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Moral Victories

Steve Saretsky -

Happy Monday Morning!

We get readers of all stripes on this newsletter. Policy makers, bankers, property developers, and every day people trying to figure out what’s going on in the crazy world of Real Estate up north. We’ve hit nearly seven thousand subscribers now which i’m incredibly grateful for. I’m not sure if David Rosenberg is one of them, but the esteemed economist echoed many of my thoughts this past week. Here’s Rosie in his widely followed Breakfast with Dave newsletter.

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You don’t say.

Political pressures are poised to ramp higher as home prices begin climbing once again. April data points to a continued rebound across most major markets.

Here in Vancouver, home prices have increased for three consecutive months as measured by the home price index. Multiple offers are back in full swing, especially for entry level product. This has confused a lot of prospective home buyers considering mortgage rates are still hovering near 5%. However, when looking at standing inventory its really not that hard to figure out, the number of homes listed for sale on the MLS as of the end of April stood at 8263, an eighteen year low.

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In other words, it’s pretty hard to find a home right now, which is stoking bidding wars, higher prices, and worsening affordability.

Same thing in the GTA. New listings fell 38% from last year, and inventory remains illusive. Here’s a chart of single family inventory across the GTA. Ugly.

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It’s worth noting that this inventory crunch is not unique to Canada, It’s happening in most major housing markets around the world. The US, Australia, you name it. We were told rising rates would crush housing, forced sellers galore. The big crash lasted nine months. Is it already over?

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Either this is one big suckers rally before the bottom falls out or something bigger is going on here. Perhaps Real Estate is doing exactly what it’s supposed to do as a hard asset in an inflationary environment. Here’s Greater Vancouver home prices when priced in gold, flat to down for the past two decades.

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I think about this a lot. We always take about how much house prices have gone up, but never about how little a dollar buys you today.

Here’s another spoiler. Housing, particularly in major global cities, hasn’t traded on incomes for a long time either. Many housing markets, such as Vancouver & Toronto are equity based markets. Pushed higher by a sea of capital from ASSET RICH investors and existing home owners. The last decade of monetary policy has only exacerbated this.

This upsets a lot of people, and it probably should. But I don’t make the rules. You either play the game, or the game plays you. There are no moral victories here.

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The Canadian Economy

Steve Saretsky -

Happy Monday Morning! Headline inflation ripped higher than expected this week, jumping back up to 4% for the month of August. It turns out Chrystia Freeland’s premature victory lap marked the bottom back in June. There’s a lesson here in base effects, you’d think her economics team would have tapped...

Steve Saretsky -

Happy Monday Morning! Over the past several months we’ve been highlighting the marked slowdown in residential building permits, a leading indicator of future supply. This is what happens when the cost of capital doubles, and in some cases, triples. This is a disaster in the making for a federal government...

Steve Saretsky -

Happy Monday Morning! The Bank of Canada moved to the sidelines once again, appeasing premiers in BC & Ontario who publicly pleaded with the BoC last week. It’s no secret these two provinces have the most to lose, their coffers largely built on a highly levered housing market, but we’ll...

Steve Saretsky -

Happy Monday Morning! A few weeks ago we summarized the cabinet shuffle, arguing the replacement of both the housing minister and immigration minister was simply rearring deck chairs on the Titanic. When new immigration minister Marc Miller was repeatedly questioned about rampant immigration putting strains on infrastructure and housing, he noted,...

Steve Saretsky -

Happy Monday morning! The Federal government is ramping up the noise amidst dismal polling numbers and a federal election only two years away. We had a cabinet shuffle just a few weeks ago, which included the immigration minister becoming the new housing minister. This week they arranged a housing retreat...

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The Saretsky Report. December 2022