Suffice to say there are a lot of Canadians out there wondering why house prices are going up in the midst of a global pandemic / recession. As I have said before, it has nothing to do with fundamentals, but instead, liquidity. Let’s keep this simple. Back in March/ April 2020 at the onset of the pandemic, when businesses were closing their doors, people were ordered to stay home, and fear was at all time highs, there was a genuine concern we were setting the stage for another depression, unlike anything we had seen since the 1930’s. Given the grim economic outlook, it made sense that banks would have to tighten lending, which would only compound the issue. Policy makers had to intervene quickly, they desperately needed banks to keep the credit taps open. So, what did they do? First, the Bank of Canada intervened, purchasing government and corporate debt, suppressing yields from shooting through the roof. The banking regulator, OSFI, then lowered capital reserve requirements at the banks, freeing up spare capacity for the banks to issue loans. The federal government then backstopped many of these loans, essentially making them risk free for the banks. Fast forward today, and

Not everyone’s a fan of the crypto bull market. Bank of Canada deputy Governor Tim Lane, was on record this past week, denouncing the latest run up, suggesting “The recent spike in their prices looks less like a trend and more like a speculative mania — an atmosphere in which one high-profile tweet is enough to trigger a sudden jump in price.” However, the market seems to disagree. The Central Banks comments surfaced during the same week further evidence of widespread adoption continues. Over the past week we have seen companies such as Tesla, Mastercard, BNY Mellon all unveil policies supporting crypto. Furthermore, the first ever bitcoin ETF in North America was also approved this week. Purpose Investments Inc. said Canadian securities regulators have cleared the launch of the Purpose Bitcoin ETF, making it the first to gain regulatory approval in North America. Whether you believe in the crypto space or not, it is here to stay. What is perhaps most ironic about the banks comments is that their policies of zero interest rates and unlimited QE have actually supported and will continue to support the price of crypto currencies. The price movement in bitcoin signals societies growing preference for opting

The Canadian labour market shed over 200,000 jobs in January, far worse than expected. General consensus had estimated a contraction of about 40,000. You know what this means, house prices are going higher. I’m half joking, of course, but it seems the worse the economic fundamentals, the higher house prices seem to go right now. However, it is certainly true that deteriorating economic figures provide further air cover for the Bank of Canada and the Trudeau Government to keep their foot firmly pressed on the stimulus accelerator. The worse the numbers, the more stimulus will keep coming. Make no mistake, housing is going up based on liquidity, not economics. In fact, the Bank of Canada was out this past week saying they might target overshooting inflation moving forward. Bank of Canada Deputy Governor Lawrence Schembri commented, “We might be willing to tolerate a small overshoot or, like the Fed has done, actually aim for an overshoot. And that’s a question we are pondering right now.” Meanwhile, housing inflation is certainly overshooting. National home sales and prices are expected to hit record highs once again when January figures are reported next week. According to data compiled by Ben Rabidoux of North Cove