What’s Impacting Canadian Housing Markets with CREA’s Senior Economist Shaun Cathcart

Shaun Cathcart: Buyers and sellers are seeing more eye-to-eye these days. Those trends are really encouraging, and homes are moving faster.

Shaun Majumder: I think biking is the way to go, man. Biking, walking. I could walk with my kids from Nova Scotia to B.C. We could do it.

Shaun M: With the ever-changing housing market, man, it's important to have a voice who knows what's up, what's going on under the hood. There's so many factors that affect the market. I want to dig deep with our guide today, Mr. Shaun Cathcart. He is the chief economist of CREA. He's going to talk about trends and numbers, expectations. Let's not waste any more time, and let's get into it.

Oh my God, Shaun Cathcart, I've missed you. I've missed you, man, because you're the only, other than Shaun Cassidy, the only other person I know with the name spelled the same as me. I miss you. How are you, Shaun Cathcart?

Shaun C: Pretty good, Shaun Majumder. I know that we discussed last time. It's odd to have an easy, common first name that you still have to spell for people every time.

Shaun M: I know, right? I know. It makes me feel a little bit unique and original in that most of it is S-E-A-N, S-H-A-W-N, but not as rare as, I met a lady from, I think it was Welsh spelling, it was S-I-A-N, Sian.

Shaun C: Oh, that's cool.

Shaun M: Yes, super cool, but not as cool as you. Not as cool as you.

Shaun C: I made my peace with my name many years ago.

Shaun M: Well, listen, man, thanks for coming back on. We got a lot to talk about. The world is very stable and uneventful right now. What a good time to chime in. As the senior economist for CREA, dude, I got to say, last time we spoke, there was a lot of bright lights shining in terms of the forecast. What the heck? Sometimes I feel like economic forecasters are similar to weather forecasters in Newfoundland. You say it's going to be sunny, and then all of a sudden it's freezing sleet and snow. What's going on?

Shaun C: Yes, I chalk it up to what our friend David Coletto from Abacus Data calls a perma-crisis. Starting from the beginning of the 2020s, it's just been one thing after another. It's a pandemic. The lowest mortgage rates ever, and then it's an inflation crisis. The first time the Bank of Canada has ever had to break glass in emergency on their inflation-targeting mandate in 30 years. Then it's a crazy tariff war. Now it's an oil crisis. It's one thing after another. I think our forecast was good. It's just the events continue to come and pull the rug out from under it.

Shaun M: Yes, that must be frustrating. It's frustrating for all humans who live in this country, I'll tell you that. It's obviously not on you at all, but you must get that sometimes. As the voice of the forecast, how does that feel? Just on a personal level, before we get into the data, tell me about that because you are the guy. You're doing interviews on CBC, you're doing interviews with all these podcasters. How does that feel, and how do you manage it?

Shaun C: I'll tell you this, it's a lot easier to get your forecast wrong when you have a good excuse. It'd be a lot worse if nothing had changed and we somehow got it completely wrong. The bigger the change in the forecast, the more you get criticized for it. Oftentimes, that's the result of these external factors that, in one interview, I said, "Well, let's just cross our fingers this is the last one for a while, once this one gets resolved." We can have one normal year in the 2020s.

Shaun M: Don't shoot the messenger. It's not necessarily the messenger's issue. It is. We're living in crazy times, I will say that, and things are changing so fast. Talk to me a bit about that. CREA has recently downgraded the resale housing market forecast. What factors played into that decision?

Shaun C: Sure. The big one is the oil price spike that the world is going through right now, and the global inflation that it is already causing and will cause more of. What happens is, the way that mortgage rates are set is that bond markets and futures markets see inflation coming for sure. It's up a full percent in the last two months just on gas prices. It's going to be worse when diesel surcharges start coming through. Then, if farmers can't fertilize their crops, oil really feeds into everything. What futures markets think is, "Well, the Bank of Canada is going to have to raise interest rates."

Bond yields go up, and fixed mortgage rates are based on that. It was a Monday night on, I believe, the fourth week of March, right in advance of the spring market that we thought was going to start to gain some momentum, that all the big lenders raised their five-year fixed mortgage rates by 40 basis points. That's a big deal when affordability is already tough. A big part of the downgrade in our forecast was, we think people are going to go back to the sidelines this spring and cross their fingers, as everyone else is, that this oil crisis is quickly resolved and those rates go maybe back to more normal levels in the second half of the year.

Shaun M: Yes. With these global events that are happening, the oil, the tariffs, who could have predicted all that a year and a half ago?

Shaun C: Oh, yes. The truth is much stranger than anyone could have predicted. There are events that happen weekly that if you told me last week, I would never believe possible. I feel like we're like the old analogy of the frog slowly boiling in the water. It's just that the crazy just gets turned up one notch every day, and you don't realize how wild things have become just from a year ago.

Shaun M: Yes. There's the oil situation. Obviously, the flow of oil, the Strait of Hormuz is closed. Currently, as we do this, what are people saying about the effect of tariffs? That was something I remember when we were discussing the last time we talked; there was the looming tariffs. The tariffs have now come, and I wouldn't say are gone, but did that have as much of an impact as we thought it would?

Shaun C: No. The last time we talked, I believe, was just in advance of the announcement of the tariffs. The original announcement was 25% blanket on everything we export to the United States. That would have been a total disaster. There were conservative economists that were predicting a million job losses. That really shut down the housing market in the spring of last year.

In the fullness of time, for one thing, when Liberation Day came, and they announced the tariffs on every other country in the world, that was like the eye of Sauron turning away from Canada and Mexico a little bit. Then, in the fullness of time, CUSMA came along to protect us from a lot of those. We have the sectoral tariffs. If you're in a place that has a big steel plant or you're in a part of the country that produces cars, it's going to have a major impact.

