Asset bubbles create unproductive debt and uneconomic pricing, which magnifies financial trauma as prices reverse. Most Canadians now live in cities where the average home price is five to twelve times the average household income (shown below, courtesy of WOWA.ca). The long-term ‘affordable’ norm was three times, max. This reality increases financial vulnerability for households, lenders, and the broader economy.
The discussion below looks at factors that have driven Canada’s housing bubble and the consequences now unfolding.
Word to the wise: Canadian banks can stay solvent and manage through credit losses, but that does not mean that bank shares do not take a pounding during bear markets. The 32% weight of financials in Canada’s TSX Composite is a concentrated risk for the entire stock index and all the portfolios and funds that benchmark to it.
Our special Guest is the Founder of Veritas one of the original Independent Financial Research Firms in Canada. Anthony is one of the few Researchers who employes Street Level investigations to reveal the truth about markets: wait till you here the story of going out & buying Condos to understand the sales tactics used by Developer’s Agents, the make-up of the Buyer Pools & the Psychology of the Condo Market place. We review the current Toronto Condo Crisis, the effects of REVERSE Immigration & what the Condo Crash means to the Big Banks. Thoughts on the Future of the Canadian Economy. Are we the midst of a Made in Ontario Recession? Here is a direct video link.
U.S. markets have seen similar trends, now reversing in several key areas.
Today we have the good fortune to hear another housing analyst’s 2025 outlook for home prices. We’re joined by Nick Gerli, founder of Reventure Consulting and creator of the new Reventure app. Nick points out that buying a home has rarely been this expensive in living American history: once was in 1981 when mortgage rates were a whopping 18%. The other time was in 2006, right before we experienced the biggest US housing correction ever. And speaking of corrections, Florida and Texas now seem to clearly be in one. And that weakness looks to be spreading into other states. What does all this forebode for 2025? Here is a direct video link.
The average home price in the U.S. is 4.28 times the average household income, which is lower than Canada’s but still elevated compared with long-term historical norms (shown below since 1955, courtesy of Nick).
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