In jail

For the seventh time, our CBers cut the cost of money last week. The Bank of Canada rate has plopped almost 2.5% since peaking out. More to come. Five-year mortgages are snaking into the 3% range. Variable loans went down with the prime, again. And meanwhile borrowing regs have been relaxed and the cost of downpayments pushed seriously lower.

Yes, plus it’s spring.

But against these positives is the overriding negative of economic uncertainty, maybe-a-recession and you-know-who. While our rates were falling days ago, tariffs hit Canada. Just the warm-up act. We’re being told to expect a nuclear event in 17 days, on April 2nd.

Before we go further, here’s some comforting news. Trump is also murdering real estate south of the border. Pending home sales have reached the lowest point since the pandemic. Actually, the worst ever. Jobs uncertainty, higher mortgage costs, inflation pressures and now tariff tension are keeping realtors vexed.

Trump also murdering US real estate. Pending sales…

Source: National Association of Realtors

(Speaking of tariffs… American importers pay those taxes and pass higher costs on to consumers. The exporting country pays nothing, despite Trump’s lies. A woman importing stainless mixing bowls from China says her duty rose from 2% to 47% – the new levy on China plus the steel tariff – which means product that sold at Walmart for $19.99 is now $27.98. Yes, 40% more. This is not how you make America great again.)

So we have a new PM, a federal election coming, hairy big tariffs in two weeks and probably economic contraction with large numbers of layoffs. Oh yeah, and the Bay is collapsing. Spectacularly. Plus Trump is mulling an invasion, or at least fomenting economic collapse north of our “imaginary” border. Is there anything else to worry about?

Yes, of course.

You can’t sell your condo.

Condo inventory swells as owners trapped

Source: Scott Ingram

Real estate is starting to hit a wall many thought would never come. Condo prices nationally are 18% below 2022 levels. Sales have collapsed, inventory is swelling and hundreds of thousands of people who thought buying a unit would put them on the property ladder now know they’ve been slammed into housing jail. Can’t get out.

Without meaningful price appreciation to finance closing costs, selling fees and the higher-then-rent ownership burden, these victims can’t move up to a townhouse, detached, or larger apartment. But buyers are demanding lower prices, since FOMO is vanished and available inventory is exploding higher.

In the GTA, for example, the months of inventory (MOI) for condos will soon be double that for freeholds. There are 1,750 more condos for sale in just the 416 area than at the same time last year. In addition to these 11,000 resale units, there are 16,900 new, unsold units available. If little changes it could take a year or two to find a buyer – at any price.

So, mortgage rates may be falling. Mortgages may be cheaper and easier to get. Downpayments may be up to 60% lower. Inventory and choice is huge, and growing. Sellers are more motivated than they’ve been in years. And yet this market is stressed. Those big shiny condo towers are teeming with owners who regret ever having plopped money down or swallowing debt when they could have been free-spirit renters paying far less per month.

It’s not just the GTA, of course. The same dynamic is at play in Vancouver, Victoria, Calgary, Ottawa and Halifax. A whole generation is learning real estate does not always go up. That housing is not divorced from the larger economy. Or politics. That you can actually lose money, shed net worth and put your financial status in reverse by doing a no-brainer thing like buying property.

What next?

It gets worse, probably. The CB will cut rates more as Tariff Man goes ape. But inflation will come back as consumer prices rise, the dollar falls and import/export taxes balloon. Most economists think what’s coming in April will lead to recession and layoffs. At that point the political fiction that we “don’t have enough houses” will be exposed. And what will government promise then?

Meanwhile we have the most indebted society in history. Over $2.1 trillion in Canadian household mortgage debt. Scant savings. Too much net worth in a single asset. So many people so ill-prepared for an economic storm, however long it may last.

The housing harvest is failing. It’s a lesson. You reap what you sow.

About the picture: “Long time blog dog here and never miss a day reading your wise words as well as your colleagues,” writes Katherine. “Thanks for posting my family cat Myles a couple years ago. I am now sending you a photo of my step dogs. They are rescues from Texas and are enjoying a snow day in Hamilton. Mocha (girl) and Smores (boy) have the best life with my stepdaughter and her husband.”

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

Source: https://www.greaterfool.ca/2025/03/16/in-jail/