The battle

The well-to-do couple with the Lexus bought it for just over two mill a year ago, then started the reno. The historic home, refreshed, repainted, replanted hit the market five months ago for just under four million. And there it sits. Cody walks me past it daily. Occasionally, we see a showing.

Inventory is piling up in the hood. Sales are sparse. A local realtor buddy sent me the latest chart of listings and accepted offers. The gap between those lines is stretching to historic proportions. We passed the ‘buyer’s market’ milestone long ago. And yet the sellers hang on, vainly seeking greater fools who will pony up 2021 prices.

Even CREA gets it.

The realtor cartel has scaled back its projections for the year, basically halving for forecast for sales growth. June was a tad better than May, but the deal count nationally is way below year-ago levels. Ditto for prices. The prediction of a 5% hike this year has also been sliced down the middle, to just 2.5%. With inflation at 2.8% – and sellers needing to fork out big bucks in commission – real estate in Canada (on average) is underwater in 2024.

Who would have thought it? This was to be the year of incremental interest rate reductions, growing consumer confidence and a return to the market of house-horny young couples stoked with pent-up demand.

But here we are. Awash in properties few are buying. In the GTA, for example, sales were down 16% last month and active listings mushroomed 67%. In Vancouver the number of available homes jumped 42% while sales slumped 19%. Victoria sales were down 6% and listings swelled 48%. Even in Calgary, then hottest market in the nation, there were 13% fewer buyers.

This is not what the industry expected. After all, it was the month in which the Bank of Canada chopped its rate for the first time in years. But a mere quarter point wasn’t enough to compensate for unrealistic asking prices, with most potential buyers swept aside. Indeed, surveys show the majority of the houseless won’t be storming back with offers until Tiff carves a full 1% from the BoC policy rate. And that won’t come (we’re told by economists) until the Spring of 2025.

There’s more.

Unemployment is ascending. The ranks of the jobless swelled by 24,000 last month alone. Vacancies are drying up. Youth unemployment is at 13.5%. Summer jobs went kaput because small businesses are cutting back, fighting increased overhead and scrapping for business from households under financial pressure.

Now Trump.

The assassination attempt this past weekend turned up the dial on anxiety. The US electoral process was already bizarre as an 81-year old incumbent fought off allegations of mental decline plus a 78-year-old contender with a criminal record. Now 47% of Americans tell pollsters they see a civil war in their futures. Plus, what happens if a new president pulls out of NATO, facilitating a wider European war. And what about Gaza, China’s rotten economy, the guy with nukes and a bad haircut or Canada as Americans return to isolation and protectionism?

The irony is that this surge in resale inventory is happening while new home construction collapses, with a giant surplus of unsold homes and condo units while governments have been shovelling billions into ‘the housing crisis’. The accelerator fund. The first-time buyers tax shelter. The density obsession.

Folks ain’t stupid. It’s not working.

They realize the risk in buying now. Interest rates may come down so slowly that the market stays unaffordable for years to come. Geopolitical risk could ramp up fast. Maybe those banker predictions of a recession in Canada with a return to inflation and rate hikes if Trump wins will come to pass. Mostly, it’s about the cost of housing amidst the cost of everything else. To carry a $1 million mortgage means six grand a month in financing alone, and takes an income north of $200,000.

And yet a million bucks is minimal financing for most new buyers in urban Canada. And how many people in this country earn more than $200,000 annually? StatsCan says about 550,000 souls – or 1.2% of the expanded population.

Bay Street economists and major real estate boards are pointing to the final three months of 2024 as the time when (a) rates may decline further, (b) mortgage costs drop into the 4% range, and (c) buyers stream back to the open houses and stumble into bidding wars.

It could happen, of course. But those 90 days will also contain explosive political events and very scary headlines amid what’s likely to be a slowing Canadian economy and quickening job crunch. In other words, you might regret having laid down four million to watch my pooch pee on your gate.

About the picture: “These two dogs are the best of friends and live two doors from each other but when it comes to tennis balls the friendship takes back seat,” writes Jim. “The two can wrestle for as long as it takes to tire them completely out. The golden lab (Cody) is my daughter’s.  I’m retired in Alberta for the past eleven years (79) and my wife and I enjoy winter trips to New Zealand to visit the in-laws (and Cody). Do not have a dog but all of my friends do and that satiates my pet desires.”

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