This Week’s Top Stories: The World’s Largest Real Estate Bubble Is Crashing, & BoC To Hike Further

Time for your cheat sheet on this week’s top stories.

Canadian Real Estate

Bank of Canada Clear For Another Hike After Employment Boom: BMO

Canada’s employment data is still coming in hot, with the economy adding 104k jobs in December. This drove the unemployment rate down to just 5.0%, only 0.1 points above the 50-year record low. BMO explains this reinforces their forecast of higher rates coming this month. Since the economy is handling hikes so well, the don’t see any cuts for at least a year.

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Canadian Real Estate Bubble May Crash Until 2025 As Indicator Flashes Warning

Canadian real estate made a move that typically precedes an extended correction. Residential investment fell to 6.7% of GDP in Q3 2022, down from the 8.7% peak this cycle. It’s still elevated, now matching the share of the economy the US dedicated to home building in its 2006 bubble. Canada has only seen two larger corrections. They followed bubbles, and research indicates the contraction will lead to a prolonged correction.

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Canadian Detached Home Prices Are Plummeting, Here Are The Hardest Hit Markets

Canada’s single-family home prices are seeing gains disappear as fast as they came. The price of a typical single-family home fell to $794,000 in November, down 17.8% (-$172,200) from the peak less than a year ago. The worst hit markets include Oakville, where prices are down a whopping $478,600 over this period. Just the loss was the price of a home across Canada just a few years ago. 

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Canadian Home Equity Loans Surged After Regulator Warnings

Canadian homeowners used their equity windfall to secure a mountain of debt. Loans secured by home equity reached $308.9 billion in October, up 9.6% (+$27.0 billion) from last year. Regulators warn that the rising use of home equity loans is a rising risk. Those warnings only led to even faster borrowing, apparently.

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Toronto Real Estate

Toronto Real Estate Is The World’s Largest Bubble & It’s Officially “Crashing”

Toronto real estate is the world’s largest real estate bubble, and now it’s crashing. The benchmark price of a home fell to $1,089,000 in December, falling 21.4% (-$294,600) from peak. Prices retracing more than 20% within 12-months is the technical definition of a crash.  

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