From a macro standpoint, it's not nearly as bad as it could have been. That's what brought a lot of buyers back into the market in the fall of last year. The question mark is, is that going to happen again this year? The situation that's causing the weakness now has yet to be resolved. Best-case scenario is we get something like last year with the tariffs, where, in the fullness of time, this oil shock ends up being not as bad as it could be if things start to settle down over the summer.

Shaun M: Right. That's the key. It's got to settle down within the next three to five months. Is that safe to say before Bank of Canada starts doing more rate hikes? What's your prediction about that in terms of Bank of Canada? As you read the tea leaves, how is the Bank of Canada reacting to all this turmoil?

Shaun C: Sure. I always read what the Bank of Canada says very carefully and try to distill what their message is. Two announcements ago, when this was all getting going, they said, "This is a really bad situation. It's going to cause inflation. What matters is the breadth and duration." At the time, what they meant by breadth was, is Iran going to keep blowing up all the infrastructure in the Gulf? Because then I don't know how you even load up the boats if you can't even create oil and fertilizer and all that stuff, if the industrial plant's blown up. That was short-lived.

Now it's the duration of the closure of the strait that's the issue. Duration. In their last announcement, I distilled from that that they were saying, "Hey, time's a ticking here." Initially, we were saying, "Oh, it's only been this many weeks." Then we said, "Oh, it's only been a month." Then, "It's only two months." It's like there's only so long you can say that before that inflation starts to really become not just temporary, but entrenched in a way that they have to react to. I'm not exactly sure what the timeline is on that, but it's before the leaves term in the fall, that's for sure.

Shaun M: Yes. It's all wait and see. There's a lot of it that's out of whether it's the Bank of Canada, whether it's our government. Canada, obviously, is where we're focused. Is it safe to say, from my perspective, it feels like there's a lot of it that is out of our control?

Shaun C: Yes, exactly. The Bank of Canada can't control global oil prices, but their mandate is to attack inflation and also inflation expectations. If Canadians start to think, "Oh, this inflation's coming again," and they start to behave as if it is, then it's a self-reinforcing thing that really the central bank's job is to get on top of. It doesn't help us that our GDP numbers, in terms of balancing out inflation with a weak economy, the bank noted, aren't going to look as bad because we're selling a ton of expensive oil, which was not the case back in the '70s when we had an oil crisis.

The Bank of Canada showed, in 2022, that they're going to be aggressive in attacking inflation. That was the lesson of the 1970s, was inflation targeting. I think that they're going to do it again if they have to.

Shaun M: Right. How do they do that? By raising rates?

Shaun C: By raising rates. If you look at where they are now on their policy rate, they have a ban that they call the neutral. It's like the neutral zone in Star Trek. They're at the bottom of that. If they need to put their foot on the brake pedal, that's not one or two hikes away. That's at least four or five until they're actually putting their foot on the brake pedal again. Right now, markets are edgy, and they're saying maybe they'll do one or two this year. I think it's either going to play out as they don't have to do any, or they're going to have to do more than that. Markets are in the middle, just waiting to see how things play out at the moment.

Shaun M: Right. Now, last time we spoke, there was this conversation around-- Your prediction was that buyers are going to be waiting on the sidelines, waiting for that rate to go to the bottom. Talk to me about what that bottom seems to be, what it is. I know we're a little more concerned about rate hikes at this point. Talk about what that bottom looks like, and does that change over time, and where are we headed with that?

Shaun C: Sure. That's a great question. That's a tricky one because Canadians famously love their five-year fixed rates. Most Canadian borrowers take that, classic conservative Canadian. For the last year, or up until a little while ago when rates started to go up, the bottom was about 3.99 on a discounted five-year fixed mortgage rate. I know from talking to some brokers that they were having a tough time. That was the bottom. It was there for a year.

I know that a lot of lenders and brokers were having a tough time convincing their clients, and saying, "This is about as good as you're going to do." The clients were saying, "Well, no. For more than a decade leading up to COVID, a five-year fixed rate was like 2.8, 3, 3.1. I'm not locking it at a 4." They were waiting for rates to continue to go down, even as markets, we're starting to say, "Hey, we think they're going to go up."

For all those borrowers that said, "No, 4 can't be the bottom," I think it's pretty clear now that it was, and it's now gone. Hopefully, it comes back in the fullness of time. Do we return to a pre-COVID era where rates are really low again, or is around in the 4s going to be the norm going forward as opposed to in the 3s? I don't know. I guess that's a medium-term thing for the Bank of Canada to figure out.

Shaun M: Yes. What are you seeing in the short-term?

Shaun C: Oh, in the short-term, mortgage rates have already gone up. I suspect that they may go up more. Every day that ticks by with the Strait of Hormuz closed, the odds of a rate hike or more rate hikes and sooner go up. Bond markets price that in now. Clock's ticking.

Shaun M: When we say short-term, what kind of frame are we talking about?

Shaun C: Inflation just came out. Inflation's way up, but the core measures that they prefer to look at are still edging down. We got the initial shock of the oil and the gas pump is driving the overall headline number up, but all that other stuff that was gradually easing off—food and that sort of thing, travel—is still sort of moving in that direction. The problem is the longer the oil price stays high, it's going to start to raise those other things up again.

When I say near-term, I'd say six months to a year. That's really their time horizon for oil to get itself under control is by this time next year, because, otherwise, your year-over-year then builds another year on top of the inflation we already have now.

