- High unemployment,
Canadian households that are more in debt
than any single nation in the G7
and a mortgage deferral
cliff that's upcoming.
Gonna hit us like a freight train,
are just some of the reasons why
Canadian real estate is going to crash.
But what about the limited supply,
employment numbers improving
and government intervention?
Will those balance out
these negative factors
and prevent the real estate market
from crashing in Canada?
On this episode
of Bald Prairie real estate,
I'm going through five reasons why
the real estate market's going to crash
and five reasons why it might not.
(upbeat music)
Hey everyone,
welcome back to Bald Prairie Real Estate.
My name is Matthew Pfeiffer.
I'm a real estate agent
in Regina, Saskatchewan,
but I'd like to be known
as your favorite realtor on YouTube.
So if you like great
real estate educational content
or my awesome Canadian
Real Estate Market Updates,
go ahead,
hit the subscribe button right now.
So you don't miss any of those
and you won't miss my
terrible bad dad jokes
like this one.
What do you call Mac and cheese
that gets all up in your face,
too close for comfort food.
This video is going to be a follow up
to one I did recently.
It was "why hasn't the real
estate market crashed yet".
So if you want to check
that out for some context,
go ahead.
I'll put a card up right here
so you can take a look.
But in this video I'm
going to present to you
five reasons why the real estate market
is going to crash
and five reasons why it might not.
I'll let you guys make the decision,
what you think is gonna happen.
Let me know in the comments below
what you think after watching this video.
Is the real estate market gonna crash
and why?
Now I don't do predictions.
If you know me, well,
I like talking about what has happened.
What are some factors going on
in the market right now?
Kind of give you an overview of
where things are at right now.
So if you wanna check out my most recent
Canadian real estate market update video,
I'll put a link up,
So you can take a look at that as well.
But I don't do predictions.
That's something that CMHC does.
They did a video recently,
or a market update
or forecast, I guess we'll call it.
And they said the real estate market
was gonna go down in 2020 by 18%.
And then in the back half of 2021
prices would start to recover.
Well,
since that prediction was made in May,
prices have gone up
and sales have gone up.
So that's one of the reasons
I don't like making predictions.
I just like talking
about what has happened.
So enough of the chitchat
let's get into telling you about
five reasons why the real estate market
isn't gonna crash
before getting into
why the real estate market is gonna crash.
First up in my reasons why
the real estate market isn't gonna crash,
it's gonna be government intervention.
Now, the reason I bring that up is
because we don't really know
how motivated the
government is going to be
to add liquidity to the market,
keep interest rates where they're at,
add special programs,
all that type of stuff,
throw incentives,
especially a government that's potentially
facing an election here in the fall.
So that's why I put him in...
I called it a wild card
in that last video,
you don't know what the
government's going to do.
If you do, let me know.
Somebody, give me a quick holler,
I'd like to have an inside scoop
into what's going on with
the government's thought
process right now,
So I could raise my clientele.
Hey, there's a new program coming out,
but that's type of stuff that
you just can't make predictions on,
but we know that the government
is not gonna wanna go into an election
with the real estate market being bad
or the economy being bad.
So they're gonna do whatever they can
to keep those two markets strong.
Next up,
we've got to talk, supply and demand.
This is one of the most important factors
in a real estate market.
It's pretty self explanatory,
but yet it's a problem
we keep seeing come up
over and over again in Canadian cities.
And that is,
it lack the supply to
meet the strong demand.
Many Canadian cities,
especially the biggest markets,
like Vancouver and Toronto,
these are the two best examples of this,
are constantly constrained
by supply problems.
And they even have geographic boundaries
that make things even worse for them.
Vancouver,
you've got the ocean,
you've got the US border
and the mountains
kind of funneling everything
from West to East there.
They don't have a lot of room to expand
and makes land and house
prices more expensive.
Toronto of course has the Greenbelt
and the Lake there.
There's only so many places they can build
before they have to expand significantly
further out increasing commute times
that people might not want.
So that limited supply
why across Canadian cities
is what is currently keeping
prices where they're at.
And if that supply problem doesn't change,
if there's still a strong number of people
wanting to buy houses,
more people wanna buy houses
then are willing to sell their homes
or homes available for...
Prices aren't going to crash.
So until you see inventory buildup
in some cities in Canada,
we're seeing like one or two
weeks worth of inventory.
Until they start building up to
five, six, seven months of inventory.
You not gonna see prices decline.
How about low interest rates?
That is another big factor
that's going to keep prices
and demand where it is right now.
