2023 Real Estate Market Overview & 2024 Outlook

Welcome back to another episode of Inside Canadian Real Estate. Today's episode is a little different, and I would say a little bit special because it's a solo episode. So you got me the whole episode. But that's not why it's special. It's special because I'm doing a year in review. So we're going to be talking about the 2023 real estate market, but also the Canadian economy as a whole.

I'm going to run through some stats and some numbers. It's going to be very unstructured. So like, bear with me, Anthony and my producers here in the background. He's probably going to be jumping in asking some questions as we go. So whether you hear you hear him or not, if I start answering random questions, that's why that's happening. I have a bunch of charts in front of me.

I prepped all day yesterday for this. So if I'm flipping through stuff, just like I said, bear with me. This is not, you know, something that we've practiced and and streamlined. It's just going to happen live on camera. But there are some very important takeaways here. And my kind of warning is I don't have all the answers.

So like, I don't, I don't know everything. And there's some stuff I'm looking at that I'll bring to your attention. I don't know what some of it means. I'm going to guess, but I don't know. And like, I mean, if I knew I'd, I'd probably be a billionaire already because this stuff is just not easy to anticipate. It's not easy to understand, It's not easy to predict.

I guess is the better word. Point is this stuff is not easy to, it's not easy to make sense of. I mean, it's it. You can understand it. You can read it. I'm going to present it now.

What it means going forward is anyone's best guess. You'll hear a lot of predictions from people on the economy next year telling you what's going to happen to rates, what's going to happen to jobs, what's going to happen to real estate. The truth is, nobody knows. I don't care how smart they are, how successful they are, what kind of company they run. Nobody knows, because if they knew, they would be placing very large bets in that direction and none of them are. So it's a guess.

And it's also a guess because there's a lot of variables both at home and globally right now. Like what does war mean? If we go into a global scale war, which I hope we never do, What does that do to markets? Well, that changes things, right? What does government policy do? What does a next pandemic do?

So it it's very hard to predict. All things equal, we can make educated guesses and that's the best that we can do. And obviously, Full disclosure, I'm not an economist, right? I'm not some like math statistician, whatever the word is. What's the word, Anthony? Statistician, statistician, Statistian, I'm not a statistian.

See, I don't even know the word. I'm just a guy that does real estate. I'm a guy that sells real estate. I'm a real estate agent. I'm a real estate investor. That's what I do.

But I'm going to do my best to get the information in front of you that I use to help me make educated decisions. And if you find value in that today, then good. So agenda for today, we're going to kind of run through this really quick. We'll give you an idea of what we're going to cover. We're going to do a quick overview first of 2023. So what went down, what we saw.

From my perspective, again, there's so many takes and views on this. I'm just giving you my view. My view. Like I said, being real estate agent, I've sold a bunch of properties this year. I felt clients purchase properties. I have purchased many properties.

We've invested in a lot of deals. We've bought and sold a lot of flips. We're developing properties. We've purchased land. I'm doing a whole bunch of stuff with different partners and people. I'm very active in the local real estate market.

This is my perspective of what 23/20/23 felt like. It's also all the people around me that I deal with, other investors, partners, vendors, lawyers, accountants, my brokerage. I work at one of the biggest brokerages, Ontario, talk a lot with our brokers, our managers, our other staff and agents. So I get a lot of that conversation too. So I'm bringing you guys a 2023 overview from my perspective, but I'm pretty deep in the market like I said. So I think you're getting a pretty decent perspective and we'll talk about how it went, some of the highlights, some of the key takeaways, all that fun stuff.

Then I want to jump into some stats of interest. So basically, we're going to look at the numbers, What do they mean? So let's actually look at some graphs, look at some charts, some things that I think are relevant to support some of these ideas and maybe some things that you haven't looked at before. So that's going to be fun. I'm going to talk about how these stats kind of impact different locations, different property types, because that's another important factor when it comes to evaluating real estate or real estate markets is like, what type of property are you talking about? Because we'll have people come to me and ask questions like, well, what do you think?

Are housing prices going to go up? Are they going to go down next? It's not that simple because condos in Toronto will move very differently from detached homes in Oakville, will move very differently from luxury cottages in Muskoka. So it's not really something that all happens together. So we're going to get specific on kind of how these numbers play into different locations and property types. We're also going to talk about based on kind of this year in review, real estate as an investment from the residential standpoint, how that went this year and how I think it's going to go real estate investment in commercial because there's opportunities there.

It's an interesting year in commercial as well. I got to talk about projections for Q123 and four. So all of 2024, we're going to go through some of those projections on 1/4 by quarter basis. And then I'm going to give you my take kind of on ultimately what happened this year and how you should prepare for next year based on what I'm doing and how I'm thinking about it all and kind of how I'm preparing my business, my clients, my partners for the new year, we're going to talk about that as well. And then do a really big, like just zoom out, what are the next 5 to 10 years in real estate look like? And I'm going to talk about that too.