Shaun M: There's been a lot of talk in Canada about us becoming more independent of any of our major trading partners. Do you think that will help ease some of the stress of that upward pressure on inflation? We're making big moves. We're trying to disconnect a little. Do you see any upside in that?

Shaun C: I don't know how it could affect-- Well, if there's a lot of money swirling around, that can be inflationary, but it's also a transformation that we have to make, I think. It's a smart one, very big and bold. I just read a thing this morning saying that we are now the number one destination for foreign capital coming into making big investments because we're reliable. That's good in the medium to longer term, but I don't know how it could affect inflation in the near term because there's so many factors pulling in so many different directions.

Another thing with the economy is consumer spending. We've got these big mortgage renewals that have been going on for the last two years. Some of the biggest ones are happening now. People that had the lowest mortgage rates of all time are right now having to renew at much higher rates. There's worry that that can affect the housing market in terms of people feeling like they have to sell their house. I don't think it's going to go that far for most people. Canadians are pretty good at holding onto their homes, but it is going to affect consumer spending if a lot more of your monthly income is going in interest to the bank.

Maybe that's dinner out once every two months instead of once a week. Maybe it's a used car instead of a new car. Maybe it's a road trip instead of a trip on an airplane. That's going to slow the economy as well.

Shaun M: That's going to be a tough one, road trip versus airplane. They're both going to be jacked, but I still think driving anywhere is still going to be so expensive now because of the gas, if you add it all up. Are you a road tripper or are you a plane tripper?

Shaun C: I've been more of a road tripper. My granny gave me a piece of advice many years ago. She said, "See Canada before you start going and seeing the rest of the world."

Shaun M: Good advice.

Shaun C: We've seen Canada with our kids. I had road tripped, not this year, but in the past, way down into the southern United States, which was fun. That's as far as you want to go in a car. Then, occasionally, we've been over to the West Coast on a plane and to Europe, and that sort of thing. Interesting thing about-- I just read this this morning. The price of the gas pump is incorporated into CPI inflation right now. The price for the increase in jet fuel that's causing airplane tickets to go up is barely being incorporated into CPI at all because it only makes its way into the CPI when the plane takes off, not when people buy the tickets.

That's another one that's coming where people are already spending more money on that now, but it's not even in the inflation numbers just yet.

Shaun M: I see. They're booking flights that are three months down the road, six months down the road. That's when those will start to play into the CPI. Is that right?

Shaun C: Exactly. Maybe we should just take a bike trip.

Shaun M: I think biking is the way to go, man. Biking, walking. I could walk with my kids from Nova Scotia to B.C. We could do it.

Shaun C: I might just stay in the backyard this summer.

Shaun M: No, too many ticks here in Nova Scotia. It's crazy. They're going to try to eat us. Let's talk about trends. We talk about two or three major trends we saw in the first half of 2026. What are the numbers telling us, and what do these trends mean for REALTORS® and their clients?

Shaun C: Sure. At the overall Canada national level, it was a weak start to the year for sales in January, February, March. The thing is, over the last decade, as supply has become more and more and more constrained, the market has become more seasonal because you don't have that big float of listings just hanging around to be able to buy at any given time. You have to wait until they come blasting out in the second week of April, and then people attack them.

I wasn't surprised that it was a weak start to the year. I thought it was really going to get going this spring. Then, of course, now with mortgage rates going up. The April numbers were up a little bit. One of the really neat trends that's under the surface in the daily data that we track, but we don't publish, is the sale-to-list price ratio. You list a house for, say, $700,000, which is the average home price in Canada, and then you negotiate, and maybe you land on $685,000. That ratio is that sale-to-list price ratio.

Now, if you go back a couple of years, you had a lot of sellers still thinking, "I have a million-dollar home." I always said, "Yes, you did for one week in February of 2022. That's long gone." Then you had buyers saying, "At these mortgage rates, I can only qualify for this." They're really far apart. What we're seeing this year is it's getting really close together. Maybe you're negotiating, and it's only a difference of maybe $10,000. The seller's like, "Oh, well, whatever, that's okay." The buyer's a little bit more eager. That means that the number of days on market is falling.

Buyers and sellers are seeing more eye-to-eye these days. Under the surface of some quiet numbers, those trends are really encouraging, and homes are moving faster. I think that part of our forecast of things are going to get going is true. It's just, at this point, it's going to be very muted by other external factors. It's happening under the surface. I think that's the most important trend to watch. The other one is prices are stabilizing. We had a pretty big price decline in January. It got smaller in February. It got smaller in March. Basically, it was flat in April. Those are all positive trends.

Shaun M: That's positive for buyers, for sure. That might activate more activity, I assume.

Shaun C: 100%. If I'm a buyer and I'm buying an asset and I'm putting my down payment down, I don't want to buy one that's going down by $5,000 and $10,000 a month. Price stabilization has always been a super important milestone that I think could really flip a switch and say, "Okay, well, this is the bottom, let's jump in now."

Shaun M: Yes. Talk about any of the major trends that were pretty close to what CREA predicted, and are there any that really surprised you?

Shaun C: Oh, yes. One that is playing out is the idea that some of these places-- In the last number of years, Ontario has been really chilly market; B.C, a little bit less so, but chilly, really dragging the numbers down. In the Prairies, Quebec, and the East Coast were hotter. The prices kept going up. We had multiple offers because they're relatively more affordable. They were able to keep doing that in an era of high interest rates and massive population growth, by the way, too.

Part of our forecast was that B.C and Ontario were going to start to pick up, which has happened, and that some of these hot markets are going to start to cool off because obviously that record population growth that many of these markets had never seen before, that sort of spigot has now been turned off by the government. That element is no longer there, despite rates being a little bit better.

