods of time. This include the stock market, real estate, food, oil, etc.

    We will see in a few months if my prediction reveal to be true or not. But the best we can do for now is to be prepared if that happen, mentally and financially.

    Wishing the best to everyone in here.

    1. Sorry, average mortgage in Canada is 329 560$ in Q3-2022 if we consider only homeowners who have a mortgage. Around 33% of household in Canada are renting, and another 25% own a home without a mortgage. Both of which it doesn’t make sense to consider in an average since they don’t have any mortgage anyway.

      That leave around 45% of people that may face a potential 13 182$ increase in interest costs, or 1 098$ per month. For some it will be lower. And for others, it will be higher. 1 098$ is a considerable amount, but it’s bearable if you have 2 high salaries to pay for the cost. Anyway, we will see in a few months, but I doubt we will have housing crash in Canada …

      https://www150.statcan.gc.ca/t1/tbl1/fr/tv.action?pid=3610066001&pickMembers%5B0%5D=1.1&pickMembers%5B1%5D=2.3&pickMembers%5B2%5D=3.46&cubeTimeFrame.startMonth=01&cubeTimeFrame.startYear=2019&cubeTimeFrame.endMonth=10&cubeTimeFrame.endYear=2022&referencePeriods=20190101%2C20221001

  17. One thing to notice as mentioned by economists is that when it dips and recovers, the recovery is over and above the previous high, and it never falls again to the previous low. I just want to know where all these people in my city were living 5-10 years ago. How can we be that short on housing along with record rents! Multigenerational housing hopefully makes a comeback.

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