A flicker, not a flame

Days ago a certain pathetic blog told you homebuilders in BC were pleaded with politicians to end the two-year-old ban on foreign buyers. We need those guys, they said, to purchase new units so we can get financing and start building again – because Canadians have abandoned us.

Without buyers, they argue, there is no new construction. Supply will run out. Prices will go up. And how does that help anybody? Isn’t government spending billions to try and get more homes online? Why are we doing this to ourselves? Why the hate?

Well, read the comments scrawled on the walls of the steerage section to find out. Anti-foreigner sentiment runs deep and wide in this country. We keep looking for scapegoats for real estate prices (which our demand escalated). They have included (a) Trudeau, (b) the Bank of Canada, (c) the chartered banks, (d) realtors (e) realtor tactics, (f) MPs who own rental condos and, especially, (g) foreign dudes.

But why did prices ramp up dramatically after 2019?

Covid, of course. Everybody wanted to cocoon, and flee to Bunnypatch. Emergency interest rates, designed to stave off a pandemic depression, fuelled borrowing and buying. And human nature was the sauce – as FOMO accelerated desire and buying decisions, creating bidding wars and price insanity. People crave what’s going up. They shun things that decline. Real estate is our shining example of how we do the opposite of what makes sense.

So where are we now?

According to RBC, things are getting peachy again. Economists there looked at last week’s sales stats from major markets and decided momentum is back. It is, “rebuilding in several Canadian markets as earlier fears of economic doom fade,” they said.

“Resales picking up—markedly so in Toronto—is helping supply and demand rebalance, which in time will ease downward pressure on prices… A jump in resales in Toronto confirmed the market is turning a corner after trade war worries weighed heavily in spring… We expect a broad market recovery to get back on track across Canada as confidence builds further. Diverging price trends are likely to persist, but they could narrow later this year or next.”

Wow. A broad market recovery. It’s already begun. And the GTA numbers (sales up 10%, prices down 5%) confirm that the good old days of FOMO are coming back. That is now the position of the country’s biggest mortgage lender and financial behemoth.

But is it so? And how could this be happening when interest rates have not budged for months, Trump continues to whack Canada and the foreigners are still walled out?

Maybe it’s not. There’s evidence we are nowhere near a phoenix-like revival from the market ashes. Not yet. Not until interest rates are meaningfully chopped, the economy and confidence rebound or prices drop seriously lower – a full capitulation by sellers.
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Look at the facts. A sales ‘rebound’ last month is just a small improvement from a disastrous 2024 summer. We are still miles below 2022 activity levels. Moreover there’s been no spring market whatsoever for the past two years. Unprecedented.

Meanwhile in most places inventory has continued to pile up while listings take longer to sell. In the GTA, for example, we have just clocked the first-ever month when 30,000 resale properties were available at the same time (plus 21,000 new units for sale). Also unprecedented.

So why have sales moved modestly higher? Probably because prices have gone modestly lower. The slow melt continues – more pronounced with condos. That has brought home ownership more within the orbit of some families, but with average detached homes still fetching $1.4 million, affordability for most is stretched.

New listings are starting to decline, but existing ones sit unsold. The market overall is losing enthusiasm, energy and emotion. It doesn’t help that a lot of the country – the GTA especially – hae been in a slow broil. Humidex temps this week will again range up to 40C or 104F.

“It’s that the market lacks conviction. There’s no urgency,” says broker Danniel Foch. “When rates were low and prices were climbing, hesitation was costly. Today, waiting is rewarded. That shift in psychology is powerful. It rewires the market’s metabolism. Buyers negotiate harder. Sellers reduce expectations. And the entire transaction cycle drags out. In markets like these, volume can rise, just as it did in July, but that volume is often more reactive than proactive. It’s opportunistic. Buyers are bottom fishing.”

These days there is scant fear prices will rise, motivating those who have been sitting on the fence. The economy feels weak. Trump and tariffs are a low-hanging threat. Jobs are being lost. It’s a time more for caution than expansion. Taking on big debt at the moment feels… extreme.

What can change this?

Likely, only the cost of money. Expectations are the Bank of Canada will start that process next month. But it will be slow and cautious.

You can also relax about the foreigners. This will remain a mess of our own making.

About the picture: “We are from BC, driving across Canada,” writes Jennifer. “Manitou Beach, Saskatchewan , was one of our stops.  It’s called the Dead Sea of Canada because the lake contains so much salt and minerals that you float. There are a number of carvings around the little beach community and this one is in the fenced dog park. The pooch is our dog, Atka (means, guardian spirit in the Inuktitut language. Atka is a rescue from Nunavut). Our friend John, reads your blog all the time and suggested we submit a photo (he loves Atka and I think, misses him).”

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

Source: https://www.greaterfool.ca/2025/08/10/a-flicker-not-a-flame/