Juggling Dynamite

A secular confluence of factors–peak debt, unaffordable prices, rising rates, tighter lending, reduced foreign flows, insufficient saving rates and aging boomers looking to downsize–are all finally working to dramatically reduce Canadian home sales from peak mania in 2017. Prices should continue to follow with a lag, and history suggests that these trends could continue for a decade and more.  No one should be surprised.

Sales of luxury homes in two of Canada’s most expensive cities fell this year, as the high-end real estate market continued to feel the impact of foreign buyers taxes.

Realty brokerage Re/Max says sales of single-detached homes priced from $1 million to $2 million fell 35 percent from a year ago in both Toronto and Vancouver.

According to the annual report, released Tuesday, sales of single-detached homes in the $2-million-to-$3-million range were down 50 percent in Toronto and 22 percent in Vancouver.  See Luxury home sales drop 35% in Toronto and Vancouver

One in three respondents to a new Ipsos survey conducted on behalf of insolvency trustees MNP said they are concerned that higher interest rates could force them toward bankruptcy. That was up about six per cent over a similar survey in June. Higher interest rates are already pinching the budgets of about 45 per cent of respondents and 52 per cent say they are concerned about meeting their debt payments.  Here is a direct video link.

As markets plunge around the world this week, we should not lose big picture perspective on how relatively little they have mean reverted to date.  And also on how much further stocks are likely to fall before they complete their third, and potentially final, bear cycle of this secular bear that began in 2000.

This chart of the Canadian stock index (TSX) from my partner Cory Venable offers a glimpse of where we are today and where cyclical value is likely to present (green band).  A great opportunity is coming, but only to those who have been defensive in reckless times and prepared their liquidity in advance.  Sitting ducks tend to get shot, and no one should be surprised by any of this.