The good old days

Twenty-one years ago the prime minister was Paul Martin (remember him?), Canada had a federal budget surplus of more than a billion dollars (this year the red ink will surpass $70 billion) and the average Toronto property cost $315,300.

So, 2004 might as well have been a faery tale. We ain’t going back.

No surprise then that CHMC has abandoned that year as the benchmark for housing affordability. Recently it picked 2019 instead as the holy grail it will strive to recapture – when average families could almost afford average homes, but not (of course) in the GTA or Lower Mainland.

Six years ago T2 was PM. The federal deficit was the largest in eleven years, at $25 billion. That Toronto property now cost $819,100. And people had no idea of the crapstorm that was about to hit in the spring of 2020.

As we all know, and this pathetic blog documented daily, Covid brought 1% mortgages, urban flight, bidding wars, cocooning, seller greed, buyer FOMO, mayhem in Bunnypatch and a price explosion. Today the average property is miles beyond the grasp of most families – and CMHC maintains that can be reversed by doubling annual new house construction.

False, of course.

Housing starts have stalled out at half that level and collapsed in Toronto and Vancouver. New houses actually cost more than resale ones, so building a slew of them is no solution to affordability. Demand has crashed amid economic concerns. Mortgage rates are stuck at almost twice the rate of inflation.

Thus, building four million homes in a decade won’t make real estate cost less and, more importantly, it’s not going to happen. It looks like 2019 pricing is also a fantasy.

Unless, of course, there’s deflation and a recession that feels like a depression. In that case – an economic emergency – the CB will drop interest rates enough to ignite buyer interest, as it did during the pandemic. But we know what thosecrazy rates did to prices. That’s how we got here.

Well, there are zero signs of deflation at the moment. A recession is certainly possible if Trump and Carney fail to write a new trade deal and we get tariffed to death – but that’s also unlikely. American protectionism will not endure. Trump will not last. The US dollar has been falling, the country’s stature eroding globally and its citizens now face higher prices while watching their president become a king.

So, the likely outcome? In 2028?

Dunno. But it won’t be 2019.

The largest number of homes for sale – ever

Source: Toronto Regional Real Estate Board

Last month real estate sales went down in most major markets, like Toronto, Calgary and Vancouver. Inventories went up. Never before in history have we seen more than 31,000 properties for sale at a single time in a single city. Construction levels have fallen to the lowest in decades. Prices have declined, but not significantly, which is why demand for real estate has waned, months of inventory swollen and the amount of time required to sell a place jump wildly.

Realtors say a trade deal with the States will change the public mood and help stop the slide. They want the Bank of Canada to cut interest rates twice this summer and fall to boost mortgage demand. In the meantime the new Carney government is gearing up to dump more than $25 billion into a build-baby-build program of cheap developer financing and pre-fab construction.

CMHC officially says real estate prices need to fall about 30% from current levels. Combined with lower mortgage prices, that will allow average families to buy typical homes and carry them for a third of their gross household income. But not in the GTA or Lower Mainland. To achieve this, as stated, we need an economic crash or a construction bonanza.

Neither is in the cards. But a slow melt is. We have that now. It will continue this year.

And then, everything changes.

About the picture: “Attached is a picture of two Cairn Terriers that actually visited your office in Lunenburg a few years ago,” writes Don. “Thanks for all your good work. I’ve been reading the blog for many years (and have even recommended that you delete the comments section for the good of your health once or twice).”

To be in touch or send a picture of your beast, email to ”[email protected]’.

Source: https://www.greaterfool.ca/2025/07/06/the-good-old-days/