Groundhog Day

A boring, half-house in the nether bits of the GTA was listed for $749,000 recently. Hundreds of people turned out to view it. There were 85 offers. It sold for about $1 million – the point at which CMHC makes you cough up a 20% downpayment.

Was this a realtor trick?

Of course. The property was listed – deliberately – just over its sale price of five years ago. The market went nuts. It turned into a media circus. The realtor vaulted to rockstar status. Crowed he to an enchanted CBC host, ‘it was all about the pricing strategy.’ Stirring the loins of the house-lusty rabble got his vendor a premium.

But, he added, this crazed episode also showed that people are getting squirrely again because ‘everyone knows the interest rates will be coming down. This is the opportunity.’

Faithful blog addicts will recall our suggestion a couple of months ago that anyone who really, really, really needed to buy had about a hundred days in which to do so. It’s been a buyer’s market for a while, with despondent sellers, reduced valuations and pliant lenders. DOM has crept up. The sales-to-new-listings ratio has been vapid. Competition’s been weak. But this, we predicted, would not last.

Naturally, the macroeconomists and market gurus in the comment section said phooey. It’s all going to crash. Of course, it didn’t. It won’t. That suburban semi feeding frenzy may end up being a marker.

As noted, mortgages have dropped from six-something to the high-fours. You can bet the spring market – now about four weeks away in most of the country – will see aggressive jostling among lenders for loan originations after the 2023 drought. The cost of borrowing will drop in advance of the Bank of Canada making any adjustment to its policy rate – whether that comes in April or in June.

But wait.

Will a torrid US economy nix rate cuts?

What about today’s blockbuster jobs report in the States? An astonishing 353,000 new positions were created last month, kicking off 2024 in spectacular – and surprising – fashion. The jobless rate stays at 3.7% providing more solid evidence of (a) a soft landing and (b) no recession. The jobs news comes atop the latest GDP report showing the US economy growing like a weed at 3.3% in the last quarter, after a 3.9% (annualized) eruption in the previous few months. (Taylor Swift aone is considered responsible for a 0.5% hike in GDP. Go figure.)

Doesn’t all this growth, expansion, fat tech profits (Meta and Amazon just scored) and hiring mean the Fed will be in no hurry to drop its key rate?

Maybe. The bond market sold off and stocks stuttered. The CB indeed has more time on its hands to see if inflation will stay tamed amid the economic advance. But the basic belief remains the same – this is the year of the pivot.

“The strong increase in productivity in the fourth quarter capped a solid year of efficiency gains that supported better-than-expected economic growth and will allow employers to increase employee compensation without corresponding price hikes,” says BMO Economics. “Meantime, the sharp slowdown in unit labor cost growth in 2023 alongside moderating inflation will set the stage for the Fed to cut rates later this year.”

As we all know, the US ain’t Canada. Our economy is far slower, the unemployment rate higher, household debt greater and the pressure on the Bank of Canada to reduce the cost of money is swelling faster. Inflation at just over 3% is considered a win, with the expectation it will dip into the 2% range by summer. There’s a better-than-even chance now our CB will cut before the Fed does. As stated, this will be proceeded by a reduction in the price of a fiver mortgage.

Do houses already cost too much? Are we a nation of real estate junkies? Are we shutting out the first-time buyers who fuel the market? At some point will we stagger into an epic property price correction?

Yep. It’s inevitable. But it’s not now. It’s not 2024. The can is kicked down the road again. Over and over again. It’s our national sport.

About the picture: “Hi Garth, longtime readers and first time to be in toich,” writes Collin. “Here is is our sweet goldendoodle Pellli, who unfortunately just passed away due to cancer – apparently a common thing with doodles!”

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