So again, bear with us. First time doing this, it's kind of a special kind of episode. I just thought year end, this is the thing to do and then we'll get back to our normal kind of scheduled interviews in the new year. So hopefully you guys enjoy this. Let's jump right in. OK.

So year in review, 2023 was a weird year. So 2023, I'm talking about the Canadian real estate market, but specifically the Ontario real estate market and specifically specifically the GTA and surrounding pockets. So I do also a lot of business in Simcoe County, so we're talking Bradford, Berry, Innesville, but also I'm around Vaughn a lot, York Region a lot and of course fall the Toronto market a ton. So let's talk about that. So 2023 in these markets was very interesting. We saw something this year that we have not seen in decades.

So most of you have never seen and to be honest I've never seen and that is a very weird phenomena. So starting I guess earlier in the year it was it was clear that slow down was happening. Prices came down a bit but not from their all time like necessarily like what they should have been. It came down from pandemic highs. So this this falsely inflated crazy two year and this is what threw a lot of people off. We had two years or so during the pandemic where real estate just like exploded and then it started to come down.

It's not really coming down from what it was before, it's just coming down from that new crazy artificial high. And so we're not really at a loss and if you look at pre pandemic numbers too early this year, they were very, very close, right. So no need for panic. It wasn't like oh, we're going backwards, you're just losing the the, the, the gains that were not sustainable anyway and you're coming back to a normal market. So that was fair. Then the interest rate hikes started to kick in and this talk about these are going to continue and there's going to be more of these and they started to happen really, really quickly.

So interest rates started to come up, which means mortgage payments started to come up. And the thing with that is it's it's kind of there's an immediate effect and there's a lagging effect, but mainly it's a lagging effect. So when the interest rates came up, of course, activity slowed for two reasons. One was fear. It was, I don't know what's going to happen next is it's going to keep going. How high are these going to go?

Like, oh, my God. And everyone just got kind of frozen in place, right? But part of that is because borrowing gets more difficult, like the banks are are qualifying you at a much higher rate now. It's harder to get money. It's harder to get to a new deal. And if you have that, sweetheart, 1.92% interest rate in your house that you got a couple years prior, you're not going to move.

And so the whole market kind of started to freeze. That created a few issues. The market started to freeze and things started to move very, very slowly. And So what happened was you'd put up a listing and no longer would you get those 30 offers in 24 hours. You'd get one offer every other day, every three days. Very slow movement.

And the buyers now started to realize like this is towards already the spring, summer this year. The ball was in their court. They came with all the conditions. They wanted inspection, extra time for this, extra time for that. Hey, can I sell my house first? Like no I haven't been pre qualified.

Yeah, but I'll get it. So condition of financing is in there and you saw a lot of that which we haven't seen in a while And so listings were still going up, buyers were still there, but not with the same energy or enthusiasm that they had in the past. So like it was this very weird, weird market. And as we got into the fall, winter, which is where we're kind of at now, this has definitely been exaggerated. So we have and you'll see some of this in the stats later, but we have one of the highest supply of listings. So we have one of the highest inventory numbers all year right now where there's a ton of listings hitting the market, especially in Simcoe County specifically is what I'm thinking about.

But I know it's all over ton of listings hitting the market now because people are saying, OK, maybe I got to sell, maybe a crash is coming like Oh my God, these rates have been high all year. Like what if it's going to slow down? What if we crash next year? Now is my time to cash out. So you're getting a lot of people selling or they have renewals coming up this year already, some of them and they're just trying to get out, they're panicking. So a lot of people selling is my point, a lot of inventory and the buyers still show up.

That's that's the weird thing. There's just not that many of them. So you'd think prices would come down, but they're not. So prices have remained relatively flat since the spring and summer right now through the fall and winter. And it's the weirdest thing ever because I'll show you guys on a graph after, but basically we have two stats that are important here. So our sale to new listing ratio which is basically how many new listings go on market versus how many sell.

So how many come up versus how many get taken down because they've sold. That's at a really at a really low point right now in the sense that we have a lot of listings and not a lot of sales. The stuff is just not moving and it's not not moving because buyers are not showing up at all. It's not moving because the buyer's offers are are quite low and very unmotivated and are loaded with conditions and the sellers are unmotivated too. So they've listed the property, but they're kind of just like, you know, what if I don't sell? I don't sell.

And that's the prevailing attitude right now in the real estate market. And it's very, very weird. You have a lot of people selling, but a lot of those people are not motivated to sell. And you have people still buying. There's not motivated to buy. And it's this weird, stagnated thing because partially the buyers aren't willing to pay so much for these houses because they're afraid that these prices are going to come down.

But the sellers aren't willing to come down either because they think I'm in this thing, top of the market. I know my house is worth more. I'm sure it'll come back up. And so they're both kind of, it's basically a stalemate. We have a real estate stalemate that is the state of the market right now and that's what 2023 is. And this was driven by so many things, but the biggest one really was interest rates.

