Nationally, Canadian home sales were down 19% year-over-year in December and the average sale price -4.9%. Unsurprisingly, rather than acknowledge that a cyclical downturn is the natural product of unsustainably high home prices and household debt levels, the Canadian Real Estate Association and analysts from the broker/dealer/lending sectors are blaming stricter mortgage qualification rules and interest rates that remain well below historic norms.  This is classic salesforce myopia. See Canadian real estate outlook 2019:  stable but struggling:

According to the 2019 RE/MAX Housing Market Outlook Omnibus Survey, 36 per cent of Canadians are considering buying a home in the next five years, down from 48 per cent in 2018. RE/MAX blames the drop in interest on the mortgage stress test and rising interest rates, both of which are eating into the purchasing power of buyers.

Realty insiders (most, highly levered themselves) are now warning of the negative impact that a housing downturn brings for the Canadian economy, and imploring governments and the Bank of Canada to intervene and loosen terms for lending even more. Naturally, few were warning of the building downside as prices and debt levels soared far past prudent levels in recent years.

While higher rates typically take a few quarters to work through the real economy, there’s evidence this is happening now. Canada’s Office of the Superintendent of Bankruptcy reported a 9.2% jump in consumer insolvencies in October 2018 and consumer insolvency firms are reporting a surge of new clients with each passing month.

The beneficiaries of the spreading correction will be those in the rentals, repo, collections and bankruptcy sectors, as well as those who have been building savings and patiently waiting to buy a shelter at three to four times their income rather than five to ten.

No one gets the credit cycle all their way. Everyone gets a turn.