Where that is already playing out is definitely in Alberta. They were the first market to start to roll over and sales went down and prices stopped rising. No surprise because, of all of those other markets, they're the most expensive. Now, we're starting to see a little bit of that, too, in Saskatchewan, Manitoba, the Maritimes. The surprising one, which you'll like, is Newfoundland and Labrador. Hottest province in Canada right now, double-digit price growth. It's the only a province with double-digit price growth right now, multiple offers.

There's two other cities that are doing that right now. It's Quebec City and Sudbury. The only province that's doing that is Newfoundland and Labrador. I spoke to a reporter in St. John's, maybe a month or two ago, and she asked me the question, "What's the challenge for young buyers right now in a market like this?" I said, "Well, it's easy because we've seen it happen in every other place in the country. You're just doing it now. You're going to show up and say, 'Well, I think we can afford that as our first starter home, and we're going to actually do it.' What you find is there's six other young households, young couples or whatever, that are exactly like you that show up, and they want it too, and there's only one house."

That's how you end up with 12% price growth when people are bidding against each other for scarce listings. The listings in the province currently are at a 20-year low.

Shaun M: Yes, explain that now because we're talking about supply and demand, we're talking about a market that goes hot. Is that because the inventory is low, but there's a demand for Newfoundland and Labrador? Look, what brings people to Newfoundland? There's all these other factors, but why are people flocking to Newfoundland to buy homes if they know, before they go, that there's not that many homes? Do you know what I mean? Does that make sense?

Is that why the market is hot? Is the market hot because people are outbidding each other's multiple offers on low inventory, or is the market hot because there's a lot of new homes that are being built there, people want to go there, all the factors, everything is firing on all cylinders? What is it that makes a market hot like that?

Shaun C: Typically, when you've got strong price growth like that, it's just demand outstripping supply every time. Prices may be going up, but one experience of some of your neighbour maritime provinces is if you got people showing up, then they just sold a place in Toronto, they don't think your market's very expensive. That's a bit of a double-edged sword in a hot market is who's outbidding who.

The way that inventory gets drawn down like that is when you have a lot of first-time buyers because they absorb inventory, but they don't have another one to put on to sell. There's two kinds of first-time buyers. There's typically young people who get older, and finally they come into the market on their own as opposed to living with roommates or their parents or whatever. There's people that come from other countries or other provinces that leave a house maybe there, but they don't put one on in your market. There's a lot of absorption, and it draws that down.

Then what you end up with, the only way that you get price growth in the double digits is if you've got many instances of listings that have multiple offers, that have multiple buyers that want it, and they're going to compete against each other, and they're going to eventually land on the winning price. We've seen it everywhere else, and saw it start in Toronto in 2010. It's just played out across the entire country, and now it's playing out as far east as you can go. It's not surprising at all.

Shaun M: Now, have you looked at a micro of Newfoundland and Labrador? Is it mainly in the urban centers like St. John's and Corner Brook, or is that also around in Labrador or rural? Do you look at that?

Shaun C: The MLS^® Home Price Index can break it out into-- In cities, it's neighbourhoods, it's very detailed. Bigger areas in the more rural areas, because you need a minimum data threshold. For Newfoundland and Labrador, there's about 100 regions we can look at in the HPI, and the gains that we're seeing are very, very broad base and generally very, very consistent.

I think there's one resort, or it's one of the really nice neighbourhoods north of St. John's that's got price growth like 20%, but most of them are in that 10% range. It's very consistent. It is very broad-based across the province.

Shaun M: Got you. Let's talk about-- You were saying young, first-time buyers. One of our discussions we were talking about are the sentiment of buyers right now. We interviewed someone from Abacus Data recently, and they were talking about 90% of Canadians under 30, they want to own a home. Talk to me a bit about that. What is the buyer sentiment right now? Are people giving up? Are they throwing their hands up and going, "I can never afford a house, this is too crazy"? Are they still active in the search? What are you seeing out there when it comes to numbers?

Shaun C: Right. That's a tough one. Some people are saying, "I give up," unfortunately. A big part of our advocacy work here at CREA could be distilled down into, we want to restore that pathway to homeownership. What we sometimes hear, when you look at the frustrations of people, say, in their 30s, and their homeownership rate is falling off a cliff, we're not going to know. It's a census data, so it only comes out every five years. I don't know if you got your census. I just did mine.

That data is going to come out next year, and we'll see how much worse it's gotten since 2021. What we sometimes hear is, "Well, young people's expectations for their first home are too high. You're not going to get a four-bedroom, 2,500-square-foot house as your first house." The other one is, "Well, maybe they don't want to own homes anymore." That's some of the work that we did with Abacus Data, was to go out and ask those questions, because we didn't believe that.

It turns out that, as you said, the propensity to want to own a home has not gone anywhere. It hasn't changed, despite the homeownership rate falling off a cliff. That creates a lot of pent-up demand of people that still are out there, piling up. That's what pent-up demand means, piling up, still wanting to get into this market at some point, but haven't been able to. The other thing that we asked them was, "What are your expectations?"

You know what they say? There's a whole list of different stuff that they say, and it breaks out differently, but mostly they say, "I don't need something fancy, and I don't need something big, but it does need to be big enough for me to start a family in, and I want to be a homeowner." A one-bedroom apartment that's a rental is not going to cut it, even though that's what's 40% of our completions right now, is purpose-built rental apartments. It doesn't tick either of those boxes.

A big thing that we've been pushing is, "Hey, if we're going to build more housing, and that's the commitment of the government, let's make sure we do the right stuff." The right stuff is family-sized, medium-density, not low-density like we've built in the past because land's gotten too expensive, but medium-density, family-friendly, and there needs to be a lot of good ownership options because people still want to be homeowners. They want to pay themselves instead of a landlord, and at some point, they want to pay it off. That's where we're speaking with the government, and that's our messaging.