And so now that that's the talk of as we go to the new year, like the last announcement was a hold. So we had raises, raises, raises, raises very aggressively, the most aggressive probably in history and finally hold and hold. And so now we're in a position of what's next, are they going to hold and start going back up again, are they going to hold and come back down again. So we'll talk about that. I have opinions on that obviously and we'll we'll go through all that stuff, but that's going to be taking us into the New year. So that's it kind of for my 2023 overview, it was a good time to buy.

This is why it's so weird. It was a good time to buy, but also not a good time to buy because there was so many opportunities. There was so much to look at. There were so many listings, but there were so many sellers that were just not realistic that you could never get money that made sense. So it was a good year to buy, but a difficult year to buy and we're going to talk about how that's going to change the New year. But that's 2023 in a wrap.

That's kind of my take on it. What I saw from my perspective, our clients were still buying and selling. We did both and from an investment standpoint, we still did a lot of buying and selling as well. I also work with a lot of investors and house flippers and that and they were all still buying as well. It's just that the market was a little softer and slower. But I mean, that's where you can really shine, like if you're an agent or working with an agent that knows how to market, for example, this was the year for you because a lot of stuff sat just because there was demand.

But because like I said, the whole stalemate issue, you needed so much more demand for listings to get them to move and most agents couldn't generate that. So if you were an agent, like kind of what I was doing with all of our clients in 2023, and this probably will be the case in 2024, is we were investing heavily, heavily, heavily in marketing in 2023 for listings. So every time I put up a listing, it was like spend thousands of dollars on Google ads, on Facebook ads, on mailers, and that allowed us to generate enough interest that we were selling houses still in three or four days instead of average days on market. Last I checked on Trev was almost 40 days.

Our listings are selling in three or four days. And so the market is there, like the buyers are there, the sellers are there. It's just you had to do the extra work to connect them and that came down to marketing. So that was a really good year. If you're a good marketer and you have that capacity, that was definitely something that I saw as well. But anyway, let's wrap that up.

Let's jump into some of the stats to support some of these ideas. I'll show you guys some of the graphs they're going to get thrown up on screen. So if you're listening on audio, it might be worth pulling this up on YouTube. We're going to have the whole episode on YouTube and Spotify as well. We'll have the full video, So pull up the video if you can, and we're going to start showing some of these charts on screen and we'll start talking about them. OK, so I'm going to throw some charts up here.

No particular order. Like these are just stuff. I'm going through the first one. These are going to get simpler and get more and more complicated as we go. So anyway, make sure your video's on and you're checking this out, but if not I'll do my best to explain it. The first one is very straightforward, annual average TREB MLS system sale price.

So this is just what I'm looking at in front of me here is the average sale price of homes within TREB. So TREB obviously being the largest real estate board in Canada, essentially it encompasses a lot. So all the GTA, all the big pockets, Toronto Mississauga, Dork region, that's all going to come up on TREB and including they have also basically merged with a lot of the other boards. And so a lot of the data from like B, DAR and Barry and stuff is likely pulled into this. But let's just assume for now it's all the GTA in Toronto. And So what I'm looking at is going from 1975 to 2023, you can see the trends in sale price.

So relatively straightforward and smooth big jumps into 2015, 2016, you see a lot of climbing. And then of course the pandemic boom. So you can see right when that pandemic hit. I think that was around, I mean Anthony, what was that 2020, the pandemic, It was 2019 or 2020. So it was, it was 20. Yeah.

So March 2020 was when the pandemic really kicked off and you can see that here in this graph. So just booms crazy spike in prices all time highs. Our average sale price surpassed $1,000,000 for the first time and spiked all the way almost to $1.2 million at its peak, which is insane. And then you can see coming into 2023 that correction. So we have pretty much 2019-2020 going up, 2021 going up, 2022 going up. And then 2023 average house prices come down for the first time.

OK. So if we break that down, I mean, you can see by volume as well. So this is kind of like a chart that's going to show you from those years, from the 70s till end of 2022, you can see that price creeping up. So like end of 20th, 2022, sorry, end of 2022 we're at 1.190. So yeah, just shy of 1.2 million average sale price and the volumes. So you can see huge volume pickups.

If you go back to the 70s, eighties, 90s, you see like 20,030 thousand sales a year, 40,000 sales a year, very much like I mean peaking out that 40,000 mark, a few 50s towards the 90s and then you get into the pandemic peak in 2021 and you see 121,000 sales. 20/20 was 95,000 sales. So huge sale volume over the last few years and prices just massively driving up. So from 20 to show you how dramatic this is from 2018 average sale price of $787,000 to 2022, almost 1.2 million, right. So that's what is that four years in four years from the seven hundreds into 1.2 million. So that's something that has to correct.

