Shadow of a crash?

Zeke asked me The Question this week. ‘So, is the market gonna crash?’

He’s 28, house-horny, married (with child), earns $132,000, has about sixty grand saved, and wants to stay in the GTA, commutable to the core. “But no condo. Ever.”

The simple answer is: Duh. Meh. Nobody knows.

However, here’s a scenario for ya. No crash. Not even close.

First, if the US jobs report tomorrow is weak (likely, given the recent data on rampant layoffs and shrinking openings – despite Trump’s new beancounter) the Fed will start its rate cuts on the 17th.

Second, Trump is close to taking over control of the Fed board, given his trashing, thrashing and mincemeating of governor Lisa Cook. As well, Fed boss Powell is out in May. So come the spring – or sooner – an unconventional plop in American interest rates.

Third, our guys will follow. They must. As US rates dip the American dollar will weaken and the loonie swell. Bad for exports in a trade war. Besides, the Canadian economy is losing altitude and more monetary stimulus is justified. It’s probable our rates will drop twice by Christmas and twice more in the spring.

Fourth, variable-rate mortgages will ride these cuts immediately. Five-year money will follow, more slowly, but also drop meaningfully. Expect lots of 3% loans flying around later this autumn, with even lower borrowing costs in place by April.

Five, there’s a huge well of pent-up housing demand. No decent rutting season has happened since 2022. Prices overall have declined in the order of 20% in most major markets since that year. The houseless Millennials who decided to wait for cheaper real estate may realize that moment has come. Their kids will follow. FOMO will not be far behind.

Six, expect more surprises. The kind that could bring rates lower still. An American recession as the US loses the trade war, unemployment mounts, anti-US trading blocks solidify and tariffs raise US consumer prices, dampening demand and economic activity, just as the Trumpers on the Fed respond by stepping on the gas.

Add it up.

Cheaper money. Lower house prices. Aggregated demand. Massive inventory and motivated sellers. How does any of this portend a crash?

Answer: it doesn’t. Not unless Canada also slumps into a job-robbing recession, causing potential buyers to run for cover while the pile of unsold house grows ever-larger causing desperate owners to wildly deflate their asks and accept crazy, bold low-ball offers.

Possible. Not probable. Canada is not America. These days we’re far more stable economically, politically and socially. Our central bank is an indy organization which has made the right decisions repeatedly. Over 85% of our trade with the US is currently free and the average tariff we face is just over 5%. That is apparently the best deal on the planet.

So, Zeke. If you are waiting for a gonzo, 50%-off, light-my-hair-on-fire house price crash, 2026 will not bring it. If fact, the oppo.

Well, where are we now? The most recent market stats have just hit the wire.

In Vancouver, monthly sales were up a tad (3%) but remain 20% below the long-term average. In the Fraser Valley, not so hot. Sales were down 13% year/year and plunged 22% in August from July. Across the region listings are up 18% and are way above the 10-year norm. The benchmark prices is $1.15 million – down about 2% from last year but tanking a full 1% last month.

In Calgary, not good for sellers. The pace of offers is down 9% and the average price has dropped 4% in the past twelve months. There are more houses for sale than before Covid – up 48% in a year. “The numbers reflect a significant swing away from the sellers’ market conditions of the last four years, but are still far from the pre-pandemic buyers’ market,” say the realtors.

In Victoria, the average house lost about $30,000 in value last month as sales declined almost 4% from last August. Listings are 14% more plentiful than last year and it all adds us to, “a real estate market which has a much different pace than the highly pressurized conditions that made headlines five years ago,” says the local board.

Toronto realtors say sales went up a little year/year but fell from July to August. Prices have dropped 5% in the past year, atop the declines of 2023 and 2024. Meanwhile new listings rose about 10% and there are still 27,500 resale homes on the market, plus about 22,000 new and yet-to-be-purchased units, 17,000 of which are condos.

Prices off another 5% in GTA. A bottom or a prelude?

Source: MLS, Toronto Regional Real Estate Board

The federal housing czar, that Gregor guy, this week made local headlines by saying the condo market is “in freefall”. Like realtors across the nation, agents in the Big Smoke are begging ffor a rate drop.

“A household earning the average income in the GTA is still finding it challenging to afford the monthly mortgage payment associated with the purchase of an average priced home. This is even with lower borrowing costs and selling prices over the past year. Further relief in borrowing costs would see an increased number of buyers move off the sidelines to take advantage of today’s well-supplied market.”

So, a market ready to tip as the economy wilts? Or one about to be revived by central bankers after a meaningful price correction?

We used to read a lot of comments on this pathetic blog about how buyers would ‘stampede back’ if houses ever shed 20% of their value. No more. What does that mean?

About the picture: “My husband and I have followed your advice for a number of years and are so much better off,” writes Janice. “Earlier advisors  started off well, then got into ‘churning’ mode which we did not agree with.  I am including a picture of our grand dog Brady during one of his visits. He is a miniature Spitz  and generally a very a dear little fellow, but he does have another side to him when he feels threatened by a bigger dog. Here he is waiting for his mom to come upstairs in the morning.  At home he is allowed in the bedroom, but not at grandma & grandpas!”

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

Source: https://www.greaterfool.ca/2025/09/04/shadow-of-a-crash/