Expectations

Will a new cabinet make houses cheaper?

We’ll see. The shiny new PM unveils his team this week. Choices for finance minister and the housing czar will be interesting. The Carney plan to rescue real estate is based on lower building costs and whipping up a mess of pre-fab affordable stuff. But as with the last plan (and the one the Cons proposed) it’s all dependant on whether or not the buyers show up.

Lately they’re turtling. Looks like that will continue. Especially in those parts of the country – southern Ontario, the Lower Mainland, Calgary – where US tariffs bite a little harder. The more integrated we are with the Americans, the more it blows.

Like K-W, for example. The Kitchener-Waterloo-Cambridge region is home to a high tech sector massively tied to the States plus car parts and assembly plants requiring an American customer base. Layoffs and shutdowns have already been announced. And the housing market has felt it.

“Home sales remain notably below the ten-year average,” say local realtors. “What we’re seeing is a clear market rebalancing, with inventory levels up 75% above the ten-year average and nearly four months of supply across all property types. This shift is creating more opportunities for buyers who now have more time for due diligence and negotiations, while sellers are adapting to a market that demands strategic pricing and patience.”

Sales in the area are way below the decade-long average while inventory is higher and prices have backed off in the same slow melt hitting most of the country. In short, buyers have way more choice. There’s less competition. Sellers are more willing to barter. But prices are still ridiculous. A single-family home in this place – a three-hour drive to Toronto – still costs almost a million dollars. In contrast, the average home price a half-hour from Chicago (where the new Pope grew up) is $150,000 US.

Prices have dropped a little more in the Big Smoke. The average Toronto property has given up $35,000 in three months. It’s a similar story in Vancouver and Calgary, with higher inventory and sales that have dropped by 20% or more.

Last week Trump said tariffs on Canada aren’t going away. A reporter asked why. He said, “That’s just the way it is.”

Such American-MAGA arrogance. It’s hard to see how any Canadian government can break through this. But maybe she can charm the old buzzard. Let’s hope.

Meanwhile the question is whether Canadians will muster up the courage to take on more debt and start writing offers. Job security confidence has dropped back to Covid we’re-all-gonna-die levels. Only 44% of us feel secure at work and a third of Canadians are uncertain they will still be employed in a few months. The savings rate is up because the spending rate is down.

BMO just discovered 74% of Canadians expect a recession. Only 14% of people are planning to buy a home this year. Half think it’s a worse time to make an offer, despite the fact prices are down and choice plentiful

This is why the inventory of unsold new homes in both the GTA and Vancouver is surging higher. At the same time up to 30% of all “new” listings in the GTA are actually re-listings as worried sellers try to make their properties look fresh, and maybe nip the ask a little.

This is a real estate world on hold. It’s a standoff. Owners don’t want to believe the bottom will fall out of the market. Shoppers are waiting for exactly that. Meanwhile the next jobs report is forecast to be a weak one, beaten up by tariffs, and the Bank of Canada is expected to react with a rate cut in early June.

It won’t matter. Rates (and prices) have to fall further before demand rekindles. The entire year of 2025, in other words, will be a wipeout for the industry. By Christmas we could have 3% mortgages and 2022 prices, plus a federal government shovelling money into throwing up more walls. But unless people feel hopeful about their employment, finances and future, nothing matters.

If Trump and his tariffs had not arrived this year, we’d be having a different conversation. We might also have a different government. And PM. We might have seen FOMO return and a spring market with swelling sales, bidding wars and higher prices.

Weird how things turn out, isn’t it? Go Mélanie.

About the picture: “I’ve been reading your blog since 2009. How things have changed since then!” writes Anne, in Toronto. “Here’s a picture of my friends’ one-eyed American rescue dog, Ripley. She was found wandering in the woods with her siblings, led by a sweet Rottweiller who was definitely not the mother. The mystery was never solved but everyone found a good home. Despite only having one eye Ripley was unmatched in catching balls and Frisbees. She left us recently after a long happy life.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/05/11/expectations-6/