the uncertainty could be removed at any moment, unleashing a wave a buyers similar to the post-lockdown COVID-19 market
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, April 8th, 2025
Real Estate markets in the Fraser Valley and Toronto are breaking down under increasing inventory and buyer hesitancy. The story on the North Shore, however, is not as bleak. Here, prices are holding up thus far and the market is moving more inventory in the “affordable” categories of each property type, whereas it was the luxury categories pulling the weight earlier in the year. Buyers are benefiting from lower interest rates, but many are understandably hesitant due to the uncertainty coming from south of the border or with our own federal election. Job losses are a real fear for many who work in industries with exposure to international trade. Lower interest rates are cold comfort to those watching coworkers losing their jobs. On the other hand, the uncertainty could be removed at any moment, unleashing a wave a buyers similar to the post-lockdown COVID-19 market.
The last week has been consistent with the “decade that happens in a year” thesis I wrote about to start the year. Headlines have been breathtaking in their geopolitical and economic significance. The Trump administration hasn’t been around for 3 months yet, but we are already becoming a little numb to headlines like this one, indicating the US will go ahead with a total of 104% tariffs on all Chinese good imports, effectively ending any bilateral trade between the two largest economies. We are currently witnessing the end of the post-WWII geopolitical order and the end of the Bretton Woods monetary system simultaneously, as President Trump attempts to build a new global politics and monetary framework with the US at the centre, while attempting to exclude any nation that wants to hinder it from continuing as a hegemonic power. While Trump targeted nearly every country with last weeks tariffs, it’s clear that his primary target is China. Already, China is experiencing stress with its currency (that is pegged to the US dollar) wobbling. This involves the defending of the peg by selling USD assets (like Treasuries). This may only be the first act.
Of course, when a major holder of US Treasuries sells a large amount of them, the yield is bound to increase. This has started to happen as almost all of the decrease in treasury yields which occurred at the expense of a stock market mini “crash”, has been regained. Similar has been the reaction in Canada, where 5 year government yields are now higher than they were prior to the tariff announcement. While still trending lower over these past 3 months, mortgage rates appear to have bottomed. Further decreases may only see major lenders reducing their discount rates, and the overall economic turmoil will surely see some scaling back on lending if it continues. Canadians are now pricing in a recession as a “base case” for 2025 with business and consumer confidence plummeting. Inflation expectations are also sharply higher. These readings will have certainly worsened over the past two weeks. Capital expenditures, hiring plans and major consumer spending plans are naturally postponed under such circumstances. It would be hard for this not to impact the local real estate market to some extent.
As mentioned, equity markets have experienced a multi-day crash, as volatility has spiked to pandemic levels. Despite a few failed attempts at a rally, the selling pressure now feels relentless as major investors appear to be repositioning for a new reality. It bears mentioning that these high volatility events don’t often occur without something “breaking”. Hedge funds caught offside or banks with the wrong counterparty risk structure can be quickly forced into liquidation, compounding the market losses. Real estate-minded folks are looking for either contagion from financial markets into mortgage availability and rate premiums, or any event that could spell medium term relief.
Bitcoin joined the risk-off trade by dropping below $80,000. Gold originally benefited from the volatility and “flight to quality”, but then also succumbed to panic, losing the $3000 mark it had taken so long to gain. Most significantly, oil, lumber, and most industrial metals collapsed on expectations of a global recession and weaker demand. This will spell some comfort for materials costs and the overall inflation picture.
For more information on the global economic realignment, read this article from Ray Dalio – one of many good thought pieces being published in the wake of the tariff crisis. Ray encourages us to look beyond the tariff story to the bigger picture. I think that is wise.
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.