Canada's Housing Market Crash? Here's What's Really Happening

seems to be nothing but bad headlines coming from the Canadian Real Estate market right now. Korea, the Canadian Real Estate Association, just dropped their November real estate stats. And

let me tell you, it doesn't look good.

It's not horrible, but it's certainly not good. A few months ago, the story

not good. A few months ago, the story was that only Toronto and Vancouver were hurting. But now, the entire country is

hurting. But now, the entire country is freezing up. Buyers are backing away.

freezing up. Buyers are backing away.

Sales are stalling. Prices are still sliding. And the uncomfortable truth is

sliding. And the uncomfortable truth is that policy has already done everything that it can and the market still isn't safe. Earlier this year, affordable

safe. Earlier this year, affordable markets were still holding up. Alberta,

parts of Quebec, the prairies were still moving. The pain was isolated to Ontario

moving. The pain was isolated to Ontario and BC, especially Toronto and Vancouver. That story seems to be over

Vancouver. That story seems to be over for the most part. November data shows that national home sales are down 10.7% year-over-year. Prices are down again,

year-over-year. Prices are down again, 0.4% month overmonth and almost 4% year-over-year. And OC activity is going

year-over-year. And OC activity is going nowhere. This isn't just a Toronto

nowhere. This isn't just a Toronto problem anymore. This is a a Canada

problem anymore. This is a a Canada problem. So, here are the facts from

problem. So, here are the facts from Korea. Sales are down month over month

Korea. Sales are down month over month and almost 11% year-over-year. New

listings are down 1.6% 6% month over month, which actually means that supply is falling faster than sales as it stands right now. Does this mean that

sellers will be waiting to put their properties up in the spring or could we gradually be getting back to a balance and and maybe even a sellers market if this trend continues? I think only time will tell and I think the market really

depends on the spring what happens in the spring this year of 2026. The MLS

house price index is down 3.7% year-over-year and the national average price is down about 2%. This isn't a recovery obviously the recovery that a

lot of people were hoping for. And even

as Korea describes it, it's a holding pattern at best and a deterioration at worst. Remember inflation is running at

worst. Remember inflation is running at the 2 to 3% range. So, if prices are falling 2% or 2 to 4%, then your real house price is down 6 7% year-over-year.

Now, the Canadian Real Estate Association and Royal La Page both said the same thing now, and I agree with them on this, and I don't often agree with them on stuff. Interest rates are no longer what's holding buyers back.

The question is, what is holding them back? So, variable rates are already in

back? So, variable rates are already in the mid-3s. Fixed rates are the lowest

the mid-3s. Fixed rates are the lowest they've been since early 2022. And the

key detail that nobody is talking about is that we're only 25 basis points away from hitting the floor of the B20 stress test. The Bank of Canada can't add more

test. The Bank of Canada can't add more stimulus. rates literally cannot

stimulus. rates literally cannot stimulate demand anymore unless OSI removes the stress test which wouldn't surprise me if they removed it or shrink

it in some form in Q1 of next year based on the fact that the Bank of Canada shows that we've seen a huge drop in

mortgages with 450% loan to income levels and OVI is currently running two tests side by side a 450% loan to income across the entire bank's portfolio and

the stress test and if it yields positive results then they might have some clearance to remove the stress test a little bit. So think about this from a policy perspective. The Bank of Canada

policy perspective. The Bank of Canada cut aggressively, mortgage rates have normalized, supply is rising, competition is down and yet buyers are still walking away and staying on the

sidelines. Why is this? It's because

sidelines. Why is this? It's because

sentiment is broken. And this is the core issue. Markets can't recover on

core issue. Markets can't recover on math alone. This is why the past five

math alone. This is why the past five rate cuts when realtors told you that this would be the rate cut that sends prices skyrocketing, it didn't happen.

And this is because prices will recover when people believe prices won't keep falling. And right now, buyers don't

falling. And right now, buyers don't really have a a reason to believe that.

