History vs hopium

Welcome to a new gig. Some think 2026 will see the nation’s ridiculous housing market sink further, taking the GDP, Mark Carney and that Gregor guy with it. Others hold that we’re near the bottom of a realistic, needed correction and, as usual, most people won’t notice until it’s too late.

You don’t know. We don’t know. Realtors and mortgage dudes are clueless. Buying into the January lull could be brilliant, or very costly. All we know (sort of) is that mortgage rates will stay stuck at current levels for many months to come, prices have retreated to bear market levels (down 20% from 2022) in many key areas, resale inventory is high, new housing is in a total funk and the economy’s fragile.

Those are conditions ripe for correction. They can also presage a further plunge.

Here’s what else we know….

Sales in the country’s bellweather GTA mega-market plopped in December – which will be revealed in a few days when the real estate board sobers up. Sales last month are believed to have dipped by about a fifth from November. Despite that, prices appear to be holding firm.

Listings always crater into the end of the year and now is no exception. But the decrease in properties on the market has not matched the decline in sales – which means MOI (months of inventory) has jumped. For GTA freeholds, it is 4.3 months (up a month from last year) while there’s a seven-month supply of condos (up from 5.7 months a year ago).

For context, there were times during 2021 and 2022 when MOI was less than two weeks. Yup. Those were the FOMO days.

Resale inventory takes a year-end leap as sales stall

Source: Scott Ingram, MLS, TRREB

Now it’s a whole other story for new houses, as we’ve chronicled for you over the past months, Builders are in agony. There’s a construction crisis in Vancouver and the GTA – which has spread to all of southern Ontario and up to Ottawa. Pre-sales have collapsed, builders cannot get financing, so projects are being cancelled while unsold inventory mounts. With over 21,000 new units available in the Toronto area, records have been set in recent months.

The buyers are gone. Prices have moderated, but not cracked in a meaningful way. Compared to the previous decade, new home sales across much of Canada are circling the drain. Will this infect the resale market? How could it not? After all, sales have crashed as much as 80%.

New homes sales tank across Canada

Source: Altus, CREA, CIBC

And how does Cabada compare to other places? Americans have been complaining loudly that young couples are now shut out of the market by crazy prices and 6% mortgages – even though the cost of ownership is far lower in America. Trump has promised revolutionary new policies to change that in 2026, which will probably include that dangerous 50-year mortgage term.

Here’s a snapshot of the situation among major industrialized (G7) countries. While prices are stable in most areas, and up in Europe, Canada is showing a marked decline. It’s evidence that when a pendulum swings too far in one direction, it will inevitably swing as widely in the other.

Canada house prices crater compared to peers

Source: OECD

You can interpret all this as the beginning of the end of a corrective phase, or the beginning of the end of unaffordable housing. History would suggest the first. Hopium suggests the second.

Real estate insiders keep telling us the 2025 construction meltdown will lead to a shortage – feeding higher prices – when buyers return in a year or two. Are they lying in their own self-interest? Or is that just the way supply and demand work? With the cost of drywall, two-by-fours and furnaces, plus living wages for the trades and the value of land, what logic is there in believing new home prices will fall by half?

We’ll see. Spring’s coming. Ball season. But it already feels like the bottom of the eighth.

About the picture: “HNY Garth. I’ve been reading since the start,” writes Charles. “Can’t recall how I found the blog. I’m not sucking up lol, but you write extremely well. Informative, honest, and funny as hell. Thanks for 5,799, and all that have come before. Here is Finnigan, pictured in blissful state on Cordova Bay. Dogs really are the best-need to get him a sibling soon. The more the merrier for labs of course! All the best to you and yours. BTW, I recall you mentioning single malt in past posts — I just tried a 14 year old Balvenie called the “Week of Peat”.  Worth a snort.”

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

Source: https://www.greaterfool.ca/2026/01/01/history-vs-hopium/