There could be more “pain” to come, if enough of the current elevated inventory becomes motivated enough to sell faster or before the end of the summer.
The Two Minute Market Update is intended to keep readers apprised of what’s going on in local real estate markets and in the global financial markets that affect real estate via inflation, interest rates, capital flows and public policy. It is best suited for those not able to keep up with all the news every day, but still wanting to be informed.
Two Minute Market Update, May 21st, 2025
The pace of new listings is potentially cresting, following a seasonal pattern often seen around this time of year. This is observable in the first two weeks of May’s activity across all property types in North Vancouver. It’s somewhat amusing, of course, that this is happening as the media has fully latched on to the trends we’ve been discussing here for months now. Mostly discussed by the newpapers are the condo crisis in Toronto and surrounding areas and to a lesser extent parts of Greater Vancouver. On the North Shore, we’re not experiencing as much of the pricing pressures as in the weakest markets; when sales are transacting (at a slower pace than usual), they are at prices maybe 3-5% below where they would have at this time last year. There could be more “pain” to come, if enough of the current elevated inventory becomes motivated enough to sell faster or before the end of the summer. For now, sellers are being counselled to be patient and wait for reasonable offers.
Part of the reasoning behind that counsel, is the broader expectation for interest rates to continue falling as the economy weakens and central banks shift their focus from inflation fighting to supporting growth. Last week’s employment report in Canada supported the need to support growth. However, Tuesday morning’s inflation report did the opposite as the Bank of Canada’s preferred “core” measures increased far faster than expectations. The core measure, which noted a rapid rise in grocery prices was very concerning and will be weighed heavily before the next rate decision on June 4th. On the bright side, it was nice to see the broad measures of inflation going down due to falling gas prices and other prices related to the ending of the consumer carbon tax. The strengthening Loonie will also help to mitigate the effects of rising import prices.
Bond yields shot higher on the inflation release, and now sit at the highest level of the past 3 months. Excepting the dip they took during the initial “liberation day” panic in April, rates have been trending upward since late February. Buyers would be well-advised to secure a pre-approval at current rates (plus a premium) in the event this latest inflation report becomes a trend. While the tariff causality of the price increases should theoretically be eliminated since the reciprocal tariff threats were removed, the damage to the supply chain was already done (noted in my April 23rd issue) and is filtering its way through the wholesale and retail sector. Switching back to US suppliers upon a normalization with the Canada/US trade relationship will also come with costs. It’s not like flipping a switch in most cases. In my annual report published last summer, I outed “interest rates not falling as fast as expected in 2025” as a major risk factor for the market. In early August, the 5-yr government rate dropped below 3% for the first time in two years. Here we are 10 months later and the yield is effectively the same, with fixed rate mortgages no more attractive than they were then.
The stock market has recovered nearly all its losses since the “liberation day” fiasco. The US administration is attempting to run it back by placing pauses and reduced tariffs on cooperating countries. If they’re lucky they’ll rebuild the global trade landscape back to 90% of the way it was, claim the renegotiated 10% as a huge victory, and investors can move on to valuing companies for their earnings. But the precedent has been set for the administration to use this playbook going forward. In their mind it is working.
Bitcoin has made a new all-time high, joining gold as the neutral reserve assets being flocked to by corporate treasuries, national treasuries and investment portfolio hedges. With governments in Canada, the US and globally suggesting growing deficits, and inflation and monetization of debt as the necessary evils to create economic growth, it’s hard to see how this stampede towards inflation protection stops. An argument could be made that premium equities, premium real estate, and business assets should also be held on the same pedestal.
Matthew Stiles
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Disclaimer: The information provided in this column is for general informational purposes only and does not constitute financial, investment, or other professional advice. While I strive to provide accurate and up-to-date information, I make no warranties or representations as to its accuracy, completeness, or reliability. Any actions taken based on this information are at your own risk. Always consult with a qualified financial advisor before making any investment decisions.