When down is up

“It’s hard to believe,” she told me yesterday, “but offer dates are back.”

She’s a veteran realtor in the snakepit of mid-town Toronto, where $2 million gets you a starter home. With hair on it. ‘Offer dates’ are blatant attempts to foster bidding wars. Listing agents will only accept or open offers on a specific day, at a specified time, in order to compel competition. Oh, and please staple a cert cheque for at least $100,000 to the deal. Thanks.

“I just saw a decent place get thirty showings on the first day,” she continues. “And five offers.” Indeed. An upscale semi went amid four offers last week for two hundred grand above the $3.5 million ask. No garage. Half a house. And land transfer tax of $151,000.

So, at least in Toronto, it’s back. The reasons: pent-up demand after two lousy springs. Wealth gains after a year of 20% stock market bumps. And big reductions in interest rates – which are a factor even when people are writing ‘3’s on an offer.

It’s happened again. This morning the Bank of Canada did a jumbo rate cut of a half-point. That takes its policy rate to 3.25%, sinks the chartered bank prime, and is welcome news to VRM borrowers.

“This should take the lowest nationally advertised variables to 4.25% (insured) and 4.75% (uninsured),” says broker and rate columnist Rob McLister. And there are more cuts to come as the economy loses altitude, giving variable-rate folks hope they’re taking the right gamble.

It’s the fifth time our guys have hauled out the rate axe. The most agressive central bankers on the planet.  And while the US Fed will be nipping a quarter point next week, the gap between the cost of money here and there continues to grow. American inflation today came in a little hotter than expected (2.7%), and there may be fewer future cuts now that Tariff Man is coming to power, expected to throw stimulus all over the place.

For crusty, potty-mouthed mortgage broker Ron Butler, it all spells one thing. Desperation.

“The Bank Of Canada says it loud & clear: The Canadian economy is in trouble There is no clearer message a central banker like Tiff Macklem can send that the bank’s view of Canada’s economy is entirely negative as a 50 BPS cut. At this moment I know of NOTHING that will cause any improvement in the Canadian economy.”

Butler joins the chorus of anti-Trudeau and Chrystia-hating critics who look at our country and see only problems. Unemployment up. Construction down. Manufacturing slowing. Government bloating. Small businesses hurting. Homeowners drowning in debt. And, as we know, the economy is currently growing at a healthy 0%.

“Another BoC cut January 29 and likely two after that,” he predicts. “Good news for variable mortgage borrowers. The path for Tiff Macklem is clear: get to a 2.5% rate by late spring. The cuts must happen and they will.”

BMO’s Doug Porter now agrees. Our CB will slow the bus down, but we have not yet reached the destination.

“In the short space of six months, the Bank has driven the overnight rate from a highly restrictive 5% level right down to the top end of their estimate of neutral rates at 3.25%,” he says. “Now, the BoC has directly signalled that the pace of cuts will slow, perhaps dramatically—the Bank even noted that it will now “evaluate the need for further reductions”. Ultimately, given the slack in the economy, and the cloud over the trade outlook, we look for some further small rate trims of the 25 bp variety in 2025, bringing the overnight rate down to 2.50% before mid-year.”

In other words, kids, three more nips to come. And that would take the variable to 3.5%.

But what about Trump? Could his policies in the States (and his tariffs against us) upset this glide path to seriously lower interest rates? As we reported days ago, most economists see Tariff Man causing a deep recession here, possibly pushing those floating-rate mortgages under 2%. But if Caada retaliates, we could get swelling inflation and a rate reversal.

So, on the horizon: Uncertainty. Lower rates. A weak economy with recession and rising unemployment. Political volatility and likely chaos in Washington. Geopolitical tension now that Syria is in play, Netanyahu continues to blow up everything, Trump will throw Zelenskyy under the bus and Dog only knows what the guy with the funny haircut is up to.

Amid that, rockstar realtors break out bidding wars for houses only 1%ers can afford.

What a world.

About the picture: “Thank you Garth for your clarity and sanity,” writes Louise. “This is beautiful Chloe, an amazing family member my daughter adopted when she was a teen. She gave us love and comfort after losing our father and grandfather and will be in our hearts forever. Chloe loved to bark at the moon, the clouds and the sun. Never knew why (lol).”

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