Juggling Dynamite

About 36% (14.8m) of Canada’s (41m) population lives in three metro areas (StatsCan data): Toronto, Vancouver and Montreal.

Unfortunately, these three cities have the dubious distinction of experiencing the most significant home price inflation in North America over the past two decades, far ahead of other major American cities (shown below, courtesy of Visual Capitalist), and multiples of household income growth over the same period.

Two months short of the 4th anniversary of the February 2022 real estate bubble peak in Canada, belief in mean reversion is spreading. Perennially bullish brokerages are now predicting home price declines will continue in some of the most overvalued areas. See, Royal LePage projects Toronto-area home prices will drop 4.5 per cent by end of 2026.

Builders and housing-related retailers are also warning along for the ride, see Home Depot Shares Fall as Retailer Gives Guarded Fiscal 2026 Forecast.

High shelter costs drain cash flow away from other spending, saving and investment. The higher the price of a home, the more buyers are likely to borrow to acquire it, and the longer the cash drain from other needs and goals.

The cost of borrowing is rarely mentioned in home-buying discussions beyond the monthly payment. But the cost of borrowing over 15-, 20-, 30-, and 50-year amortization periods increases home costs by 50, 75, 121, and 226%, respectively, depending on the term (the cost of borrowing $600k is shown in the table below, courtesy of DCP).In other words, a $600k home loan ends up costing $926k over 15 years, $1.052m over 20 years, $1.329m over 30 years and $1.962m over 50 years. Principal paid, and borrowing costs are in addition to transaction costs, taxes, upkeep, and maintenance over the holding period.

On a full-cost accounting basis, home ownership often yields a flat or negative return. It is consumption spending, and inflated prices end up costing a fortune.

Affordable homes can be lovely to own, and if they are paid off and not continually refinanced, they can serve as a store of value. But they’re more of a land bank than an investment.

All of these factors should be considered when reviewing the efficacy and efficiency of financial planning and housing-related monetary and fiscal policies.

We have driven electric cars for 8 years now, and our real-life experience confirms that EVs are safer, cleaner and much cheaper to operate than conventional ICE autos. Yes, even in cold climates. Last year, we added solar and can now self-power our cars and 75% of our annual electricity needs.

Like growing food and cultivating personal strength, there is nothing more empowering than self-powering. I am always surprised that more libertarians and others who dislike big government don’t yet seem to grasp the individual rights and freedom inherent in self-powering.

Artificial Intelligence and data centers are gobbling up energy and inflating electricity costs for everyone. The good news is that high prices are also accelerating innovation and enabling individuals to improve efficiency and take power generation into their own hands. There is nothing more democratic: inclusive, participatory, equitable, and not controlled by elites.

For years, solar power at home was mostly limited to people who owned their rooftops and could afford the steep upfront costs. But now, a new generation of small, affordable systems — often called “plug-in” solar — are making clean energy more accessible. Already widespread in Germany, the movement is gaining momentum in the United States. Laura Klivans of PBS member station KQED reports. Here is a direct video link.

Some unexpectedly strong employment estimates from Statistics Canada last Friday caused markets to reprice abruptly, with the expectation that the Bank of Canada is done easing and will hold its policy rate steady at 2.25% through 2026.

The unexpected employment gains for November were driven entirely by survey results reporting part-time jobs (below in yellow since January 2023, courtesy of The Daily Shot), while full-time employment (in purple) fell for a second consecutive month.

At the same time, yields (Canada’s 10-yr government yield below, year to date) rose as bond and equity prices fell on the prospect of less monetary easing.

Stronger employment, even if part-time, is welcome news. The downside is that a stronger loonie makes Canadian exports less competitive, and higher yields mean borrowing costs are likely to trend up, just as borrowers and property sellers were hoping for the opposite.

Meanwhile, the cash flow squeeze is intensifying for landlords. As carrying costs tick higher, the latest report from Rentals.ca and Unrbanation today shows that asking rents in Canada were down 3.1% in November from a year earlier to an average of $2,074, marking the 14th month of annual declines and the largest drop of 2025.

Daniel Foch offers a balanced assessment of the latest employment data and its implications in the segment below.

In this episode, we take a deep dive into Canada’s latest job report, which claims the addition of 54,000 jobs in November and a decrease in unemployment to 6.5%. Despite the positive headlines, a closer look reveals discrepancies: total hours worked barely changed, full-time jobs fell, retail jobs saw a significant drop, and youth employment carried most of the gains. We explore why payroll data contradicts the headline figures and the potential inaccuracies of the Labor Force Survey. We also discuss how the market reacts to these reports and the implications for bond yields, mortgage rates, and the Canadian economy. Join us to uncover the real story behind these seemingly puzzling job numbers. Here is a direct video link.