The first level of The Bank of Canada
and the government's gonna pull
when they see the economy slow down
is they adjust interest rates down
and when the economy speeds up,
they'll adjust them back up.
But The Bank of Canada
has already committed
that they want to keep
these low interest rates
for the next couple of years.
So right now in August of 2020,
I'm seeing five-year mortgage rates,
fixed rates at under 2%.
Those are all historic lows.
I don't believe money
has ever been that cheap
to board or buy a house ever in Canada.
So those low interest rates
are allowing buyers to spend
more money if they want to
or keep their payments lower.
This has got people off the fence,
buyers that aren't sure of buying.
They see as low interest rates go...
I can buy potentially for less
than my rent cost me.
I'm going to go out and buy a house.
So when those low interest
rates are out there,
it's gonna encourage people to go and buy.
It's going to continue
the demand side of things,
which will reduce the supply side.
And we gonna go back to that
supply and demand problem.
Those low interest rates,
encourage that low supply
and keep prices where they are,
or even increase them.
Where the jobs market goes,
generally, that's where
the housing market goes.
So when we saw massive
unemployment numbers to start,
that was the big fear that
these jobs would not come back.
And then you would have people
that simply couldn't afford
to buy and couldn't afford their house
that they're in right now.
But as of August, 2020
we are seeing is recovery
in the jobs coming back,
people are getting back to work,
working more hours,
full time hours,
things like that.
So if the jobs continue to improve
and we see unemployment numbers
continue to come down,
that's gonna keep stability
in the housing market.
Now I know I promised
to give you five reasons
why the real estate
market isn't gonna crash,
here's a bonus one for you
and it's immigration.
And I'm putting in kind
of a wildcard category
because this is one we really
don't know what's going on,
and it involves some government policy,
but Canadian real estate is still
heavily driven by new
immigrants coming to Canada.
In an average year,
between 250,000 to 350,000 new Canadians.
And all those people
would like to buy houses in Canada.
So that's a big driver.
If you look at Vancouver,
Montreal,
and Toronto,
those three cities account for half
of the destination for
new Canadians alone.
That's one of the reasons those markets
have been so hot for so long
because new Canadians move there
and buy houses there.
Right now,
obviously immigration is way down
in all three of those centers.
I think it's now between 50% and 75%,
depending on which city there,
which is potentially going to hurt those
cities and the real estate prices.
But eventually the government is going to
reopen the doors
and have more immigrants coming to Canada
and they will want to buy houses.
And there may be a surge of people
looking to buy houses.
That they're new Canadians,
they're coming here for the first time,
they're excited to buy
and if we have limited supply,
we've talked about, that surge in demand
will keep prices where they are
or increase them.
I hear it all the time in the comments.
He's a real estate agent.
He's only gonna tell you
about the good things.
Paint the rosy picture,
tell people to buy.
Well, guess what I'm
telling you right now,
these are the five reasons why
the real estate market in Canada
is going to crash
and why you shouldn't buy.
I talked about it as a reason why
the real estate market wouldn't crash.
Now, I'm gonna tell you,
it's a reason why the real
estate market is gonna crash.
And that is unemployment.
We are still seeing extremely
high unemployment numbers.
And if those unemployment
numbers don't come down,
people are gonna be unable
to afford their houses.
They're gonna have to
put them up for sale.
People are gonna be unable to
buy those houses for sale.
And you're going to see prices come down
because there just simply isn't the demand
to match the supply.
So if unemployment numbers stay high,
the real estate market
will come down with it.
How about household debt in Canada?
We've heard it time
and time
and time again,
that Canadians on average have the highest
household debt of any G7 country.
And it's astronomically
high compared to even
the next highest country.
We've saw when the United
States went through
its housing crisis in 2008,
how high their debt loads were.
And then as the market fell apart there
debt loads came down
and real estate prices came down with it.
In Canada, We just kept taking
and adding more to that debt,
Canada households owe something like
$1.75 for every dollar they make.
That's just too high
and it's unsustainable.
And eventually that's gonna catch up
and people are gonna be
unable to afford houses.
And it's gonna cause prices to come down.
Talking about supply and demand
and that is gonna be a surge
of short term rentals coming on the market
and specifically in the condo market
of Vancouver and Toronto
was probably where
you're gonna see this.
And that is, you know,
the Airbnb type things,
where people have decided,
I can't afford to keep these anymore.
They're not making me any money.
I'm losing money on.
I'm putting them up for sale.
This applies a little bit to the
new construction stuff.
There's a lot of new construction
that's expected to come on the market.
