The ascension

Will Chrystia Freeland be our next Grand Wizard?

Not a wild thought given this scenario: T2 resigns after almost a decade in power in little more than a dozen months. Queen Chrystia, now deputy PM and FN, is crowned. She becomes prime minister, sits on the throne for a few months, then calls an election once the Jag Singh bromance has ended.

Then, yes, it’s Skippy vs the highest-profile woman in the land. Will Chrystia mobilize the lefty/woke/newcomer/female/enviro/social justice vote? Or go down in flames, like poor Kim Campbell, our first maple ma’am monarch? (At 132 days she had the third-shortest reign, trumped only by John Turner at 79 and Charles Tupper at 68.)

Well, today Freeland delivers an economic statement and this blog is being written before that happens. Rest assured the feds will throw some more money around, tell you the deficit is under control and – according to Bloomberg’s sources – unveil a new tax on companies that buy back their own stock. Statements are not budgets, and this one is immensely overshadowed by monetary policy.

Yesterday the US Fed goosed rates again, as expected, and said no pivot is coming soon, which was kinda unexpected. Stocks went into a one-day hissy fit. But CB boss Jerome Powell did say this tightening cycle is closer to the end than the beginning. So we seem to be still on track for about a 1% additional increase, then a pause in early 2023.

Our bank will follow suit. Chrystia knows that. Inflation is a worse disease that rate affliction. The Canadian chartered bank prime will be rising very close to 7% by the Spring, with five-year mortgages at about the same level, HELOCs testing 8% and reverse mortgages hurtling towards double-digits. By April we should also have that weird FHSA in place, and one of the most interesting housing markets ever.

After all, sales have tanked. Inventory is thin. The supply of detached houses is down to two months in major markets. So many people have withdrawn from the marketplace, cancelling listings, in the belief that early 2023 will be just like 2021: wall-to-wall desperate buyers after this crazy period of rate escalation and reverse-FOMO.

This is the political hope, too. Chrystia’s political fortunes hang on a short and mild recession, a central bank pause in late winter, falling inflation and renewed consumer confidence because of jobs, wages and portfolio increases.

Is this possible or realistic?

Of course. This pathetic blog has told you with the kind of confidence that only rippling abs can bring that 2023 will be a mess better than this year. The tightening cycle will be over. The cost of living will be high, but falling. Stock markets and financial assets will be improved. Interest rates will have stabilized at more ‘normal’ levels. Surely the Ukraine war will be over, winding down, or less consequential. Neither Biden nor Trump will be White House contenders. In short, more sun and less anger.

The outlier will be house prices. Millennials are about to get their wish for a serious reduction in valuations, requiring lower down payments and smaller mortgages. Also good news will be a whole lot more listings than at present. It means time to shop. No blind bidding wars. Conditional offers. The bad news is no more home loans at 2%.

We’ve just received the October update from the major real estate cartels. No surprises. Prices are gently cascading lower but sales have tanked. The higher-priced a market is, the more deals are fading. In Toronto they declined 49% from year-ago levels. In Vancouver, a similar story, off 45.5%. In Victoria, down 35.6%. In Calgary, lower by 16%.

GTA realtors says prices look like they’re stabilizing. In Vancouver they are down about 9% over six months. The standoff between buyers (waiting to vultch) and sellers (holding on for the next boom) is obviously chilling the market. Now 40% of people believe prices will fall further and over 50% of those with mortgages are worried about their renewal rate.

What does Chrystia know?

That a nation of house-lusty little beavers who leveraged their rubbery tails off to buy an asset at its dearest moment will be rodent-pissy if real estate crashes. The feds will watch this closely and, as always, end up acting in their own naked self-interest. Chrystia doesn’t like losing.

What a surprising year lies o’er the horizon.

About the picture: “Hi Garth, firstly, thanks so much for all the work you do writing and maintaining your blog,” writes Margaret. “Regarding dog pictures requested, this is Riley, our one and a half year old Kangal Akbash, living a contented dog life in Smithers B. C. Here he is surveying farms in the Bulkley Valley.”