So what we're seeing now, they haven't published 2023 numbers yet, but I'm going to tell you basically my prediction when they published them, so 20/22 was 1.2 million. You're going to see those numbers I think come down considerably, but not where they shouldn't be. It's exactly where they should be. You're going to see them come back closer to that million mark. So I think you're going to see that 1,000,090, again 1,000,080, that's I think where we're going to sit for the end of 2023. It's not published yet as a time of recording this.

It will come out soon. But if you look at the chart, what you see is decently stable growth from 20/15/16, a little bit of up and down, 2017, 2018-2019, that's all normal. 2020, it starts to get wonky and then it goes straight up from there. So when we see this decline in the market, it's not really a decline in the market. It's just going to be deleting this crazy year, this 2021-2022, which should never have happened, but because of the pandemic it did, it's like we're deleting that. So if you extrapolate from 2020 on, that's where we should be now.

So 2023 you're going to see that that like low million mark million, fifty million, 80,000,090, that's going to be your average. That makes sense. With the growth progression over the last 5-6 years, that's where we're going to be. That's not a decline, that's not a recession. It's just getting back to the normal of what it was supposed to be from the get go. So that's what this chart really shows us here and I think that's what you're going to see going to 2023.

So this is just illustrating a little bit more of that as well from a month on month basis. So I told you they don't have the 2023 numbers out yet, but we do have the month on month numbers. So as of November 2023, well there you go. What's the average selling price, 1,000,082, So I'm looking at trying in front of me right now, 1,000,082, that's exactly how I think we're going to end the year as a whole. So we're pretty much spot on and that's marginally higher than it was November of last year. So we really haven't.

When you look month over month, especially like November last year, we're at pretty much the same point. And so we're not really going backwards in any heavy sort of way. We're just getting back to the progression we should have been at. So just close your eyes, pretend the pandemic years didn't happen and and continue the market from 2020 to now. That's basically what we're doing here and that's what these charts are showing us. So total residential transactions which kind of speak to volume.

So this is like what's actually moving, what's selling in the market. Again, these are all month to month numbers. Now we're doing just to show you kind of because I mean we don't have full year in numbers like I said, so November as of November 2023, total residential transactions only, not commercial 4200, so only really a couple 100 down from what we did last November. So it's, it's like I said, that's the weird thing in the market is like there's still a lot of listings, there's still a lot of buyers. It's just a different dynamic between those sellers and buyers, OK. So some more these are not month on month, but these are quarter to quarter.

So just kind of zooming out a little bit more but getting us towards the end of this year, you can start to see a little bit more of a gap here. But if you look at total new listings, this is where I we talked about that more supply. So a lot of inventory coming on the market. If you look at 1/4 as a whole, Q3 of 2023, so this, this last quarter, we just went through 13,200 listings on market versus Q3 of 20/22 was 10,200. So yeah, I mean, 3000 more listings on TREB in the same time period. That's almost a 30% growth in inventory.

So the growth is huge. And normally you'd see growth and sale price correlate where if there's so much inventory, you'd see pricing come down. And we haven't seen that yet, which you'll see as I go through some of these charts, sales to new listing ratio just illustrates that that point. So again, stuff coming up and not selling as quickly and days on market about the same if you look at it on 1/4 basis. So as a whole for the year, we're, we're a little higher than this. But for the Q3, it seemed to have been coming down already, which is nice 20-3 days on market, Q3 of 2023 versus this time last year, 25 days.

So we're actually doing a little bit better. So it's funny like this is not, when you look at these numbers, it's very much not the doom and gloom that the media has been selling like all the news and headlines. It's it's not that the real estate market really is not doing anything it shouldn't be doing. It's actually very healthy so far. And we'll talk about reasons why maybe the strength is coming from a source that is not very sustainable, but nonetheless, there is strength in the real estate market as it sits and we'll talk about why in a second. So this other chart I have in front of me here is the home price index, the HPI, this is, this is an interesting one.

It's pretty straightforward. This is actually right from the Government of Canada website. They have all these stats that you can pull up and HPI is one of the things they measure for their housing stats. So basically it's a way to kind of like democratize the view of pricing. So it it's like an all things equal, here's how housing prices have moved. So obviously when you talk about housing, there's different kinds of housing.

There's condos, there's luxury estates, there's cottages, there's land deals, there's large lots, small lots, there's so many variables. So it's hard to tell looking at the whole basket of it, how these prices have moved, This kind of democratizes it. So it's kind of like homes that are the same benchmark apples to apples. All things equal. Here's how the price has moved, and this chart shows you really nice, steady growth, a very healthy growth market with one bump, and that bump happens in 2020. So all of a sudden we get knocked off.

Our trajectory goes way up, and then into 2023 it comes back down exactly to where it should be. So again, no issue looking at these numbers, it looks healthy. It looks fair. I think this is important because the media covers in a totally different light. You hear your friends talking about it. Everyone thinks the real estate market's going to shit and it's terrible.

