Juggling Dynamite

Danielle was a guest with Jim Goddard on Talk Digital Network, talking about recent world economy and market developments. You can listen to an audio clip of the segment here.

From 2000 to 2022, Canadian home prices increased 375% (an average of 17% annually, shown in red below), while the average Canadian wage (black line below) rose 3% per year. In the Greater Toronto and Vancouver Areas, where most of the population lives, median home prices rose 450% and 490%, respectively. The mania escalated during the pandemic when prices in popular areas leapt 50% between the end of 2019 and February 2022, when the average sale price nationally reached $816k. In October, the average sale price was $656k, down nearly 20% from the peak. Where I live, north of Toronto, “new price” discounts are evident, and properties are still sitting. Also, see, In Victoria, former Airbnbs are flooding the market–but nobody’s buying.

The trouble is that there is a huge supply of homes where owners and lenders are banking on market values over $1 million, more than 50% higher than October’s average sale price. With buyers in hibernation, many owners/lenders are turning hopes to a stronger spring market (CREA). But with mortgage rates not likely to be significantly lower by then, prices will need to give.

🚨🇨🇦 Weren’t suburbs supposed to be affordable?

🤯 Why did houses an hour from Toronto start selling for $1,000,000?

🏠 Now that the free money party has ended, will this bring the burbs back to reality?

💰As we see with cities like London, England and New York City, prices… pic.twitter.com/c5VZJa5gyy

— Jason G. (@jasongofficial) November 16, 2023

Higher interest rates have sharply increased carrying costs while lowering spending and investment through the economy. Both revenue and profit numbers are broadly in retreat and the urge to cut costs is intensifying.

There will be a bottom in equity markets, but it has never come before central banks have resumed easing monetary conditions. Recessions, typically follow the final Fed hike within about 6 months and 2 years after the first hike. In this cycle, that would suggest a recession by the first quarter of 2024 with a stock market bottom several months later.  The segment below offers some further insight.

Doug Peta, chief strategist of U.S. investment strategy at BCA Research, joins BNN Bloomberg to discuss his view on markets. Despite softer than expected PPI and CPI in the U.S. Peta still sees a recession in the first half of 2024. He also expects double-digit declines in earnings, which he says will power a double-digit decline on SPX next year. Here is a direct video link.