So all of a sudden,
if you have a galactic inventory,
especially that short term inventory,
it's going to flood the market.
These are sellers that want
to get rid of these houses.
They're not gonna necessarily
hold up for high prices
because if they don't get rid of them,
they can't afford them,
they might have to give
them back to the bank
and therefore closure
they don't wanna do that.
So you're gonna see a flood
of these come on the market.
And it's going to hurt the condo market,
which will drag down
the rest of the real
estate market with it.
So that short term rental inventory,
when it hits the market,
is gonna cause prices to come down.
I talked about this one in reasons why
the real estate market
isn't going to crash.
Well, this is a big one.
What is gonna cause the
real estate market to crash.
And that is, I see it
a lot in the comments,
but I've read about it a lot
in different economic journals
and forecasts
and things like that.
And that is,
what happens when government support ends.
So we're talking about
cerb, when that ends
and while also things like,
the wage subsidies ends
and employers can't keep
employees employed anymore.
And those cerb payments,
people don't have that
extra $2,000 a month.
What are they gonna do?
How are they gonna pay the mortgages?
The answer is,
well, they're probably not gonna be able
to pay their mortgages
if they don't have a job
and they don't have that extra income.
So if people can't afford their mortgages,
they can't afford to
go out and buy houses.
Employers can keep people employed,
I gamble we're back to that
supply and demand problem.
The supply will go up,
the demand will come down
and real estate prices
will crash because of that.
This is probably the biggest one,
The Mortgage Deferral Debt Cliff.
That's what it's been
referred to in the media.
And the idea is that in
September and October,
those people that were given six months
deferrals on mortgage payments are
not gonna be able to
pay back those mortgages
or start paying their mortgages.
And they're gonna be forced
to put them on the market.
So we're gonna see this
massive glut of properties hit the market,
depressing all segments
of the real estate market.
That's what you're seeing
a lot in the media.
And if that happens,
if there is this something
like 20% of mortgages,
that's number I heard,
20% of all mortgages were in deferral,
if those start hitting the market,
Yep,
that supply is gonna
cause prices come down
because those people they're
gonna be forced to sell.
They don't have a choice.
They got to get rid of them
before the bank forecloses on them.
And if the bank does
foreclose on those properties,
you're going to see a ton of houses.
Come on the market at dirt cheap prices.
So the bank can just
get rid of those things
and prices will come
down because of those.
That mortgage deferral cliff,
that's the big scary word we're hearing.
September, October are
coming up real fast now.
We're gonna know real quick,
how much of a problem this is going to be,
but it is for sure gonna cause some
downward pressure on
the real estate market.
So I gave you a bonus reason
why the real estate market won't crash.
And I got a bonus reason why
the real estate market is gonna crash
and it's immigration again.
If immigration does not pick back up,
those three big centers,
Montreal,
Vancouver,
and Toronto
are going to see a reduction
in the demand side of things.
And it will cause prices to come down
because that is the three biggest markets
for new Canadians to look to buy homes.
And if they're not
looking for homes anymore,
because they're not here,
well,
that's going to cause
those 3 really hot markets
to start slowing down.
So that's your bonus reason,
is immigration.
There you have it.
The real estate agent told you of reasons
why the real estate
market's going to crash,
right now.
It's on record.
I've had a lot of people telling me,
say it in the comments,
I just lied to you,
I wouldn't tell you if the
market's going to crash,
even if I knew it was coming,
I'm just trying to make a buck,
I got a vested interest.
I've heard all the reasons guys.
Don't worry.
I've heard them all.
I check every single one of the comments
and respond to most of them.
But there you go.
Now I'm on record.
I just gave you five reasons why
the real estate market
in Canada is gonna crash.
Heck, I even give you a bonus reason.
I gave you six reasons why
the real estate market's gonna crash.
Now what do you guys think?
What do you think of the five different
or six different reasons whether
real estate market is,
or isn't going to crash?
Let me know in the comments below.
If you think I'm right
as to what's going to happen,
or if you think of an additional reason
that's gonna cause the real estate market
to crash or not crush.
Let me know.
I want to hear your comments below.
But if you're a first time home buyer
and you got questions,
that's okay.
I've got a series of
videos dedicated to you,
the first time home buyer.
I'm gonna put that up right here.
That's all first time
home buyer questions,
answer right there.
How about you just wanna get
some of that real estate knowledge
I talked about my intro?
Well, this series of videos,
it's all tips and tricks,
how to buy and sell real estate in Canada.
There's my reason why the
real estate market's gonna crash
and why it might not.
Thanks for watching guys.
