Is that it?

He never stops.

LePage’s chief shill, Phil Soper, is arguably the most-quoted, media-friendly and visible house-humper in the nation. No wonder. The company churns out an endless stream of real estate bumpf in the form of important-sounding reports, surveys, analyses and forecasts. Only the barkers at Re/Max come close to making this amount of market noise.

So what does Phil say this week?

Well, prices nationally are up a little. The spring market fizzled. Buyers are staying on the sidelines waiting for more rate cuts. And, incredibly, real estate will cost a whopping 9% more year/year by this autumn – which starts in just a few months.

Until Thursday morning, it seemed Mr. Soper had spent too much time with his Shred X Blueberry Blaster Disposable Vape. But, then, everything changed.

Here’s the news: US inflation came in cool. In fact at 3% (down from 3.3% and better than anyone expected), it means overall prices in the States actually declined a little. It was the best performance since way back in the spring of 2020, as you-know-what was just arriving and we all got masked.

American inflation zipped above 9% in mid-2022 (it passed 8% here) which resulted in 11 rate hikes that year and into 2023. But for almost a year now the Fed has been on hold, waiting for sustained evidence the CPI monster is back in the bottle. And this may be it.

Immediately after the report, derivative traders upped the odds of a US rate cut in September from 70% to almost 90%. For 2024 as a whole, they now figure rates will drop by about sixty basis points, pointing to two – maybe three – rate cuts by Christmas.

A big change. The fabled soft landing. Inflation down a lot. Unemployment up a little. No recession. Ponies for all.

“This better-than-expected inflation reading opens the door wide open for a September rate cut from the Fed,” says BMO Economics. “The report makes a very convincing case that consumer inflation has swiftly resumed its downward path after an unanticipated surge in the first quarter and is likely well on its way to a sustainable 2.0%.”

In response, the benchmark Government of Canada 5-year bond (it influences mortgage rates) dropped sharply to 3.4%, mirroring a decline in US Treasury yields. And, as you’d expect, stocks initially went up. The US$ went down, pushing commodities (like gold) higher.

As this pathetic blog has been pointing out lately, American equities have been gassed up on economic optimism and corporate profiteering. The S&P 500 has hit more than three dozen new record highs in the past 28 weeks and is ahead 18% for the year to date. You should own it – through an ETF that gives broad diversification and less risk than with individual stocks. (Remember that over time there’s a 42% chance any stock will have a catastrophic loss – 70% of its value).

Okay, so what about on the street. How does any of this matter?

Rates will surely drop more in the second half of 2024. The next Bank of Canada decision is in two weeks and the odds of another quarter-point decline have grown. After that there will be rate decisions on September 4th, October 23rd and December 11th. Some economists (like the dudes at CIBC) are sticking with predictions of three more cuts coming during those four remaining announcements. Others are opting for two.

In any case, the prime rate at the chartered banks will be three-quarters of a point, or a full 1%, lower than when 2024 began. Mortgage rates may fall widely into the 4% range. And Phil Soper’s polling (done by Leger) says at that point a large number of sideline-sitters will jump in an start making offers.

Meanwhile, as we’ve been telling you, sentiment in the housing market has been circling the drain. New-housing construction has effectively ground to a halt. There’s a huge six-month supply of condos sitting. Resale inventory of all kinds has been piling up in major cities. More buyers have been walking away from pre-con closings. Major townhouse and condo developments have been shelved. In Toronto alone there are over 20,000 unsold new units available. Sales last month were down in Vancouver, the GTA and even hormonal Calgary. It’s a mess, with prices under pressure – but still sticky.

As we’ve told you often, the only thing that really matters to real estate is the cost of money. Tiff Macklem’s ten increases were the sole effective brake on prices. All the new taxes, regs, rules and restrictions that governments cooked up accomplished diddly. And now rates will be descending. Perhaps rapidly. The real estate reckoning, some worry, may be over already,

Don’t you just hate it when Soper wins?

About the picture: “Thanks for all the advice throughout the years. I wish I had been old enough to vote in Milton when you were our MP!!” writes Matt. “Here is our arabian village dog Sandy. She’s nearly six… Only a third of a way into her life we hope!). This is Sandy playing with her friends at daycare. Sure, it sounds funny to send a dog to daycare, but it’s been great for her social skills and rehabilitation, coming as a rescue.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.