Things to worry about

Such vitriol on this pathetic blog over our claim the latest bottom for housing (at least in the Kingdom of 416) came a year ago.

Phooey, cried the rabble. This cannot be. Housing will hit the wall. Guts everywhere. You’ll see.

Well, here’s the deal. The average detached in TO was selling for $1.57 million last month – fifty grand less than in December and 1% off year/year. The high point in 2023 was in the merry month of May, when the same abode commanded $1.913 million. So the decline since then has been a meaty 18%. But prices ended the year almost 10% ahead of where they were exactly a year ago, when that house was worth $1.486 million to buyers.

So, the first month of 2023, when there was no prospect rates would soon drop, was the recent low spot. We’re now almost 6% above that, but still well shy of the spring froth. Now, in 2024, the odds of a pivot by the CB are far higher. The first cut may come in April. Or maybe June. Perchance July – only Tiff’s pillow knows. But it’s coming. People know it.

So if the average detached house could swell by $500,000 between last January and the rush in May, what might be in store for this spring? Will disappointment in delayed cuts eat into buyer lust? Will this end up being an emotional rush followed by the deafening thump of a landing dead cat? Or will 2024 mark a new ceiling being reached when a detached in the middle of the biggest Canadian market slips the surly bonds of earth and passes the $2.1 million mark?

Dunno. Nor do you. But a surge of 37% in sales in the GTA last month seems to be a harbinger. Buyers are coming back, obviously, with many of them figuring that current prices constitute an opportunity. By financing with a two- or three-year loan (or even a variable) they’re confident the cost of a home loan will be markedly less when renewal rolls around.

What can go wrong?

Lots. Property taxes are exploding everywhere – up bigly in Vancouver and the surrounding burgs, and now about to jump 9.5% in Toronto. There are underutilized housing taxes in place. The crazy spec tax in most of habitable BC. The foreign buyer taxes in the LM and Ontario. The new uber-non-beaver levy in Toronto. And the nonsensical, xenophobic, useless but besmirching foreign buyer’s ban which PM-in-waiting Chrystia Freeland extended two days ago. That door is now shut until the beginning of 2027. Just imagine if the USA did that to us…

There’s more. China’s real estate market is shrinking faster than Harry Styles’ appeal with the collapse of Evergrande and the ripples that has caused. American politics has polarized as never before, promising more turmoil and volatility as the November presidential vote nears. Ukraine is running out of ammo again. Putin is sounding weirdly belligerent. The North Korean dude is acting up and says he has a nuclear-powered underwater fish drone. The Houthis are a pain. Gaza is in in ruins and its people surely more radicalized. And the US is dropping bombs on a Middle East hornets’ nest.

Worse, real estate is making Canadians less secure. Mortgage debt has passed $2.1 trillion. Just 35% of people over the age of 50 say they’re on track to a successful retirement. There’s still $260 billion in home loans coming up for renewal over the next twenty months at higher rates. An absolute minority of Canadians have a corporate pension in their future and half the population say they’d be pooched if they had to come up with a thousand bucks by Thursday for an emergency. And yet almost 70% own real estate. What a stunning imbalance.

Despite all that, enough buyers are lining up to make the realtors giddy.

“Once the Bank of Canada actually starts cutting its policy rate, likely in the second half of 2024, expect home sales to pick up even further,” says Toronto realtors. “There will be more competition between buyers in 2024 as demand picks up and the supply of listings remains constrained. The end result will be upward pressure on selling prices over the next two years.”

Of course, more demand and higher prices mean higher rents. The latest vacancy rates are 1.5% in Toronto, 0.9% in Van and 1.4% in Calgary. In BC, this is the lowest rate in half a century. Lease costs have been escalating along with the price of housing, land, taxes and financing.

Well, there is no good outcome here. But certain facts remain. Renting is still cheaper than owning – almost everywhere. Do the math. Real estate carriage charges are rising and will continue to do so, as owners are sitting targets for government levies. The only saving grace for owners is the potential for future capital gains – which may be illusory. And the best option for Canadians is to get the hell out of town. It’s a big country. Lots of cheaper places to buy, live, raise the spawn and stabilize your finances. In a WFH world, what’s holding you back?

Whatever it is, get over it.

About the picture: “This is Raven and Riley,” writes Jenett. “Raven’ss the one on the left that looks like a skunk, Riley’s on the right with the wagging tail. They enjoy longs walks … to anywhere and they tolerate each other like any animal forced into living together. The food’ss great though. I’m a long time reader of this magnificent blog, experience has taught me to take the advice you all write about; stay calm, ignore the noise. Cheers and thank you. I’m one of those fools that migrated to Nova Scotia from AB in 2021. A bit of a mess, sure but the view is spectacular and the portfolio still diversified.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.