Happy Monday Morning! As expected, the Bank of Canada held interest rates at 5% for the second consecutive time. BoC’s Macklem flagged everything we’ve been highlighting in this newsletter for several months now. Weaker economic growth and a recent surge in global bond yields is doing most of the tightening for them. Adding, “The path to a soft landing is narrow. In our new projection that path is narrower.” No doubt. Monetary policy is working, households are pulling back in the midst of surging interest rates. Household loan growth is running at its lowest levels since 1983! We can also see demand being crushed for new mortgages. Mortgage loan growth is running at its lowest levels since 2001. It is therefor rather perplexing that house prices haven’t fallen further. This has perplexed the BoC as well. “Normally, house prices move pretty lockstep with interest-rate increases,” Bank of Canada senior deputy governor Carolyn Rogers said at a news conference last Wednesday. “As interest rates come down, house prices go up a bit. And they’ll come off as interest rates come back up.” “We’re not seeing the decline in house prices that we would expect,” she continued, adding that there is a

Happy Monday Morning! At the beginning of the year I was part of a real estate pannel with REW on the state of the Vancouver housing market. On stage, in front of a live audience, the moderator asked me for my forecast for 2023. I promplty noted at the time that “we’re going to have a year of volatility.” And that’s exactly what it’s been. This year has been marked by a record low in home sales, followed by a record low in new listings, and inventory. Against all odds, prices ripped higher in the spring. This prompted the Bank of Canada to hit the panic button and start hiking rates again. Bond yields have followed suit, pushing mortgae rates higher too. Sales have stalled once again, and prices are now following suit. To put it lightly, it’s been nothing short of a roller coaster ride in 2023. Recent stats from CREA highlight the whipsaw emanating across the nations housing markets. While home sales were officially up 1.9% year-over-year in September across Canada, they were still the third lowest in twenty years. Buyers are squarely on the sidelines with very little urgency considering mortgage rates are hovering well into the 6% range

Happy Monday Morning! The housing crisis in this country gets a lot of attention, as it should. Fixing it, however, is proving to be rather difficult. Over the past several years we have attempted to beat demand over the head with a blunt instrument. The list of policy measures include, a foreign buyers tax, empty homes tax, a speculation tax, an increased property transfer tax on luxury homes, increased property tax on luxury homes, a foreign buyer ban, and a mortgage stress test just to name a few. You’ll notice there’s a recurring theme here and it has to do with taxes. We’ll circle back on that shortly. It turns out killing demand has proven rather challening. Especially when the feds are hellbent on maintaining current levels of immigration. Canada’s population grew by 1,050,000 in the second quarter, the highest rate of growth in a single year since 1957. So now we are going to try the supply side. According to CMHC, Canada needs about 3.5 million additional housing units by 2030 to restore affordability. But what the hell does that even mean? It means over the next six years we need to average 583,000 housing completions per year. Over