And maybe maybe it is, but not because of the numbers we're seeing. If you're just judging the numbers in front of us, the numbers look fine. They are what they should be. And I think we all forgot the history of real estate and we were just looking at it as well, 20/21 was this and now we're this. So we're in a decline. Not realizing that that year was a completely like everyone was home, everyone was getting checks in their mailbox, people were panicking, rates were everything was going nuts.

It wasn't a normal time, right? And so you almost have to erase, like when I look at this graph in front of me, this HPI graph, if I just cover that little bump that comes up in in 2020 and 2021, it looks like a nice straight line growth projection. It's it's smooth, it's beautiful. It's funny, 'cause when I say, when I say cover the little bump, I'm thinking that's how like Trudeau does his economic readings when he's when he's trying to look at his financial budgets, just cover that little spike. And our our debt's fine. But no, seriously, when you look at this, it looks pretty healthy and I see no issues with it.

So we'll move on. This is just kind of illustrating for more of what we talked about. So I'm not gonna beat a dead horse, but it's a cool graph. So if you're watching the video, and I highly recommend you watch the video either on YouTube or Spotify, If you're watching the video, you're gonna see this really colorful chart. It lays out pretty much all the months of the year, so Jan to December. And there's colors under each month.

Each color is a year. So it's basically showing you four years year over year. So you have December 2020-2021, 2022-2023 all laid out, and it's showing you the sales volume for each of those years in that month. And so 2023 being the Gray bars and 2020 being obviously the green bars. So you can see what months kind of like. Like when you look at sales volume, it's a pair that yes, sales volume is down, but again, it's really only down against 2020 and 2021.

When you compare it to 2022, we're very close. It's very similar. The only numbers that stand out are 2020 and 2021, which are the years that just shouldn't exist because they're not a real indication of them. Again, like I can beating a dead horse, but those years are irrelevant. So if you take those two colors out, you just look at the, the the yellow and Gray, you're like, oh, actually we've barely changed anything at all. And actually in some months, we're stronger, all right.

So again, paints a very positive picture unlike what you've probably been hearing from everybody. OK. So we have this graph here. This one we're looking at again, shows a pretty strong case for the real estate market. But this is the average price from 1994 to 20, well basically end of 2023. So you can see again the big spike during COVID comes back down exactly where it should be.

So despite the increase in elicited inventory and despite the kind of slower total sales, average price still holding very, very strong, potentially even trending upward into 2024. So something to consider moving on. This is like possibly the coolest graph. I don't know what to make of this. If you don't take anything else away from this whole podcast, take this away, research it, talk to people, figure it out and you guys tell me what you think about it. But basically this is the SNLR versus annual price growth.

So SNLR is basically sales to new listing ratio. So it's it's how many listings are going on market versus what's actually selling, right. So if you have more stuff going on market than it's selling, of course it just backlogs and piles up and nothing moves. So it indicates a slow market. The weird thing with this chart is it's showing you that over annual price growth, so how real estate prices are changing over time. The weirdest part about this is if you look at the whole graph, they always move together.

So anytime SNLR goes up, annual price growth also goes up. If SNLR comes down, annual price growth also comes down. And for the first time ever, there's a divergent between the two. So you're seeing average price go up, so pricing getting stronger, what things are actually getting priced for and selling for is going up, but the sales to the listing ratio is going down. So things are not selling. So somehow there's less things selling and more things on market, but price is getting stronger and it is the weirdest stat of all the stats that we're looking at.

And this is straight from from trap. And so it's it's a very, very weird stat. I don't know what to make of it. It's either going to be one of two things. So either because we've never seen this, like said, going back before 2008, we've never seen this. So either average price is going to drop to meet the sales to the listing ratio the way it's supposed to because that's what these graphs are supposed to.

These are always supposed to move together, these two stats, right? And for the first time, they're not. So either it's going to correct itself. And in 2024, that average price is finally going to drop. It's going to meet the decline of SNLR and we're all going to be right and the market's going to be right and everything will be fine, OK. But that means that housing prices are coming down.

So that's not good. Or we're going to follow the other trends here, which kind of show you that once sales and listing goes down, it tends to then spike upward and we have a long growth period. So look at 2018. So from 2018, you saw a drop even in an an average price like you saw now like you're seeing in 2023 and then you see growth for 2-3 years following that, right. That could be happening too. And so I don't have an answer on this one, but we're in a very weird spot.

The numbers are very strange between SNLR and annual price growth. And I don't know if that means we're about to fall off a Cliff or about to start climbing a mountain for the next three years, but that's for you to decide. I'm just giving you the numbers. That's pretty much it on the real estate stat side. So we're going to jump into some general economic stats I think are kind of interesting. I got to go through these quickly, but I think they're sort of relevant to talk about.

