Juggling Dynamite

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.

Here is a direct video link.

From 1975 through the early 2000s, Canadian median home prices rose broadly in line with median inflation–adjusted household income. Where home prices outpaced income gains in the late 1970s and 1980s, the disconnect was short-lived, before prices corrected more than 30%.

From 2000 to 2022, Canadian home prices (shown in red below through Q2 2021) increased by 375%—46% of that from 2020-22—while the average Canadian wage rose 3% annually (disposable income in black).

My own real estate holdings were leaping along for the ride. Still, it was easy to see that this was not good for financial stability, and I was writing about the horror of it all in real time, see Capital Inferno, February 2022.

In the Greater Toronto and Vancouver Areas, where most of the population lives, median home prices rose 450% and 490%, respectively, from 2000 through 2022.

The Greater Toronto Area (GTA), which includes five regions (mapped below), is the largest population centre in Canada by a wide margin — home to some 7 million Canadians (approximately 17% of the national population).The area has the most diversified economy in Canada (finance, tech, logistics, healthcare, education, and manufacturing), has traditionally received the most immigrants annually of any Canadian region, and has a median after-tax household income of $97,000, some 15% higher than the national average of $84,000 (StatsCan).

Canada’s price-boosting monetary and fiscal policies (a decade of ultra-low interest rates, easy-lending, quantitative easing by central banks, minimal downpayments, government-underwriting of mortgages, weak money laundering rules and an unlimited principal residence tax exemption) enabled home prices in the GTA (and many areas within an hour’s drive of it) to a decade-long 2.74x leap in the average sale price from $467,300 in 2012 to $1,281,900 by peak mania in February 2022–a nominal annualized increase of about 10.6%.

The latest update from the Toronto Regional Real Estate Board (TRREB) shows that prices dropped sharply in November to an average sale price of $951,700, and have now declined 25.8% (-$330k) in nominal terms since the 2022 peak. See, Toronto Real Estate Prices Down 25%, Record Inventory Flood Continues.

Despite the substantial pullback (as shown below since 2007), this only puts prices back to January 2021 levels—speaking volumes about the speculative surge that took place during the low-rate investor frenzy.

The GTA’s median after-tax household income of $97,000 is about 15% higher than Canada’s national figure of $84,000, meaning the average GTA home sale price was more than 13x the median household income at the 2022 peak and is still a mind-blowing 10x now.

Nationally, the figures are not much better. Despite an 18% nominal and 25% real decline in average sale prices since February 2022 (shown below since 1970), the average home sale price of $690,195 in October was still some 8.2x the median household income and just back to 2021 levels. If home prices are to realign with historic affordability norms of no more than 3x household income, then nationally, Canadian home prices would need to halve from here, or household incomes would need to nearly triple. Perhaps, we can hope for some combination of lower prices and higher incomes, but the catalysts for a big boost to household income are not presently apparent.

In the meantime, active listings (in blue below since 2010) are far outpacing sales (in grey), along with record listing cancellations, as sellers pray for a return of price-insensitive buyers in the spring.

November is typically not a big month for home buying in the region, but it was still the third-weakest in at least 15 years.

Anecdotal evidence from agents suggests some sellers are waiting for the Spring, with some even de-listing and hoping easing financing conditions help manage demand—a bold move considering the overall inventory trend.

Weak sales and a weaker—but still strong—inflow of inventory pushed total inventory much higher. The board saw 24,549 active listings last month, soaring 16.8% higher from last year. This is unprecedented for November, with the above chart really emphasizing how this market is a totally different beast.

November and December typically aren’t big months for Greater Toronto real estate. Consequently, weak sales aren’t the big red flag they present in busier Spring months. However, winter inventory may have a big impact as it piles up. It sets the stage for a Spring market that sellers are reportedly holding out for—just as a wave of investor-owned new construction completions are expected to hit.

An ongoing downturn in home prices is the cure for too-high prices. Still, it bears noting that housing corrections have traditionally led to the worst economic downturns, with painful losses in employment and the stock market. Unfortunately, we’ve earned a doozy.