Oops.

Well, now we know. At least, we understand more. The real estate market’s laying an egg.

Regular addicts will recall this statement yesterday: “If March stats are dishwater it’ll be an indication that one towering leg of the maple economy is teetering.”

And dishwater she be. In the bellwether and dominating GTA housing market things appear to be rolling over – a major surprise to realtors, brokers, lenders and a bevy of economists who thought the spectre of lower rates, pent-up demand and a fresh supply of listings would enervate buyers and unleash the hormones. But, nah. Ain’t happening.

Sales actually fell in March from the same time last year. Those 6,500 sales compare to 16,652 that were clocked in the same month three years ago. Yup, a crash of 61%. Even March of 2022 – as rates started to increase – saw 11,000 houses change hands. So current levels are a mess.

Consider this: there are 230,000 more people living in the GTA now than in 2022. Mortgage rates have declined a full 1% since peaking above six per cent. Prices have dropped with the average detached in 416 now at $1.7 million, compared with $2 million in the spring of 2022 and again in May of last year.

So, sales have stalled. Inventory is up 18%. Financing is cheaper. Prices have faded. And there was basically no winter. Is this a brief thing, as realtors are spinning? (Says the Toronto board: “Home sales were lower than the March 2023 result, due in part to the statutory holiday Good Friday falling in March this year versus April last year.) Or is this more consequential – a harbinger of economic malaise caused by debt, lousy family finances, escalating borrowing charges and a web of taxes decreasing household spending while pushing real estate further beyond our grasp?

The average property in this sprawling market of 6.7 million people is just over $1.1 million (houses, condos, semis, parking spaces, porta-potties etc). Says head MLS wizard Jennifer Pearce: “Assuming we benefit from lower borrowing costs in the near future, sales will increase further, new listings will be absorbed, and tighter market conditions will push selling prices higher.”

Really?

As detailed here, good economic data in the States suggests the Fed may not move until July, and that the 2024 rate chop will be less than three-quarters of a point. Our economy is compromised, stagnant and pickled in debt and taxation. Meanwhile the feds are throwing gobs of money around ($6 billion yesterday for infrastructure, a billion for a new school-lunch program; a few billion more for pharmacare and dentalcare, hundreds of millions extra for the housing accelerator fund and $40 billion in interest payments on the debt). That fiscal stimulus is inflationary and runs counter to what the CB’s trying to do. Logic dictates Canada needs a rate cut to help ward off recession, but T2 and his non-financial finance minister are pushing on a string. Looks like the April 16th budget will be a spendfest.

So if the Bank of Canada holds off because Ottawa is out of control (as the Libs try to rescue their own future) the outlook for housing will be a crushing one for all those agents in their A7s and Range Rovers. Face it: a mild, no-snow March with greater buyer choice, population growth, low rental vacancy rate and increasing demand that results in lower sales and flaccid pricing tells us something.

And, hey, did you see this?

Source: RBC. Click to enlarge.

Our biggest bank’s latest report on housing affordability is withering. It is, says RBC, “the toughest time ever to afford a home.” Interest rates are far above pandemic levels, adds economist Robert Hogue, but average real estate prices are down only marginally (thanks in part to government stimulus). “It’s no wonder homebuyer demand has cooled so much. The ability of many Canadians to get into the housing market has greatly diminished.”

Not just diminished. Nuked.

Even with a massive 20% downpayment, a family earning a median income, says the bank, must allocate almost 64% of pre-tax earnings to carry the average house. And that’s almost impossible. “Affordability worsened in all markets we track: Vancouver, Victoria and Toronto experienced the biggest deterioration, further exacerbating acute stress. The situation also became more challenging in Ottawa, Montreal and Halifax, where affordability is at, or near all-time worst levels.”

The bank says Vancouver is “in full-blown crisis” at the moment. “It’s never been as expensive to own a home anywhere, anytime in Canada as it was in Vancouver in the fourth quarter. At a staggering 106.4%, the share of a median income needed to cover ownership costs means that only a select few high-income earners can afford to buy—or that considerable wealth must be amassed (or received) to put down towards a purchase.”

Toronto? Not much better.

“Skyrocketing interest costs continue to significantly challenge Toronto-area buyers—many of whom confined to the sidelines, unable to clear the extremely high ownership bar.” As for the Bank of Canada’s role, RBC says this: “It will take several rate cuts to unlock pent-up demand in a material way.”

Well, this is not what the industry expected. As stated above, it’s consequential.

We built an economy around the Greater Fool concept of selling each other houses at ever-higher price. Did we ever ask, what happens when the music stops?

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