Almost there

She’s surprised.

“One would expect a hot market is coming,” says the veteran realtress, “but it won’t be. Condo sales are bad. There is no supply right now. Unless something pops up in a really desirable location, we’re going to stay quiet.”

Quiet might be the best possible outcome. Comatose is also a possibility.

The weird thing about real estate at the moment is how the fundamentals are failing. In the GTA, for example, there are more than 24,000 available new condos on the shelf, and no buyers. Yet prices stay firm. For the first time in decades 30-year mortgages are available. For the first time ever CMHC will insure $1.5 million houses, dropping downpayments by 60%. Also historic is a federal house-buying tax shelter doling out refunds like an RRSP and giving tax-free withdrawals like a TFSA. Despite all that, sales levels suck.

And trumping it all is a massive drop in mortgage rates. From well over 6% less than two years ago we’re back down into the low fours, as inflation – once over 8% – has been squished to less than 2%. (It may come in at 1.2% this week).

So more condo supply has not increased demand. Cheaper financing for all real estate has not encouraging buying. Lower inflation, more jobs and rising incomes haven’t brought confidence. Sellers seem wary of listing. Purchasers are waiting.

Will tomorrow bring clarity?

As we all know, Tariff Man lays his hand on the Bible and swears to be a good dude for America as he becomes the 47th president. This happens three days after he launched the $TRUMP cyptocurrency coin, which quadrupled in value, representing a potential $30 billion windfall for the prez and his family. (They hold 80% of the inventory.) Never before has an American president so blatantly, shamelessly, aggressively pivoted to seek turning his political fortunes into a financial gain.

But Trump is Trump. It’s all about power. Money. Prestige and dominance. He is now surrounded by lackey tech billionaires, in control of the House, the Senate, the Oval Office and the Supreme Court, vowing ‘retribution’ on political foes and thinking that vassal states like Canada can pay for his domestic personal and corporate tax cuts.

Wow. And it may all be here by sundown.

As many as a hundred executive orders are expected during the afternoon and evening Monday. Mass deportation orders. A reprieve for TikTok so he can appear on it (he already promised that on Sunday). Tariff decrees. And a pledge to create the External Revenue Service, which Canadians will be expected to pay into.

The ERS, he pledged on social media, “will collect our tariffs, duties and all revenue that come from foreign sources. We will begin charging those that make money off of us with trade, and they will start paying, finally, their fair share. January 20, 2025, will be the birth of the date of the External Revenue Service.” Trump has continued with the fantasy statements that America subsidizes Canada (we have a trade deficit, actually, after our cheap is carved out) and that our border poses a threat for migrants and drugs (it does not). He’s floated the idea that we should be the 51st state. He dissed and mocked the PM. And now, it appears, the US will use economic coercion to hobble the nation – and make us pay.

Will this happen? Dunno. Most smart people say yes. The economists have been feverishly trying to figure out the consequences. In Ottawa the government (and all premiers except you-know-who) have been working on how to respond.

The fate of Canadian real estate, along with the economy – jobs, incomes and markets – is unknown until Emperor Trump makes a move. Some speculate anti-Canada tariffs will be rolled out a bit at a time, instead of in one whack. The outcome is the same.

Let’s flip over to our fav cowboy economist Derek Holt for his prediction on how the Bank of Canada is going to respond (dictating what happens to mortgages and houses).

If the US imposes major tariffs in broadly based fashion for a meaningful period of time and Canada does not retaliate, then the BoC will be cutting aggressively. If those same assumptions hold but Canada does retaliate through its own significant tariffs in a broadly based manner for a meaningful period of time, then the BoC is more likely to be tightening monetary policy.

The inflation impulses from damaged supply chains all over again plus CAD depreciation and pass through of tariffs on imports would pose upside risk to the 2% inflation target. The supply chain experiences of the pandemic plus anyone who is listening carefully to what the BoC is saying on that matter should have markets careful with their positioning.

In other words, rates could go down a lot. The economy, too. Or rates could shoot up. And the economy would still go down. The dollar will be lower. Unemployment higher. Canada poorer.

So much for the harmonious, supportive North American brotherhood of the last 158 years.

But if you’ve got crypto, or run a Chinese app, well, let freedom ring.

About the picture: “Can I submit this picture of “bed head” Barclay as a candidate for Monday’s column please?” writes Jane. “It seems suitable somehow.    Barclay is a Petit Basset Griffon Vendeen which is a very posh name for a hairy little basset hound.   Thanks you your column!”

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

Source: https://www.greaterfool.ca/2025/01/19/almost-there-4/