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<\/figure>\n\n\n\nAnd the survey says\u2026 things are going to get worse. My poll on Twitter garnered nearly 5000 votes, with almost 80% of respondents calling for a further correction in prices by the end of 2023. Yes, it\u2019s true Twitter tends to skew bearish, however it\u2019s hard to deny that further downside is likely given the rapid surge in home prices suddenly colliding with the fastest rate hiking cycle most people have ever seen.<\/p>\n\n\n\n
In fact, on a debt adjusted basis, this rate cycle is more than twice as severe as the 1980\u2019s.<\/p>\n\n\n\n Prices have already dropped quite a bit. The national home price index is down 16% since it peaked in March 2022, that\u2019s the steepest decline on record, dating back to 2005. While we are nearing the end of this rate hiking cycle, markets are still expecting more pain ahead from Tiff Macklem thanks to another strong labour report. The Canadian economy added 104,000 jobs in December, blowing past expectations of 5000 jobs. Ok there are a few things here that make you go hmmm.<\/p>\n\n\n\n Labour data is historically lagging and prone to revisions. Will the Bank of Canada look past this? Markets don\u2019t seem to think so and are placing 73% odds of a 25bps rate hike at the January 25th meeting. That would bring the overnight rate to 4.5% and the prime rate to a whopping 6.7%. That would mean any borrower taking out a variable rate mortgage would be stress tested with an 8 in front of it. No bueno.<\/p>\n\n\n\n Again, making the case for lower prices is not hard. I do struggle being stuck alongside consensus. Typically when everyone is positioned one way, the opposite tends to happen. But there are not many bull cases to be made today.<\/p>\n\n\n\n The bull case is the tsunami of people migrating here. Canada added 431,645 new permanent residents in 2022, a record high. That topped the previous high in 2021 of 405,000 and the government isn\u2019t satisfied yet. They are targeting 465,000 new permanent residents in 2023, 485,000 in 2024 and 500,000 in 2025. Keep in mind this doesn\u2019t include foreign students or temporary workers. When you lump those people into the equation our population actually expanded by 865,000 over the past twelve months!!<\/p>\n\n\n\n In the near term, interest rates are going to continue to drag housing lower. However, a combination of massive immigration and a sudden pause in new housing construction due to economically unfeasible development suggests we\u2019ll still be talking about a housing crisis five years from now.<\/p>\n\n\n\n Yes, brace for a year of volatility ahead, it will be a doozy.<\/p>\n","protected":false},"excerpt":{"rendered":" Happy Monday Morning! Back to our regularly scheduled programming after a few weeks off during the holidays. Last year was an eventful year across the Canadian Real Estate spectrum to say the least. I figured i\u2019d start off the New Year with a quick sentiment check. And the survey says\u2026 things are going to get […]<\/p>\n","protected":false},"author":1,"featured_media":10386,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[70],"tags":[],"acf":[],"yoast_head":"\n![\"https3a2f2fsubstack-post-media-s3-amazonaws-com2fpublic2fimages2fe0e14989-f651-4db6-b91a-889268271681_1468x960-6833341\"\/](\"https:\/\/www.stevesaretsky.com\/wp-content\/uploads\/2023\/01\/https3A2F2Fsubstack-post-media.s3.amazonaws.com2Fpublic2Fimages2Fe0e14989-f651-4db6-b91a-889268271681_1468x960-6833341.jpeg\")
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