Shaun M: Explain to me medium-density versus low-density for somebody who doesn't understand density. It's too dense. I'm too dense to get it.

Shaun C: Density, it's a measure of basically housing units per acre. A great example of low density would be the houses we built immediately after World War II, big, big, big lot, little tiny house. There's different measures of density about how much of the footprint takes up of the lot, and then how many floors you have, but that's very low density. In the neighbourhood that my grandfather built his house in the 1940s, he got a CMHC plan. He was a carpenter. He built it himself, but he got on a half-acre that's in Ottawa, and one of those half-acres--

They all were smart. They put their houses on one side, right up the front, so they could sell off the rest later. One of those original lots still has the little strawberry box house at the front, and they built 10 full townhomes in the back in what used to be just a backyard. The townhomes now are an example of medium-density use, and these are bigger than the original house on that lot, and there's 10 of them. I don't think people are too squished in like sardines. You're not going to have as big of a front and a backyard, but when that front and the backyard is now costing $600,000 and $700,000, part of the solution of getting young people into a first home is it's not going to have that much land under it.

The thing is, we've really stopped building that low-density stuff starting about 20, 25 years ago. We built a lot of high-rise apartments and really nothing in the middle. It's why they call it the missing middle. That term was coined 16 years ago, and everyone at these conferences--

Shaun M: Missing middle.

Shaun C: Missing middle, to talk about medium-density home types. Everyone at these conferences you go to for years, "Missing middle, missing middle," everyone nods their head. We didn't really build any of it. I see it as an opportunity. I think that we need to take the lessons of the post-World War II period. People say we need to build like post-war. Definitely not the home types we did back then, but the urgency. We can take inspiration from the urgency because we have that now.

I think we could look to before World War II, when cities were much more walkable because, guess what? People were walking. The mass adoption of personal automobiles was not really until after the war. It's why we spread out so quickly and so low density. It's really the fault of the car, quite frankly. Well, you can also look to the '70s and '80s when interest rates were very high. We did build a lot of really affordable type, medium density, small, simple townhomes and big apartments. I think that that's really the kind of home type that if we could get back to, I think it makes the most sense. The problem is it doesn't make the most money for developers, clearly, because it's never been done. I think that's where there's a role for policy to start to steer the building industry in that direction.

Shaun M: Can you remind us again what the rates were back in the 70s and 80s that everybody talks about?

Shaun C: Oh, boy. Here's the thing about that. I think we're close to the same age. Here's the thing. If you're a younger Gen Xer like I am or an older millennial, you learn the lesson at some point to never talk to your baby boomer parents about mortgage rates because you'll have to hear that old story again about what they paid in 1981. It's like, I know, Mom, 17%. Double digits.

Honestly, when I talk about the Bank of Canada aggressively attacking inflation from this oil shock, that is the lesson from the 1970s when they didn't do that and they let inflation go up and up and up and chased it and chased it and chased it, but they never got on top of it for a decade. That's how you ended up with that. That's what the Bank of Canada is trying to avoid by doing what they might have to do later this year. Yes, they were high, but home prices were a lot lower. I think I'd rather have a higher asset price and pay less interest to the bank personally. It's why a lot of baby boomers have made such a huge capital gain on their home, because the value has gone through the roof as rates have come down over the last 40 years.

Shaun M: Yes, compared to what it was, man. It's one of those things where I feel like as I talk to my kid now, my little child who is six and four years old, about a phone that used to be plugged into the wall that you were tethered to your house. You couldn't make a phone call unless you came back to your house. That concept is so far removed from their minds that I feel like interest rates at 17%, 18% are similar to some people like, wait, what? That never was real, but yes, it was.

Shaun C: It was.

Shaun M: Let's talk about supply for a minute. I want to talk about supply. What's the national story on inventory looking like across the board?

Shaun C: Sure. When you add everything together and say this is the Canada number. Number of months of inventory is five, which is exactly in line with the long-term average. You couldn't be more Goldilocks if you tried. The problem is there's virtually not a single market in the country where that's the case. It just sort of happens that when you aggregate it together, it looks that way.

That's why we always say there's no Canadian housing market. What you have really is lots of inventory in Ontario, although still less than they had in the '90s, quite a bit in B.C., that's why those markets are cooler and still pretty low on the Prairies and in Quebec and the East Coast. Including some places like I think Quebec, and also like I said, Newfoundland and Labrador, that are at two-decade lows still, which some of those other places were previously. That's where that story of some of these hot markets are starting to turn, they're starting to build up a little bit. I always say that's a good thing. That's where you don't want to be a hot market. If you have 10 young buyers looking for that first home, you want to have 10 homes to sell them, not to have a battle royale for one.

We're starting to move in that direction, but the overall supply is a stock variable. Monthly variables, like how many sales sell inside a month or how many listings come out from the start to the end of the month, is a flow variable and that can jump around a lot. The overall, the big stock variable moves very, very slowly. To get into this hot market that we've been in that was really starting at the beginning of COVID, it took 60 months from about 2015 down to about 2020 to go from a buyer's market to a seller's market, and where we were reporting every month this slow-moving, you could draw it with a ruler, and now it's slowly moving back up, but it's going to take time.

Shaun M: It takes time, and also, I would imagine government programs help with that. We've got a new government now. Talk to me about these government programs. Is it actually happening? Is it all hot air? What's your feeling about that?

