Bubble, meet prick

The sleepy little university city is a hundred clicks from the Big Smoke. Not exactly an easy commute.

But WFH and Covid changed all that. So far in 2021 home sales in Guelph jumped 62% above 2020 levels. Prices increased 32% in a year. Nobody – not a single agent or broker – had ever seen this kind of exodus from east down the highway as GTA virus refugees arrived to Hoover up every listing.

But wait. What just happened?

A classic heritage stone bungalow on one of the best streets – a trophy property – came up for ‘offer night’ a week ago after seven days of showings. The listing agent braced for a bidding war. But total buyers: zero.

Well, the price reductions have started there and, in fact, much of the hinterland hunkered around the metropolis. Meanwhile in the urban core, condo sales have spiked. City rents have started to escalate. And it sure looks like peak house came, and went.

Four months ago a certain pathetic blog told you we were there. Sales levels cannot last, it said. Hold your powder. The pandemic will end. Restrictions will go. WFH will dissipate. And faced with a commute plus the horrible reality of having to find clean underwear and pants on a daily basis, many ex-urbanite Millennials will realize they lived DT for a reason. Cows are nice. But the 401 isn’t.

This week economists at the big green bank admitted to the same conclusion. “March seems to have been the absolute peak of the mountain in terms of activity, a couple of months ahead of what we had anticipated in our outlook released last winter,” says TD.

No kidding. Sales are down 25%. Listings are edging higher. It’s abundantly clear that – as with lumber and puppy prices – the pandemic housing market was unsustainable. It was emotional. Quixotic. Kneejerk. Dripping with recency bias, buyers made unconditional, no-inspection offers in blind auctions, showering speculators in hotbeds like Milton and Niagara with windfall gains while pickling themselves in epic debt.

So why is it ending?

The tougher stress test kicked in, punting another one in ten buyers to the curb. Mortgage rates have stiffened a little, but everyone knows more increases are coming. Covid is retreating and September/October will see the reopening of the downtown bank towers and a myriad of other workplaces. Meanwhile as restrictions and curbs are lifted people are far less consumed with where they live and are returning to normal life. That involves travel, vacations, dining out, sports events, concerts, shopping and pure socialization.

In short, the pandemic real estate fling was just that. Hormonal. Briefly compelling. Obsessive. Enthralling. Vaguely dangerous. Exciting. But ultimately short. And costly.

“Now that sales have begun their correction in earnest,” says the bank, “the interesting question becomes how steep the decline will be.”

You bet. And in some places valuations over time will plunge. Not just in the near-Toronto hick cities, but also in Atlantic Canada, northern BC or southern Saskatchewan. TD forecasts weakness “in Ontario, Quebec, PEI and Nova Scotia,” for example.

“Relatively steep year-to-date sales declines have occurred in places where affordability is more stretched, including Nova Scotia (-32% ytd), Quebec (-20%) and Ontario (-17%). This trend should hold moving forward, leading sales to underperform where affordability is poor by historical standards. Accordingly, relatively steep sales declines are anticipated for 2021 and 2022 (on a Q4/Q4 basis) in Ontario, Quebec and most of the Atlantic Region.”

Hmmm. Tough news for people who just bought properties at peak prices in places where your whole income might depend on a WiFi signal and the benevolence of a remote boss. In fact, look at what’s already starting to happen to prices across the country.

One reason prices are edging into decline is the sales mix. In a word, condos. Not only are cities rustling back to life and urban apartments and townhomes offer exceptional convenience (and no commute) but pandemic housing lust made SFHs completely unaffordable. Suddenly middle-class folks are staring at a $2 million price tag in southern Ontario or the Lower Mainland for what used to be an achievable home. It’s insanity. And unsustainable.

So the condo bargains this blog underscored in November are history now. Prices are up. Rents are up. In Toronto, Vancouver and even Calgary – where the downtown commercial vacancy rate is nearing 30% (but residential vacancies are at a two-year low). In fact sales of Cowtown condos and urban towns doubled in the past year. The demand is coming from students returning to uni, families pushed out of the detached market, smart downsizers and employees sensing the end of remote work.