So we have two things. We have headline inflation is increasing and you can definitely see that headline inflation including gas, so your fuel, energy costs and food. And then core inflation is the same basically, but they take those big things out. They say it's more fair because food and fuel are volatile. And so that's why when you see normal inflation numbers, what they're typically reading you on the TV, when you see the the announcements, that's core inflation rates. And that core doesn't include fuel and fuel, food and fuel, sorry.

But if you look at it, headline inflation is way, way, way up. And that's important because fuel and food are the two most expensive things for most Canadian households minus housing expenses. And so that's actually the more relevant number. And we see that growing a lot, which is still concerning because they say it's coming down based on core inflation. But obviously, you see that the headline inflation tells a different story. So something to think about when it comes to what they're going to be doing with rates or not doing with rates and generally the spending power of Canadians.

What's going to happen if people, I mean, if this inflation keeps climbing the way it is, what are they spending on retail? What's happening the economy, what's happening to jobs, That's all to be determined. And you can start to see that because of my next chart to the right, you see the growth in average consumer spending has stalled. So you actually see these two lines coming together. So private real consumption and then real net household disposable income. So you see income coming down and you see consumption coming down to meet it.

And so that's not good. It means that people are not spending. It means they're not making as much. It means they're not spending as much. Those are both not great trends. So to be determined, you'll see how that plays out in the new year.

The other thing that you see, which is also very concerning and This is why I say the real estate market stats look fantastic based on the actual stats of what I show you. But the underlying economics are very, very weak. And so these are those weak economic stats that I was talking about. So it's kind of scary because you're like, why is the real estate market as strong as it is when this is the underlying. So look at this chart to the left, substantial population growth but subdued productivity growth. OK, What does that mean?

There's a stat that's basically called productivity, and it's just the productivity of individual. So if you look at the whole GDP, how much output does each person in the economy have? What? What does each of us produce? So you picture, you have you have 10 workers in a room, Each one of them makes one light bulb, so you have 10 light bulbs. If that drops, that means tomorrow you have nine light bulbs and the next week only eight light bulbs.

You have the same workers, but productivity is going down. That is what we're seeing for the first time in a long time. Is worker productivity down? Less output from the same amount of workers in a society, which is strange because we also see population growing at record pace. That's the red line. So massive population growth.

What does this indicate? It means that we have unproductive immigration. That means we have a lot of people coming in, but those people are not contributing at the same rates that they previously and historically were. And that's where you see these two lines coming apart. The blue going down and the red going up. The red is population and the blue is real GDP per worker, which is productivity.

So productivity down, population up, it should almost always be the opposite of that. So that's not a good sign. That's a sign that something has to change. Also, large projections on domestic growth slowing. So demand growth just meaning what we need here at home in terms of supplies, what we're buying, what we're making, what we're importing, that's all slowing and projected to slow further into 2024 and not recover until 2025. S I'm going to think about household debt is this other chart I'm pulling up here looking at 1969 to 2023, it's it's basically skyrocket.

I mean this is sort of normal and other countries are far worse than this, but it has skyrocketed to 2022 and it's actually been coming down in 2023. So let's hope that's a trend. But that also typically means that people are also not spending. So it means less and that that makes sense. And that kind of maps out to that last chart I showed you guys with domestic demand decreasing. So we're we're spending less, we're we're buying less stuff domestically.

We're not putting as much money to the economy, which also means we're probably paying down more debt and that makes sense. So that's what we're seeing in 2023. That's a good thing for stability, it's a bad thing for economic growth. This next chart, this is the last couple I'm going to flip through here, M2. So M2 is one of the basically money supply metrics that we look at and it's how much, how much money is the government printing, right? The government prints money.

It doesn't actually make new money. So like when they print, it's not more dollars. We now have, like we won the lottery. It's just we've made more of the same thing, making every single one of the dollars worth less, right. So that's what this represents. And you can see the money supply.

So how much money the government is printing based on this chart from 2013. So I went back about 10 years. You see it's kind of fluctuating up and down, up and down, up and down. And then you see 2020 head and boom. The money printers were full speed ahead. We printed a ton of money and there's a ton of new money in the market.

And that means two things. It means that's why inflation happens. That's why you saw crazy aggressive inflation, because all your dollars are worth less, so you can buy less stuff with the same dollars. And then you layer that with the carbon taxes and other increases in taxes on on different corporations and corporate structures that all trickle down to you wage increases which trickle down to your expenses. So everything just got more expensive to make to produce and then your money that you're buying it with got worth less, right. So that's why you saw that inflation happen and it correlates exactly with this chart and I should have overlapped them but with money supply.

So the more money they print, the higher inflation went and that's pretty much the story. And you can see that here. Luckily they've turned off the money printers clearly coming into 2023 and I think that's going to be the case for a while. But that also means they may have kind of pulled the rug from under us on this one, because the only reason we might still have such a strong economy was this money printer machine. They kept pumping money into the system and now if they're not, it's kind of to be determined what's going to happen with the economy, with that money printer turned off, which it clearly now is. So moving on, This is again that money supply that I was talking about.

