The spring thing

In frosty Canada the spring housing market starts… soon. By Lover’s Day it’s in full flower in the majors of Toronto and Van. In Saskatoon and Moncton, not so much. You know why.

This year it’s completely unclear what may happen. As we all have heard, Tariff Man says he’ll whack Canada on January 20th. If he’s bluffing, nobody cares. If he’s not, everybody pays. Trump is the difference between a recession and a recovery in this nation. His actions will have an impact on the value of the dollar, inflation and monetary policy. The American president may also keep up his campaign of mocking and taunting the current prime minister, reducing the worth of our nation to that of US state.

Economists think tariffs will sharply cut our GDP and encourage the Bank of Canada to continue reducing rates as a counterbalance. Those three planned quarter-point nips may turn into something more. It’ entirely possible Trumpian tactics will take the CB rate down to 2% in 2025 from an anticipated 2.5%.

That will mean VRMs tumble to just over 3%. Fixed-term rates however will likely be stickier. That’s because the bond market sees inflation ahead (tariffs are costly and a lower loonie means import prices surge) and has started to price it in. Five-year mortgage rates are linked to govy bonds that are sticking close to the 3% mark, despite multiple CB rate cuts.

So Tariff Man = lower home loans. This comes just after 30-year amortizations have become available to all newbie buyers. It also is on the heels of CMHC exploding its price cap to $1.5 million. That’s shaving 60% off the required minimum downpayment for higher-priced listings. All of that is a heap of stimulus for housing. Politicians can’t help increasing demand. And Mr. Poilievre supports these measures, dashing hopes of the houseless that anything will change after the next federal vote.

But there is another major factor. Supply. It has started to swell and looks ripe to balloon further as 2025 floods over us.

In the mighty GTA, for example, at the end of November (latest stats) there were 21,818 properties for buyers to choose from. That was up from 16,754 a year earlier – for a gain in active listings of 30.2%.

Similar story in Vancouver. Actives there now number 13,245, which is a 20% increase over the 10,9331 available at the end of November, 2023. And look at Calgary. A year ago just over three thousand properties were on the market, compared to 4,352 recently. That’s a seller explosion of 45%.

Available inventory in Victoria is also ahead (a modest 7%) while across all of Ontario, inventory of 56,384 is a 19% advance in a year, and sits 56% above the five-year average and 47% higher than the ten-year norm for the month of November.

By the way, this is a trend not unique to Canada. Unsold inventory is also stacking up across America – especially in key markets like Florida and Texas. A Redfin analysis found more houses currently for sale than at any time in the last four years. Over half (54%) of those listings had been available for at least 60 days – the highest proportion since 2019.

“A major reason for the jump in supply is a pileup of unsold homes, many of which buyers have deemed undesirable because they seem overpriced,” says the company.

So, this is why Spring of ’25 is a conundrum.

Money will be cheaper to borrow. Financing will be less onerous with longer amortizations and lower monthlies. Downpayments will be easier to achieve, thanks to CMHC. More capital will be available because of FHSA accounts and those rich RRSP withdrawal limits. And a surge in the number of available active listings will augment buyer choice while lessening competition. Meanwhile governments are spending big trying to increase construction in every market in Canada.

But will the buyers buy?

What impact will tariffs, higher consumer prices (from a lower dollar), economic uncertainty and a brimming unemployment rate have on confidence? Will January 20th – inauguration day – be the dividing line between nascent spring optimism and economic indigestion? And if things worsen so much that mortgages again tumble into the 2% range, will all be forgiven with bidding wars erupting – as they did during the depths of Covid?

Dunno.

But in 2025, in most of Canada, it may be a helluva lot easier to buy than sell.

About the picture: “Her’s Rusty, after a 1 And a half hour walk,” writes David. “No bitterness,resentment , just needing a good nap.”

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

Source: https://www.greaterfool.ca/2024/12/31/the-spring-thing-2/