It will be everywhere soon. And you were foretold.

About the picture: “I read your blog daily. Thank you, it’s very helpful”, says Michelle. “I’m sending this as wasn’t sure if you accepted unsolicited dog pics. This is Winnie. My grand dog. My son adopted her from the pound two years ago.”

The bottom

At 11:37 am Eastern on July 29th, this blog might have hit bottom. At that time K. Lech, from somewhere in Toronto, posted this:

In what sort of sick, moribund, morally and spiritually bankrupt society do aging cowards like Mr. Turner sitting on mounds of money sacrifice the developing bodies and minds of their young, to satisfy their own neuroses?

Moments later, this…

Garth, I am disappointed, but somehow not totally surprised, that you would throw in your lot with Nazi doctors who had to be hanged for their unnecessary, unwanted, and harmful medical experiments.

There ya go. I’m now a wealthy, old, cowardly Nazi engaged in the cruel vivisection of the young. Amazing where writing a free blog of financial advice, real estate trends, canine fancying and macroeconomics will take you in life. Maybe this is why Dorothy has started goosestepping around me.

No, we won’t drag out this vaccine thing, but because it’s my site and I’m the reigning dictator, here are a couple of final thoughts.

First, having just read almost 400 comments (and a slew more too gross to be published) I conclude there is one common thread to every anti-vax message. It’s fear. They’re afraid of needles, fearful of side-effects, scared of the science behind vaccines, worried about long-term consequences and terrified of becoming sickened by succumbing to inoculation. In short, pansies. This is then cloaked in the bravado of ‘freedom’, libertarianism and Trumpist iconoclasm. It’s augmented with the usual straw man arguments – big Pharma is to blame; big government is the enemy; anyone supporting either is corrupt, bought-out or drifting.

Layered over this is the deep scientific learning that only Facebook, YouTube and Parler can provide. This assists IT guys, florists, equipment salespeoplekind and bus drivers in becoming virologists, infectious disease experts and epidemiologists. They, in turn, use social media to impart their learning to others. And, presto, 51% of the unvaxed believe there are microchips in the serum. Or the CEO of Pfizer won’t take his own medicine. Or that Covid is mutating wildly within the bodies of the blissfully vaccinated.

Second (and this is worse) is a theme I touched on some days ago. We have lost our commonality of purpose. A global pandemic of historic nature should have brought people together. The opposite happened. What a loss. A loss of life and liberty. A loss of trust.

The pandemic has increased social stress, kept people apart, broken familiar bonds, disrupted school, work and leisure life. The Black Lives Matter movement might not have erupted with such force and determination had society been functioning as normal. In Canada the residential schools issue – centred on misdeeds of a century ago by people long since passed – was probably exacerbated by general feelings of loss, victimization and injustice as people were forced out of jobs, schools and relationships.

Aiding and abetting it have been politicians only too happy to mine the divisions among us. Now we’re separated irreparably. Indigenous and settlers. Straight and LBGT+. Owners and renters. Vaxed and unvaxed. Climate changers and deniers. By race. Gender. Pronoun. Region and language.

In the past, as you know, citizens lined up so that measles and polio could be eradicated. It worked. Gone. We sent 18-year-olds into the trenches and killing fields to win some world wars. And we did. Now we see millions afraid of a needle, refusing to help end a public health emergency that has killed 26,000 of us, and claiming it’s in the pursuit of liberty.

Face it. Alone we are victims, prey to those who exploit that. Together we’re strong. Fear and weakness lead to really bad outcomes, as a person or a nation. The time has come to stop the apologies, the hesitation and the divisions.

Lay down that keyboard. Find your conscience. Take a look around. You live in a favoured place, in a time of promise. Act like it.

About the picture: “We do love your blog by the way as the mandatory suck up line,” writes Nick. “This is Lulu and she is almost 7. This picture is at Furry Creek in BC. We got her a life jacket as she is always going in the water to save people. She’s a good swimmer, but thought this might add a bit better protection. It’s the biggest one we could find. She was at 180 pounds, but is on a diet and has lost 15 pounds to date. We are so proud of her. The best family dog you could ask for, we love her so much.”