They've been rewarded for patience. If

you waited six months, you got a better deal. If you waited a year, you got an

deal. If you waited a year, you got an even better deal. And so, why would you rush? This is exactly what we saw in the

rush? This is exactly what we saw in the 1990s housing downturn. The bottom

wasn't sharp. It wasn't a bounce. It was

long. It was drawn out. And the recovery was even slower. So, what would actually restart the market? There are only three things that bring buyers back in full force. Number one is that prices get so

force. Number one is that prices get so cheap that they can't be ignored. So,

that would mean we need more downside risk for buyers to really rush into the market. Number two is that prices start

market. Number two is that prices start rising consistently and buyers start becoming afraid of missing the recovery or at a very minimum they're confident that prices aren't going to keep falling

and so they're a bit more eager to get back into the market. That doesn't look like that's going to happen anytime soon. And then the final one is that

soon. And then the final one is that household income growth restores affordability. And given that the

affordability. And given that the unemployment rate is rising, although it did back off in the last couple of months, we're seeing layoffs and wage growth is strong but not really showing

much upside. We don't have number one.

much upside. We don't have number one.

We definitely don't have number two. So

that leaves wages. Firsttime home buyers are the biggest potential source of demand. They represent about 50% of the

demand. They represent about 50% of the market according to the Bank of Canada, but they're also the most exposed to layoffs. They're exposed to weak job

layoffs. They're exposed to weak job prospects and they're exposed to rising unemployment which disproportionately affects young people and entry-level careers. Now, there is some evidence

careers. Now, there is some evidence that they're coming back and I posted this chart on Twitter and a bunch of people were complaining that it was too bullish, but it does show that

first-time home buyers are coming back, but they're doing so very slowly and cautiously. And I'm going to cover this

cautiously. And I'm going to cover this entire Equifax report in another video, so stay tuned for that. Make sure you hit the subscribe button. But first-time

buyers aren't active enough to force a recovery or even support a recovery.

They're not aggressive enough to reset prices higher. In fact, the reason that

prices higher. In fact, the reason that they're getting in is because they can get good deals and because they have the negotiating power to get sellers to meet them where they are, which means prices have to come down. Sellers have to come

down. Buyers are setting the market

down. Buyers are setting the market price. Now, Korea will tell you that the

price. Now, Korea will tell you that the market is balanced. And and most data would tell you that this is correct. The

sales to listings ratio is at 52%.

Inventory is at 4.4 months, but balanced market doesn't necessarily mean healthy.

It could also mean that it's a stuck market, right? That there's not any

market, right? That there's not any transactions happening. And the fact

transactions happening. And the fact that volume is falling and volume is significantly low by comparison to the long-term average. It just means that

long-term average. It just means that nobody has conviction in this market, buyers or sellers. So, here's my takeaway. I'm going to try and keep this

takeaway. I'm going to try and keep this video short. A lot of people have

video short. A lot of people have mentioned that my videos are too long and that might be impacting my views.

So, I'm going to try a short one. Policy

didn't save the market. Interest rates

didn't save the market. Supply hasn't

saved the market. The only sentiment and income growth can save the market. And

both of these take time. We need the unemployment rate to stop rising for a substantial enough period of time that people feel confident that they'll have a job to pay the mortgage that they're committing to. And so, the bottom likely

committing to. And so, the bottom likely won't be dramatic. It's not going to be this bounce or a V-shaped recovery.

It'll be boring. It'll be slow. It'll be

frustrating.

But most importantly, it'll be healthy.

This is what's necessary for our market to get back to a point where we can buy and sell properties in a safe environment. There's no huge volatile

environment. There's no huge volatile swings that are wiping out people's equity or getting people trapped with one or two homes. And until buyers believe that prices have truly stabilized, they're going to keep

waiting. So, if you want more data

waiting. So, if you want more data driven housing analysis, uh, the Canadian Real Estate Association releases a stats package for realtors, and I just finished building a tool that

I'm going to use to do a deeper dive on their monthly reports. So, hit the subscribe button and I'll get that out within the next week or so. My goal here is to not be cheerleading, not be doom

posting, and if that's what you like, I'd appreciate you following along. I'll

also be breaking down the Equifax buyer data and what it actually tells us about first-time buyers coming back into the market or not. And as always, thanks a lot for taking the time to watch this video. I really appreciate you taking

video. I really appreciate you taking the time out of your day and I'll see you again as soon as I