The final nail

Sorry newbie buyers, desperate realtors and lonely lenders. No rate cut tomorrow.

The Bank of Canada’s in no position to drop the cost of money when it reviews things in the morning. In fact, bond yields have been rising as much as falling lately. The evil orange dude is set to double tariffs on our metals industry in a few hours. The US Fed is thinking about raising rates a little, not dropping them. Our CB is not about to pull the trigger when it may need the ammo more in a few months.

So, another nail in the coffin of the Spring housing market that croaked before it could crawl. In the absence of any joyous news (like Danielle Smith separating from Alberta to join Breitbart) real estate in Canada is pooched for the rest of 2025.

Why are we stuck with 4.25% mortgages when they used to be 1.5% during the good old days (Covid, masks, pandemic, social distancing, cocooning, vaccine and bidding wars)?

Lots of reasons. Inflation is at the top of the list. The last headline number (1.8%) was weensy, but it hid a meaningful boost in core measures. Prices for most of the stuff we need to live continue to rise. Economists think big wage gains (Canadians unions are far more prevalent and militant here than in the US) will push the CPI up. Immigration levels have been slashed, impacting industries like construction and adding to costs. Tariffs and retaliatory tariffs are expensive.

“It would be a mistake for the Bank of Canada to ignore the evidence before them,” says the chief economist at Scotia, Derek Holt. The economy does not need more stimulus or incentives to borrow money right now. “It would be disconcerting if an inflation-targeting central bank already at—or possibly below—neutral were to see fit to add more to monetary policy stimulus without a shred of evidence that they’ve been able to bring this measure within the target zone.”

And here’s a key message for the shiny new Carney government: stop spending.

One big reason rates aren’t going down any time soon is because (once again) Canadians voted for politicians who promise to give more and tax less. The Libs made that commitment. The Cons did the same. Only the Dippers were honest about their economy-wrecking wokey agenda.

Think about what we’re getting, how much this will cost plus the fiscal stimulus these policies will pour into the economy.

• An income tax reduction of 1%, scheduled to be effective in less than a month, dropping payments by over $800 a year.
• The consumer carbon tax is now history.
• GST on new homes is being tanked.
• Over $20 billion is being pumped into a fed home-building frenzy. Plus new tax incentives for rental construction.

And, of course, there’s extra stimulus to come. Carney and the premiers have been collaborating on major ‘nation-building infrastructure’ projects. Pipelines. New nukes. Critical mineral mines. The blitz to reduce dependence on the USA will not be cheap. There’s also a major boost coming for the military (hopefully shunning that stupid Golden Dome). And in three or four months will come the first federal budget in ages – guaranteed to throw out more bones.

By the way, a report this week from TD Economics says the Carney guys’ plan for building 500,000 houses a year is, well, nuts. Can’t happen. Won’t happen. How can we possibly go from current levels to that extreme amount of activity when material costs are rising, the labour pool shrinking and buyers balking? The highest level of building per year – ever – was 260,000, and that was half a century ago.

Source: TD Economics

The best the Libs might do, says the bank, is to throw up four hundred thousand units. “To hit the 400k level, the government will likely have to rely on a combination of workforce growth (which is challenged by the wave of retirements set to impact the construction industry in coming years), and an unprecedented boost in productivity. The latter would likely require a revolution in how new housing is delivered.”

So, no slam dunk. But you can bet it will cost a bundle. More stimulus. More expansion. More inflation. And mortgage rates stay stuck.

The slow melt in the housing market will continue. Sell while you can.

About the picture: “Here is Lola showing off in her Hudson Bay sweater! She was such a darling, we miss her greatly,” writes Deborah, in Victoria. “I took her to the downtown Victoria Bay when she was a pup. She had a pee on the main floor and was banned for life. I just want to let you know we love your weblog. I read it on weekdays and my spouse never misses a day. He comments often as “Wicked as it seems”.  He got very excited when you replied to one of his posts. If our beloved Lola makes the cut, he might just pee his pants.”

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Source: https://www.greaterfool.ca/2025/06/03/the-final-nail/