Shaun C: If you go back in the advocacy space on this issue, there's a long time where the government was trying to just restrict mortgage lending and do demand side stuff to reign the market in. At some point, we started saying that some other people going back almost a decade, like maybe you just need to build more houses because you've got all these millennials. It's a huge cohort of people, and our immigration targets are going up every year. We really do need to be building more. That's what the issue is. You can't just continue to make it harder for people to borrow money because they still want to be homeowners.

That took a while to catch on. It was a political issue for a while. Some political parties were like, "Yes, maybe it is." For a while, everyone said, "No, it's not," and then some people started to say that it was. It was the fall election in 2021, where all the political parties said like, "Yes, it's the supply price crisis. We need to build more." That was where it became common knowledge.

Then the next step was you had CMHC, and the parliamentary budget officer started making predictions about how many more houses we needed and there were tehse really high numbers and millions and millions and more with no way to actually get it done, which is kind of depressing. What's interesting about the last year and Build Canada Homes say, and some of the goals of this government, they're saying not only do we have to double construction, they're saying we are going to double construction through these programs. The one I really like is the promotion of offsite building, factory building, modular, panelized, mass timber.

We have this thing in Canada that really affects productivity in the housing sector. It's called winter. If you're building outside, it's really hard to do for half the year. You know that Sweden now has 85% of its new home construction is in factories, it's modular.

Shaun M: No way.

Shaun C: It can be done. There's resistance to it. I know there's been many advances, obviously, but the idea that there's a guy standing outside in January, whacking away with a hammer the way my grandfather did in 1946, I feel like there's a lot of opportunity for-- Where we are now--

Shaun M: Yes, but it's character building. It makes Canada Canada. I know it doesn't solve the housing crisis, but it builds grit.

Shaun C: You don't have the most productive workday when you have to spend the first three hours shoveling off the materials because there's a blizzard. Yes, with some of the programs that's been announced, the money that's going out there, and some of the enthusiasm about some of these opportunities, especially having a revolution in building technology, I'm optimistic.

Shaun M: Are there investments in that? Has that been activated? Are people taking advantage of these programs? Canadian builders, are they responding well to these programs? What are you seeing on that front, or can you see below the surface?

Shaun C: I think when we talk about near-term versus medium and long, I always say that the housing market is like an ocean liner. It takes a long time to get going. It's slow. If you want to steer it, it's a long process. Housing tends to be a medium to long-term thing. This has all been announced last year.

We've had meetings with some of the people in the new agencies. They're definitely scaling up very quickly with the staff that they need to do the research. The studies that they need to figure out how they're going to get this stuff done, where they're going to put it. A lot of that work is being done. I don't know how many shovels are in the ground necessarily, but you can't expect something like that to happen overnight. It was always going to be something where it's like turning the Queen Mary, but at least we're doing it. It's going to take a while to get pointed in that direction and get going in that direction.

Shaun M: Right. It does. Long-term, it's the right way to go. We just got to figure out this whole short-term stuff. How do you see trends in terms of people's reactions to when everybody gets afraid, it's like, uh-oh, do people rush to the market or do people hold back? What are you seeing the behavior like for Canadians right now?

Shaun C: Right. Let's say you're buying your first home, that's a scary thing. Then you're also committing to be able to pay a monthly payment for the next 25 years. When there's uncertainty around, especially with your employment, when the economy's shaky, people definitely go to the sidelines. The irony is that during periods of high uncertainty and fear, what people want the most is a stable home base like your own home. In terms of the market activity that we measure, people moving around and coming into the market for the first time, it definitely keeps people away. Uncertainty. Uncertainty is not a friend of the housing market, that's for sure.

Shaun M: Yes. We talk a lot about consumers, we talk a lot about government, but let's talk about REALTORS®, agents who are out there watching this right now. What if your local market doesn't match national headlines? How does this emphasize the importance of the REALTORS®' local knowledge?

Shaun C: Oh, it's all about local. Even when we drill down to the city, look at Toronto, for example. There's no Toronto housing market either. There's what's going on in the condo market right now in Toronto versus what's going on in the detached side of things. In the last 30 years, no matter whether the Toronto market was up or down, if you got one of those detached homes in Midtown on one of those leafy streets, it's getting 10 and 20 offers. Every single time.

Then you could look at the condo market and say, how's the condo market in Toronto doing? Well, you know what? In the 1970s and '80s, the condos that were built in the city of Toronto, the median size of them was 1,100 square feet, which means that half of them were bigger than that. My parents had an apartment like that. Often told the story, their sectional couch was so huge that when they moved into a detached home, they had to split it between the living room and the basement. Their conversation fondue area or whatever in the '70s.

Are you talking about a 500 square foot thing that was designed to be an Airbnb or are you talking about a 1,300 square foot apartment that you could raise a family in? It's really all about-- it is just so hyper-local that you always have to go to the level of the local expertise of those agents. We just-- our job is to have the view from 10,000 feet that sometimes helps, but to your point, sometimes hurts when people want to ascribe it to what's going on in a particular micro neighbourhood and property type situation.

Shaun M: Within those micro climates, if you will, it's almost like an economic climate within a certain block, are there some regions within a city, for example, that could be hot on this corner and not on this corner?

Shaun C: Oh, yes. It depends on walkable places with great-- Like there's a neighbourhood here in Ottawa where one side of it is a super walkable street with all kinds of shops and restaurants and stuff, and the other side is like-- on the other side of the neighbourhood you cross the big road and it's like a sketchy neighbourhood, but they're right next door to each other. Yes, it really can-- the neighbourhoods are basically defined by those boundary lines that were established years ago where there was a difference in who the builder was or who the people that lived there were.

