Juggling Dynamite

More than a decade of near-zero interest rates spawned a generation of bonkers financial decisions. Now, we are in the reveal and clean-up phase.

Unlike fixed-term mortgages, other forms of credit quickly change with overnight policy rates set by central banks.  As shown below, since 1960, courtesy of the Daily Shot, non-mortgage interest payments now suddenly consume 4.5% of employment income–the highest share in 15 years. Inventory for sale is spiking across most assets as available credit and able buyers contract.

Home sales (in blue below) in the Greater Toronto and Montreal areas outright contracted year-over-year in October, while new listings (in yellow) have leapt in all major cities. See more in Fall housing market stuck in a low gear across Canada.

Prices are naturally moving lower as initial denial by owners and lenders shifts to terror and liquidation mode.

🚨🇨🇦 Have we hit the bottom?

🤯 Toronto sales have dropped for 5 consecutive months..

🏠 Inventory continues to grow… but where are the buyers? Scared, and many unable to qualify.

💰As we see prices come back to 2020 levels, how much lower can we go?

🙏 Let me know your… pic.twitter.com/jKrBwWkiEM

— Jason G. (@jasongofficial) November 7, 2023

Used vehicle prices in October were 18% below their 2021 peak (Manheim US Used Vehicle Value Index in red below since 1997). This is the largest drawdown on record, but prices are still 33% higher than in 2020.  Mean reversion is only started here.

Delinquencies and bad debts are mounting. It is hard to imagine the madness that has been. The segment below offers a taste.

Here is a direct video link.

Danielle DiMartino Booth, CEO and Chief Strategist at QI Research, joins Bloomberg Radio to discuss the FOMC decision. Here is a direct video link.

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

Also see, Toronto area buyers are walking away from deposits on new homes–some losing as much as $300,000:

Property values have fallen most for single detached homes in cities between Toronto and Barrie, such as King City and East Gwillimbury, Morris said. During the February 2022 price peak, the average home price in King City was $3.2 million and dropped to $2 million in September 2023 — a decline of almost 40 per cent, according to the Toronto Regional Real Estate Board.

“We’re seeing it happen the most in cities that are an hour or two outside of Toronto, where people paid $1 million for a property and are now getting appraisals of $600,000,” Morris said. “They’d rather face the builders’ wrath and walk away, than close on that transaction.”