While this is probably getting tiresome at this point, inflation came in hot once again in March, hitting a 30 year high. Consumer prices are up 6.7% from last year, and are likely to hit 8% in April based on Stats Canada finally adding used car prices to the CPI basket. This is ramping up rate hike expectations, with traders placing a two-thirds chance of a 75bps rate hike at the banks next meeting in June. Suffice to say this would be a disaster for housing which is already slowing precipitously. Again, just to reiterate many of these rate hike forecasts do not include house price declines. Raising the overnight rate to 3% will result in house price declines, it’s just a matter of how much. In other words, if you want to make money you should probably fade CMHC’s latest prediction, this time calling for a 10% increase in home prices this year. You can run models all day, but at the end of the day housing markets run off sentiment and liquidity, and both have turned south. Of course this is not just a Canadian problem. Mortgage rates in the US are the highest they’ve been since 2010, resulting

For the first time in over 20 years, the Bank of Canada raised rates by over 50bps at their most recent meeting. Everyone is panicking, inflation is here and the Bank of Canada is acting tough, they’re no longer going to support the housing market, so naturally a housing crash is just around the corner, right? Keep in mind, the big brains at the Bank of Canada were dead wrong on inflation being transitory over a year ago. They were also completely wrong on the housing boom just being a short burst of “pent-up demand”. Now they are telling you they are going to fight inflation, that the economy can handle higher interest rates and housing activity will simply moderate, no drop in home prices. Really? Have we all forgotten that Canada’s total non-financial debt to GDP is north of 350%? In other words, you can’t fight inflation without trigger the debt bomb. At some point they’ll have to choose between inflation and financial stability. In simpler terms, it sounds like the Bank of Canada is determined to keep raising interest rates until something breaks in financial markets. My opinion is that something will break much sooner than they are

The Federal Government unveiled an updated budget this past week, and it included a wide range of housing policies. While many of these were good headline grabbers, some of them will never see the light of day, and others lack any real substance. Let’s dissect some of them further. Foreign Buyer Ban The media took this one and ran with it. A two year ban on foreign buyers across the nation. It made for great headlines until you read the fine print. Unlike most of the Governments housing policies, this one has no official start date. In fact, here’s the exact wording they used in the budget, “To make sure that housing is owned by Canadians instead of foreign investors, Budget 2022 announces the government’s intention to propose restrictions that would prohibit foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring non- recreational, residential property in Canada for a period of two years.” They intend to propose. In other words, we might never see this get passed through parliament. Even if it is passed, it is loaded with loopholes. It exempts International students on the path to permanent residency and individuals on work permits who

It’s official, mortgage rates have hit 4% here in Canada. Several of the large banks have increased their popular 5 year fixed rate mortgage above 4%. You’d have to go back to about 2013 when rates were this high. Also worth adding that 2013 was a pretty slow year for housing and so I expect nothing less for us over the coming year. You have to remember, people buy payments, not houses. If they feel they can make the payment then they’ll buy the house. I won’t bore you to death on mortgage rates but here’s the gist of what you need to know. The 5 year mortgage went from 2.5% to 4% in two months. That increases the typical mortgage payment in Canada by about $550/ month. In more expensive cities like Vancouver & Toronto that increase is even higher. Now throw in the rising cost of living and you can see that something has to give. The cost and the availability of credit is ultimately what drives home prices. The media likes to talk about foreign buyers and investors but that’s really just skirting around the elephant in the room. At the height of the frenzy people were taking