Hopium, again

So, is it over?

The country’s biggest bank thinks so. The housing market, it says, “is finally taking steps toward recovery,” and has been on a “winning streak since April”. That’s the story for resales. As far as new homes go, the 230% increase in sales recently – thanks to a sales tax holiday – have shamed the doomers.

Says RBC: “We think there could be hundreds of thousands of Canadians who put plans to buy a home on hold in the past several years due to sharp increases in ownership costs. Many of them are living longer than preferred in rented accommodation or delaying upsizing or downsizing current digs.”

And the forecast: house sales across Canada next year will increase by almost 7%. Prices will be higher, pushing the average value to more than $800,000. Historically, sales will still be far short of those seen pre-Covid, but the price collapse is over.

By the way, what was the highest-ever average national home value?

It was $816,720 – a pinnacle hit briefly during February of 2022 when FOMO still stalked the land and we were all delusional, believing WFH was an actual forever thing. Currently the average (according to CREA) sits at $674,819. So the correction has shaved 17%, or $142,000, off the selling price of that property.

While this is miles below the 32% chop of three decades ago (our worst real estate collapse), the bankers figure the bleeding will stop. The reasons: pent-up demand. Stable mortgage rates. Less inventory. Lower population growth.

“An upturn of this magnitude won’t be transformative,” says the bank, “while welcome.”

But wait. Doesn’t this smack of mortgage-lender hopium?

After all, there are serious new headwinds for real estate and consumer confidence. They may blow through. Maybe not.

The crazy Iran war is hot again. The Americans can’t win it. Can’t end it. Oil is back at ninety bucks. Inflation’s getting stoked. The CB paused interest rates again today but is expected to hike next year as price pressures mount. (And the Fed’s likely to increase benchmark US rates this month.) There’s a global spike in bond yields as investors demand a premium for the extra risk posed by inflation and worrisome government debt. So it looks like the cost of a mortgage has only one way to go.

Oh yeah, and there’s a trade war with America. We can’t win it, of course. But we can’t surrender, either. So there’ll be higher consumer prices, a hit to jobs and a new raft of reasons for people not wanting to walk into epic mortgage debt.

Have things changed in the last two weeks?

You betcha. Iran’s back on. The bond market’s having a cow. Lake America. Body-shamed Vernon cadets. Edmonton mall subs. 50% tariffs. The works.

How much of this is temporary and how much is a harbinger remains completely murky. Canada and the US can’t stay at loggerheads permanently. Trump will be gone in two years. Carney has a solid majority with no election until 2029. By most measures, Canada has so far weathered this assault surprisingly well. We have many reasons to be proud and confident.

However, these days call for more caution than usual. The American administration is clearly out of control and might well start throwing more than shade our way. It’s not a great time to be swallowing debt to buy an asset that may, at best, be worth what you paid for it in a few years (minus land transfer taxes, closing costs and commission).

The bond market is telling you to keep it in your pants. Best to listen.

About the picture: “Hello, here is grandpa Hugo who is 10 1/2 and likes pickup truck rides to the beach for a swim and short walks to hide in the shrubbery,” writes Derek, “or is he hiding from Trump’s tariffs on his dogfood? s an aside I was thinking you should start carrying pepper spray for any future altercations as it works great on both 4 legged and 2 legged beasts or as The Right Honourable Jean Chrétien said in a heavy accent ‘For me, I put pepper on my steak’.”

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

Source: https://www.greaterfool.ca/2026/09/02/hopium-again/