That's the blue line on the chart here. And then you have the black dotted line is productivity, which we talked about earlier. And you'll see for the first time in this entire charts history and in most of Canadian history, this goes all the way back to 2000. So the first time in 25 years productivity has fallen below our money supply. So the first time in 25 years productivity has fallen below the money supply, right? That is not good.

And if you look at the year that started very carefully on this graph, it's 2015. So I'm, I'm not going to play Paul Dix. I'm just saying 2015 is the year Justin Trudeau got elected. And for the first time in 25 years, we began printing far more money than ever before, while simultaneously productivity declined. So the output of each individual person got less and less and less. And that speaks to the most basic psychological principle There is The more you do for people, the less they do for themselves.

And I know it's it's not popular to think that way and it's all about giving and doing and helping. The problem is the numbers don't lie. The more money we printed, the more we handed out, the more we pumping the economy, the lower productivity got. That is a statistic. It's not a feeling. It's not my feeling.

It's this number you're looking at on the graph that is not good for economies. I don't know that they had much of A choice at the time. So it is what it is. But if you look at the spread right now between money supply and productivity, it's massive. We have never, ever had a spread like this. And I don't know what that means.

And it's continuing aggressively in both directions. So how that pans out is to be determined and what that means for the economy is to be determined. But again, I think what it means is when that money supply stops and slows down and that productivity remains low, that's where you have the potential for economic recession. And that's something that's still very possible going to 2024 and 2025 S It's something to think about. Look at this graph, take a screenshot if you have to. It's definitely an interesting one and I know people are talking about it.

One of the last ones here that I have going is kind of a a fun fact one, but it's it's just speaking more to you know, does our policy actually make sense economically or are we just doing stuff that looks and feels good. But Canada average hourly wages is the blue line. So this is how wages have increased since 2014 and then the black dotted line is CPI, so Canada Consumer Price Index. So the black line is basically the cost of stuff and the blue line is how much money people make. And you can see they do move hand in hand. Now what this does because one does not really leave the other, they're kind of hand in hand.

But what this graph basically shows us is that you can't raise wages to meet growth and prices because the more life costs. If you just try to raise wages without increasing productivity or there's actually no new output, you just make things more expensive. So you're always trying to catch the thing that you can't catch. So basically it's like things are too expensive, so let's pay people more so they can get those things. Then those things get more expensive because all the people making them get paid more and that cost rolls into the thing. And so then again, things become more expensive.

And so we have to raise wages. This chart shows that I did this exact same chart. I should have taken a screenshot, but in the US, and it's totally different. It's completely different. The wages are flat and the consumer price index is is similarly flat. So it's it's a fallacy that we live here in Canada, but it's something we have to still live with and understand to understand the real estate markets and the global economic markets that we deal with is if we're in a country that keeps raising wages because it sounds good and it's trendy, we have to know that prices also will keep increasing and that's not going to stop.

And the only way to fix this is not to focus on wages, but to focus on productivity. How do we get more output, more creation, more innovation, more investment in business and growth? That's what moves your actual productivity and real GDP up and that's something that doesn't push prices up. So you can raise GDP and productivity without raising prices. You cannot weighs raise wages without raising prices. So something to consider, another very cool stat.

This is just more on wages and again just kind of proving what we just looked at, but that's pretty much the economic stats broadly outside of outside of the the real estate stuff. So we've covered some of the real estate stats, we've covered some of the economic stats. Hopefully that wasn't too boring and dry for you guys. I know it's kind of like an like an economic lesson but from someone who's not qualified to teach it. But hopefully you still managed to learn something through this. This is just something I'm very fascinated with.

I think it was helpful for me. Hopefully it's helpful for you. That said, we're probably not going to get too much into the. I thought I'd have way more time than I did. So we're going to, we're going to skip over the investment stuff for today. And the only thing I'm going to want to leave you guys with is kind of projections on what I think is going to happen next year just so I can come back and revisit this and see if I'm right or wrong and kind of what I'm thinking in terms of what I'm doing in real estate right now.

So basically as we go into 2024, I think what we're going to see is this, I think the remainder of this winter, 2023, we're going to see some small decline in in pricing and house prices. So price is going to come down. So you're going to see a little bit of a slow in the market, which we normally do. It's seasonal. But now, especially because it's kind of at the end of a long interest rate cycle of interest rate hikes, you're going to see a bit of a slow down to the winter, bit of a slow down to January. And as soon as we get into spring, I think late winter, early spring, the Fed's going to start to announce rate decreases.

I think we're expecting four of them this year. I think in the US it was like 6 or something. They're going to start announcing those probably close to the springtime. And as soon as that happens, everyone's kind of going to perk up and go, Oh my God, it's happening. Like rates are coming down. Oh my God, I got to get into a house.