Then some of the hottest places are the places that used to be-- There's a neighbourhood here in Ottawa called Mechanicsville, these tiny little streets and these skinny little clapboard houses, where all of the workers that used to work down on LeBreton Flats in the train yards and the manufacturing units and the breweries, they all lived in these little tiny things, but now it's being redeveloped. Now, it's like super hot, because it's centrally located. Yes, it's always changing, and I think that's going to accelerate going forward.

One of the things we don't talk about a lot, we talk a lot about development. We don't talk a lot about redevelopment. Canada is a fairly young country. A lot of our homes were built after World War II and most of them are still where they are. They're mostly greenfield development, so they've never been torn down and rebuilt like land everywhere else in the world, but that's coming at some point. An interesting thing is going to be, I think, in my own neighbourhood, which was one of the first track-built neighbourhoods, where one builder built 500 homes. They're all going to age and be deemed tear-downs all at the same time, and so there could be a lot of-- There's not a lot of redevelopment activity yet, but that's--

Shaun M: It's coming.

Shaun C: It's coming. At some point, it has to.

Shaun M: Yes. Well, yes, I just love talking about that. I love talking about the future. I am personally hopeful of the future for Canada. Obviously, I moved back here. I feel comfortable raising my kids here, but-- As you said earlier about how Canada is the number one place for foreign investment because we're a stable, safe country, but when it comes to the real estate market, the short term feels a little bit hairy. What should REALTORS® do to navigate the market on the back half of 2026?

Shaun C: Sure. Well, I guess, if you're representing sellers, it's good news that-- I think one of the difficulties can be trying to convince a seller that their price expectations are out of line with the market. What I'm seeing the data, and that's coming out of the situation that we were in, where prices went so high briefly, and then buyers had so little borrowing power, that's been, in my career, the biggest gap between buyer ability to pay and seller expectations I've ever seen. I think that we're coming close to closing that now.

If you're representing a seller, it should be a little bit easier to convince them when you look around the neighbourhood and start to see, okay, we're starting to have a consensus on that sort of thing. It's the same thing for buyers when they look around and they say, maybe that isn't too much for that house. Maybe that's what they're going for these days. Then they start to move faster, and you see a house that you might want to think of, and then someone snaps it up. That's how markets get going again, especially these cooler ones in Ontario and B.C.

I would just say, I'm not giving advice here, but just to know that trend is playing out under the surface, even though the overall numbers that are published by us are still looking weak at this point, because a lot of people are staying on the sidelines. It's not that those trends are reversing. That's playing out up until like-- we have daily data up until yesterday.

Shaun M: Right. We started this conversation talking about the doom and gloom forecast part of things, but let's talk about the hopeful things. How are you feeling about

everything hinges on global activity and chaos or stability, but what are you seeing within Canada as something that we can focus on the positives, the hopefulness?

Shaun C: Sure. Definitely, what's happened over the last-- I wouldn't just say in the last year. It's been a process to say, okay, we need more homes. How many we need? How are we going to do it? We're at that point now. I think the next phase for us has been, okay, now it's not just, we need 100,000 more units of whatever you can build and wherever you can stick it. It's, let's think about typology or built form. Let's think about ownership tenure. Let's think about where these things go. Let's do what makes sense, not what just makes the most money or makes the most units.

That's where the role for policy is to maybe steer the ship and tilt the luck plane in the favour of builders saying, ah, maybe it does make sense to build that affordable townhome if I get a bigger break on my development charges, or if there's a CMHC program that was getting a lot of this thing built over here, rental apartments, rents are down, vacancies are up. Maybe that program can now build something over here that we need. Stuff that we've never tried.

A huge opportunity in my view. Last time we talked was 16 months ago, and I was still really big on the factory-built stuff. I thought that was the big idea. Then the new government said, like, "Yes, good. What else you got?" From an advocacy standpoint, you can't just keep talking about that one. I think the next big one that I'm really excited about, there's people talking about it, but I think it's bigger opportunity than what people are talking about is downsizing options for people like my parents' age and a little bit younger. We're not building a lot of new family homes, but there's a ton of family homes out there in the existing stock that are great in great neighbourhoods. The further in and the older the neighbourhood, the more likely they'd be like mine. I don't know how it breaks out between young families and older empty-nesters, but I can tell you they're closing schools down and consolidating schools because there's not a lot of kids. Meanwhile, where my wife teaches out in the suburbs, the schools are overflow. They got 20 portables. They can't build them fast enough.

I got to always be careful with this one. The first really big group of population Canada has ever seen is the younger baby boomers, so people that are in their 60s right now. They're probably not in that age where they're looking to downsize yet, but the problem for that is there are a lot of people that do want to downsize. They say, "There's nothing for me because I don't want to go live in a downtown condo and I'm not going to buy another big house on the ground like a bungalow, but I need the single floor." The main thing they say is, "I want to stay in the community I've just lived in for the last 40 years. I don't want to leave my community."

I think there's a huge opportunity to not just build family-friendly homes for the young set, but to build great downsize options in communities for people that are looking to downsize, that want to take that money out of their home for their retirement, that want single floor living, that don't want to be shoveling snow and doing maintenance, but still want to be able to go out and walk to their same grocery store and pharmacist and all that.

I think big apartments, that's low hanging fruit. That's a low density area. It's the way we built buildings back in the '60s and '70s. We dotted them here, there, and everywhere. They weren't all downtown. You could do that again in every neighbourhood. Nice big apartments, whether it's for someone who's downsizing, or when they do that, then you start to free up some of that existing stock.

I always make the point, my bedroom that I grew up in has been gathering dust since 1998. No one's using that. My parents are the type of people that are like, "We're emotionally attached to this house. This is where we're staying until the bitter end." I think a lot of people feel that way, but there's also a lot of people who say, "I want to downsize, and I want to take this $500,000 tax-free and put it in my pocket for my retirement."

