Canada’s Entire Housing Market Is on the Verge of Collapse


by Justin Spittler, Casey Research:

Toronto’s housing market is unraveling.

Last month, home sales in Canada’s biggest city fell 40{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}. That was the largest annual decline since 2009.

But that wasn’t the only bad news to come out this past month.

The price of the average home in Toronto also fell 4.6{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} in July. That’s the biggest monthly decline since at least 2000.

It was also the third straight month that Toronto home prices fell. The average home is now selling for $175,000 less than it did in April.

That’s a staggering decline. But it’s just the beginning.

You see, the number of house listings in Toronto also jumped 5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} last month. There are now 65{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} more homes listed for sale in Toronto than there were a year ago.

This is a bad sign.

• It tells us homeowners in Toronto are running for the exits…

If this doesn’t change, the supply of Toronto homes will outstrip demand. This will send prices even lower.

Most investors aren’t taking this seriously. But they should.

After all, Toronto isn’t headed for a run-of-the-mill downturn. It’s headed for a crash.

I’m not the only one saying this, either.

David Madani, an economist at Capital Economics in Toronto, thinks housing prices could plunge as much as 40{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}. Madani also said that the coming downturn will be deeper and longer-lasting than previous ones.

That’s the last thing Toronto can afford right now.

• Toronto’s housing market has been booming for nearly two decades…

Local housing prices are now up 218{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} since 2000.

That’s far more than prices have climbed in New York, Miami, Las Vegas, and even San Francisco.

Prices have risen so quickly, the average person can no longer afford to live in Toronto. These days, the only way to swing it is to borrow huge sums of money.

It’s complete insanity.

That’s why I’ve been writing about Toronto’s housing bubble this year. It’s also why I’ve been urging investors to take shelter.

If you took my advice, great. You’re much better off for it. If you haven’t yet, please read this essay closely.

As you’re about to see, a Toronto housing crash isn’t just a problem for Canadian real estate investors. Anyone with money in Canada’s stock market is in danger right now.

I’ll explain why in today’s essay. I’ll also tell you how to “flip” this crisis into big profits.

But let’s first be clear about something. This isn’t just happening in Toronto.

• Canada’s entire housing market is collapsing…

In June, nationwide home resales fell 6.7{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}.

That’s the biggest monthly drop since 2010. It was also the third consecutive month that this happened.

The number of monthly home sales in Canada is now down 14{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} since April.

That’s a big drop. But it’s only going to get worse.

You can see why by looking at the chart below. It shows Canadian housing prices going back to 1975. It also tracks U.S. housing prices for comparison.

You can see that Canada’s housing market wasn’t slowed down by the last global financial crisis. It just kept rolling.

Canadian housing prices are now up 101{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} since 2009. And they’re up 218{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} since 2000. U.S. housing prices are up 85{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} over the same period.

As if that weren’t crazy enough, the average house in Canada is now selling for 16 times more than the average Canadian’s income. For perspective, this same ratio peaked at 12.5 during the last U.S. housing bubble.

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