Misfire

An historic mid-town rowhouse, 17 feet wide, sweetly reno’d, two-car parking and a one-minute walk to the Toronto subway emerged at $1.9 million. Hoping for a bidding war the agent set an ‘offer date’ of this past Tuesday. It came and went. No sale. Now it’s listed again, for $2.1 million.

A more veteran agent says while the market overall is in choke mode, there are still deals flying around in the more affordable range of $1.7 to $1.9 million. By the way, up the street from the 17-footer half a dozen homes have come up in a posher hood. Five million gets you on a decent street. One place is listed at $17 million.

For most people, this is a fantasy. And yet it’s reality.

A $2 million house with 20% down needs $400,000 cash and another $75,000 in land tax. The mortgage would be $9,500 a month, with property tax of about $20,000 annually. Required income is $350,000. However, it’s interesting to note the average family income in the hunk of Toronto just referenced is $420,000.

So, yeah, we’re a polarizing nation. The average household income in the GTA as a whole is $97,000. That’s enough to afford a mortgage (or rent) of $2,600 a month, and a house worth almost $500,000 with 10% down.

But wait. The average condo in the burbs costs $618,000, and in the city it’s $710,000. A detached home in 905 is $1.3 million and in 416 it rings in at $1.7 million.

Despite Trump, trade wars, the 51st state, a federal election, recession, stalled mortgage rates, rising unemployment (up again today), financial market gyrations, unaffordability, measles and Danielle Smith, house prices across Canada haven’t plunged. They’ve melted a little over the last three years of turmoil, but valuations have not crashed along with sales levels.

A report from RBC’s Robert Hogue this week says homebuyers are, well, giving up.

“The trade war is taking an increasing toll on Canada’s housing markets as potential economic fallout weighs heavily on the minds of prospective homebuyers,” he says. “Southern Ontario and parts of British Columbia—the country’s least affordable areas—are seeing sharper pullbacks in activity and weakening home prices as a result.”

As this pathetic blog has been detailing in the last few days, the stats out of Calgary, Victoria, Vancouver, the Lower Mainland, Toronto and the GTA suck. Down 20% or better over April of 2024, which also sucked. Active inventory is up and demand down, but prices have dropped only a few percentage points, if at all. As the realtor listing that rowhouse demonstrated, both sellers and their agents think FOMO is alive and well, just waiting to be coaxed out of the shadows of doubt.

Hogue suggests, however, the market overall is still pooched.

“Property values are coming under growing pressure amid rising inventories and soft demand. Bargaining power has shifted in the buyer’s favour in Vancouver, Fraser Valley, Toronto and other southern Ontario markets. Prairie markets such as Edmonton, Saskatoon, Regina, and some in Quebec including Quebec City and the Atlantic region like St. John’s seem to be holding up at this point. But, they aren’t immune to trade-induced anxiety.”

His bottom line: “We don’t see a meaningful rebound as long as trade uncertainty lingers.”

But here’s the rub. A ‘rebound’ means an increase in demand, which would suggest rising asking and sale prices. Given the massive gulf between average incomes and average house prices, how can that be a mathematical reality? Given the looming certainty of a Trumpian downturn in Canada, with more layoffs and pressure on wages, how is it possible real estate will have a renaissance?

It isn’t.

Unless there’s a plunge in interest rates. The Bank of Canada would have to drop its policy marker three or four times, taking it back toward the near-pandemic 1% range. With mortgages then around 3%, or a tad less, realtors figure demand could come surging back as the masses again their appetite for heaps more debt.

The odds of this happening are slim. Yeah, we’ll likely get one or two more cuts in 2025, shaving a half point from the BoC rate. But more would be reckless on the part of the CB. Given the inflation a trade war threatens, we can’t afford to trash the loonie (pushing prices higher) with rates far below those of the US.

Or, the government caves. Housing took a back seat to Trump in the federal election. It won’t stay there. Prices are not falling enough to make homes reasonable. Incomes are not swelling enough to carry crazy levels of debt. Employment is uncertain. Trump is nuts. Folks are frustrated.

Building more homes people can’t buy is no solution. Expect chaos.

About the picture: “I’ve been a big fan of your blog for the last 8 or 9 years, it always helps me to get the big-picture perspective of where things are across Canada, and reaffirms that my decision to move to Calgary, from Mexico City, was the right one,” writes Victor. “I also really appreciate the investment advice. The dog in the picture is Oso, he is a weird breed: Rocky Mountain Liberal. On that, I know that Albertans have a reputation of being “regressive”/disgruntled with Ottawa, and I can appreciate how that sometimes could be true (a fraction of my in-law family is in that camp unfortunately), but that’s not the full picture. There is at least one riding here in Calgary that sees things differently and believes Canada is better as a unity. Long way to say, Alberta is not all folks complaining about Canada. Some of us are grateful to be part of Canada and more than happy to pitch in to keep up the great standard of living we all enjoy in this country. Anyways, hopefully Oso makes it to the cover of one of your posts one day.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.

Source: https://www.greaterfool.ca/2025/05/09/misfire/