Now's the time. You're going to have a lot of buyers that have been sitting on the sidelines jumping back in. You're going to have a lot of sellers, people that would not sell their home even though they need to get out of it for whatever reason, but they were afraid of getting a new mortgage at a crazy rate. They're going to say, Oh my God, now's the time I got to sell. I got to get into something new. So a lot of new inventory is going to come on market.

A lot of buyers are going to come on market, going to have a lot of activity, I'd say by the summer of 2024. And that's going to lead to a very strong summer and fall market. And then I think the dust is going to settle. And again, we're going to see a calm, kind of flat winner. So that's kind of what I'm anticipating. So what does that mean if you're a house owner?

If you own a home and you're looking to upsize, I think now is the best time to do it because you're going to buy way lower. So yes, there's temporary high interest rates, but you're going to be able to buy lower. You're going to sell a little lower than you would have like last year, right? But you're going to buy way lower. So if you're going up, you're getting a better property, you're upgrading. The savings you're going to gain on that purchase is greater than the small loss on the sale.

And then that price is forever. So price is forever. And rates are temporary, right. So you're going to get a better deal on a home and then rates come down, you're going to have a better price, better rates, better everything. So now's the time to upgrade. And if you're a buyer, now is definitely the time.

Use this pain in December, January, before everyone else jumps into the spring. Now to buy a home, to get into market, That's the time to do it. I've actually done exactly that. So what I'm telling you is exactly what I've just done for a personal home. And that's what I'm telling you guys, I think you should do. But again, this is not actual financial advice.

It's just opinion. So I'm just sharing opinion. It's just stats, just numbers, just ideas. Take it for what you will, OK, next 5 to 10 years, nobody knows. I think overall I think Canada's a strong economy. I think it's a very strong country.

I think we have some leadership issues in office right now and countries do go through that. I don't think anyone leadership change is going to solve all those problems either. But I think we have to take a path towards change and I think slowly we're going to move in the right direction. But Canada's still overall one of the best place to live in the world, despite how it feels sometimes when you're here, when you actually look around or you travel the world, you realize just just how safe it is here, how many natural resources we have here, water, lumber, fresh air from our trees and forests, these are things that don't exist anywhere else, a relatively small population, lots of room for growth and and sprawl.

Still, it is a great country with great potential. So I think long term it's going to be a great place to live. It's going to be a great place to own real estate. But I think overall real estate prices will continue to increase because they have for a very, very long time. But that's not the only reason. The other reason they're going to keep increasing is because supply is always going to be an issue.

It's very hard to build housing. It's very expensive to build housing here. It's a very timely process. There's a lot of red tape involved. That's never going to change in the land that we do have that's buildable is already quite dense. And so building things like detached homes is going to be very hard.

You're going to see not as much of it. The costs are going to be too high for the average family to afford. So my advice is, I mean if you can buy over the next 5-10 years, if you can get a detached home, get it and just run like those detached homes are going to become gold. This whole fallacy of affordable housing there, there's no way to bring housing down. There's zero. You can have government programs, you can have subsidies, you can make tiny apartments.

And if you look at the rest of the world, that's how they handle it. Tiny apartments. You look at Japan, you look in Europe, you're going to live in a tiny shoebox that that there's going to be those things that are available, but that's never going to bring down the cost of those single family detached homes. Those will be luxuries. They will be things that are going to be very hard to get. So if you can get one now, get one, do whatever you got to do, borrow, beg and steal.

Get into that adult steal. I didn't tell you to do that. Get into that detached home and thank me later because I think 10 years down the road it's going to be something that people will be like, Oh my God, you have a detached home. You have a single family detached home on your own lot. They're not making those no more And I've already seen many, many developments that were slotted to be built as detached communities. There are now townhomes.

So it's just that's what's economically feasible. So I think Canada's going to stay very, very strong, housing market very strong in the long term and that's what I'm betting on. And I think if if you're seeing all the same stats I I'm looking at, that's what you're going to be betting on too. So anyway, hopefully you guys enjoyed that long kind of dry, but I mean to me interesting economic update. Hopefully it was helpful. I'm sure I made some mistakes along the way and you guys will correct me, I have no doubt about that.

But we threw this together pretty quickly. If you have any questions, drop some comments below. You can e-mail me also anytime Darren at cabrelreal-estate.ca or visit the website cabrelreal-estate.ca as well. And I'm happy to connect with you guys. Chad, you can find my Instagram at Darren Cabrel. I'm pretty active there in my DMS.

That's probably the most active spot for me. But yeah, I I'm looking forward to hearing your questions, what you guys think of all this. Hopefully this helped, guys. Have a Merry Christmas. Happy holidays. Happy New Year.

I'll see you guys in the New year. We have more incredible interview schedule. We have all kinds of cool people coming in the new year, so I'll see you guys there. Thanks again for watching and listening. Thanks for tuning into another episode of Inside Canadian Real Estate, guys. Don't forget if you liked the episode, if you found it enjoyable, if you learned something, if you liked our guest, if you liked our topics.

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