The thing is, big apartments in existing neighbourhoods would also be a great entry point for young families that can't afford something on the ground in some of these more expensive places and start to get more kids back into these existing neighbourhoods where, like I said, the schools, they had no enrollment and everyone's getting pushed out to the suburbs. I think that's a huge opportunity. It's not just building family-friendly stuff for the exurbs, for the young people. It could just be something that precipitates a reallocation of the existing stock sooner than it would happen naturally if people just stayed in their house until they were 85 because there was nowhere else for them to go even though they wanted to. That trend will happen in 15 years from now. If you start building some of that options now, you could get some of that going now. That's a huge opportunity.

Shaun M: You could accelerate it. Let me ask you this. Have you looked at any of the data showing that these empty nesters are looking for that very specific kind of home? Is there a lot of downgrade momentum happening?

Shaun C: I think there has to be. I think that a lot of people are millionaires and it's all locked up in their house. It's a house that is getting harder and harder to maintain, that they don't use all of. It's got to be there on some level. I say it's always tricky because I'm not saying to anyone that you should downsize. I'm saying if you want to. It's just like we never say that anyone should be a homeowner or want to be one versus a renter, but we're saying if you do want to be one, we want to help facilitate that. This is the same sort of thing.

The biggest thing you hear is, "I want to stay in my community." Those options aren't dotted around in those communities. We've never had this giant cohort of people that are in that life stage. The baby boomers are the first big group to do everything. In the '60s, it was [unintelligible] Woodstock. In the '70s, it was, I guess, Disco. In the 80s, it was Yuppies. Then they started to have kids. Then they were middle-aged. They're the first big group to do all of those things. Now they're the first big group to hit that stage of life where you're in your 70s, moving towards your 80s.

The number of people we have in their 80s right now are very small compared to the boomers that are coming because they're members of what's known as the silent generation. They were born from the start of the Great Depression to the end of World War II. It wasn't a huge boom time for having kids, obviously. Then the big boom came later. There's this tidal wave of population that's coming towards that age range. It will be a big turnover of the existing housing stock, which I think will solve a lot of the problems we have because it'll turn that stock back over and become available in much larger numbers for the people who need it. I think that there could be a way to make that happen faster as part of this what we're going to build and where we're going to build it conversation that we're in right now.

Shaun M: I would like to see the trend of young, fresh out of university partiers meet up in a shared accommodation with the empty nesters who want to get back to those old days of partying. I mean, that would be one cool house. Would you support that if I could get it going?

Shaun C: Oh, I feel like this new generation is a little bit different than we were. We were on a camping trip last year with some of our friends sitting around the campfire, and there was some young, they must have been close to 20 years old, crew on the campsite next to us. It was only about 9 o'clock, and we were like, oh, it's really quiet over there. They already went to bed. Our friend, it wasn't my thought. Our friend said, "Yes, these young people are different. They don't sit out, drink a beer around the campfire. They just take a gummy and go to bed." I don't know if it would be the same sort of thing, but maybe.

Shaun M: Well, that sounds cohesive, like with the empty nesters and then just take a gummy, go to bed. They could enjoy their lives together and share the cost.

Shaun C: They don't get driver's licenses either.

Shaun M: Maybe I'll work on that. Shaun, man, what a great catch-up, bud. This has been good. I'm so happy to catch up with you. I know that the world is in a bit of a tipsy-turvy place, but hearing the data and hearing the numbers really helps clarify our path forward. No matter which way it goes, thank you for all of your knowledge and sharing it. No matter how many comments you get in the comment section saying, "You said it was going to be good, and that was bad." We still love you. We just want you to know we love you.

Shaun C: Oh, thanks, Shaun. Yes, it's been great catching up. I have a lot of fun talking about the policy stuff and the advocacy stuff that's a little bit further out because that is the optimistic part. As far as what's going to come in the next year, that's really out of our control. It's just my job to measure the numbers and say what's going on and roll my eyes and say, maybe this'll be the last crisis for a little while.

Shaun M: Yes, but I do think it's cool, no matter which way you swing on the political scale, our new prime minister, I like what he says about we can only control what we can control. You know what I mean? Focusing on that, taking care of that, and that helps us forward. Again, thank you so much, Shaun Cathcart, Chief Economist for CREA. We look forward to our next chat. Let's make it sooner than 16 months, bud.

Shaun C: Sure thing.

Shaun M: By then, your puppy will be grown up a little more. I know you have a new puppy.

Shaun C: My puppy will be, hopefully, grown up a little. I have a new puppy, yes. Very new. The waking up in the middle of the night, I haven't had to do that with kids for 15 years. I thought it wouldn't be that bad, but it's a lot harder when you're closing in on 50 than when you're 30.

Shaun M: Yes, it is. It is. Well, I started late with my kids, so I'm going through puppy and baby stuff all at the same time.

Shaun C: Rough.

Shaun M: Yes, woof. All right, man. Thanks so much.

Shaun C: Sure. Until next time.

Shaun M: Mr. Shaun C, thank you so much. What a great conversation, a great catch-up. Always, his insights help me and I hope you navigate this wild world of the housing market in Canada. I really hope you enjoyed this episode, and if you did, please let us know by giving us a rating and a review on wherever you listen to your favourite podcasts. We always appreciate it. REAL TIME is brought to you by the Canadian Real Estate Association, CREA, production brought to you by Alphabet Creative. My name is Shaun Majumder, and I hope you enjoyed today's episode, and we'll see you next time on REAL TIME. Peace.