Ep. 48 - Special Guest Ben Rabidoux on Toronto’s Condo Market - The Last Honest Realtor

Episode Transcript
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SPEAKER_02 (00:00):
Do you like celebrities?
I don't.
And that's why today on The LastHonest Realtor, it's just going
to be me and my good friend, BenRabideau.
Hello, everybody, and welcomeback to the Last Honest Realtor
podcast.
I'm your host, David Fleming.
Thank you for joining me today.
All jokes aside, Ben Rabideau,he's my celebrity because he is
a data nerd like me.
He's the founder of EdgeAnalytics.

(00:20):
He's an economist.
He is regularly quoted in allthings media as it pertains to
real estate and the economy.
He's got a pretty big followingon this thing that I don't use.
It's called Twitter.
I think I have a Twitteraccount, but honestly, I don't
tweet.
But yeah, Ben is one of the guysthat loves to comment on on all
things real estate and theeconomy, and then have people
clap back at him with nonsense,which is something I've grown

(00:42):
accustomed to by doing thispodcast.
Some of the YouTube comments, Imean, I know it's not you
watching this right now, butsome of them are pretty crazy.
So yes, Ben has agreed to joinme today.
I want to talk about a lot ofdifferent things.
Obviously, this is a real estatepodcast, but I want to talk
about the intersection of realestate and the economy.
Of course, we're going to haveto touch on Trump and tariffs

(01:02):
and taxes.
We're going to talk about theelection.
We're We're going to talk abouthousing demand.
We're going to talk aboutinterest rates.
We're going to talk about themovie that's going to be made
about me and Ben.
I'm going to have Christian Baleplay me because he played
Michael Burry in 2008 in themovie The Big Short.
You're like, where are you goingwith this, David?

(01:23):
Seriously, Ben and I, for 15years, have been talking about
the coming apocalypse in thepre-construction condo world
where people are paying 40%premiums for something that's
not built.
And if the market ever were todecline, forget just being
balanced and stopping.
It's ridiculous acceleration ofprice.

(01:44):
But what would happen?
And I liken this to themortgage-backed security crisis
of 2008, where a couple ofpeople were like, hey, everyone,
look at this.
No one cared.
Everyone just kept buying.
Everyone just kept on like therewas nothing wrong.
And we know what happened there.
So Ben and I are going to talkabout that.
And in all seriousness, I havestarted to liken the

(02:04):
pre-construction condoapocalypse to what happened in
2008.
There's so many similarities,guys, and I will leave it to me
and Ben to talk about, but I doreally believe that 10 years
from now, we'll be studying howcondos were built because of how
they were pre-sold and how theywere financed and how this thing
was always going to happen.
Well, there, I let the cat outof the bag.

(02:25):
Ben and I are going to talkabout that.
Ben and I are going to talkabout predictions for the rest
of the year.
Some very interesting topicsahead.
So I'll thank him in advance forjoining me.
And folks, away we go.
All right, Ben, are you there?
I'm here.

SPEAKER_00 (02:38):
How are you doing, man?

UNKNOWN (02:39):
Good.

SPEAKER_02 (02:40):
Good.
How about you?
Well, we were just chattingoffline about that.
It's tricky out there.
And obviously, much of it madeof the condo market.
But as I said to you, thefreehold market, not what it
was, let's say, a couple ofmonths ago.
So probably get into that.
If I could start with some stuffthat maybe we could have, would

(03:01):
have, should have covered a fewmonths ago, the Trump and
tariffs.
I just, I feel like everyone outthere is going to want to know
your take on this.
And I think we chatted a fewmonths ago and we were like,
hey, should we talk about this?
And it's changing rapidly everyday.
Like, We've kind of come torealize that this is just sort
of the way we're going to livefor the next four years or
longer, dot, dot, dot.

(03:21):
Can I get your post-mortem oneverything that happened a
couple months ago?

SPEAKER_01 (03:26):
Yeah, well, the post-mortem is, you know, it's
still very much in flux.
So much so that the Bank ofCanada, who's, you know, one of
the primary jobs is to doeconomic forecasting and
modeling.
They basically threw their handsup in the air in their latest
monetary policy report.
And they're like, we don't havea clue.
But we'll lay out some potentialscenarios.

(03:47):
And so, you know, if you kind ofdefer to them on some of this,
there was two main takeaways.
The first is that the set oftariffs that we have in place,
which is primarily related toaluminum and steel and some kind
of non-compliant auto products,is effectively a non-issue.
I don't mean to say that likethat's going to obviously be a

(04:08):
big issue if you're in theHamiltons of the world or
certain parts of Quebec.
But from a national kind ofeconomic perspective, it's
really not an issue.
They're projecting basically onequarter of flat GDP.
And then we get back to theraces in Q3.
However, where it gets a littlemore problematic is if, in fact,
we end up with like a like abase tariff, which is.
what people were expecting them.

(04:29):
Remember that at one point wethought that we might have a 25%
base tariff.
And had that come in, we wouldhave been looking at somewhere
around a four to five percentagepoint cumulative decline in GDP,
which is about on par with whatwe saw during the financial
crisis.
So like a really meaningfulimpact to the economy.
That's a recession, right?
Oh, that is a deep recession.
Yeah, that's a real problem.

(04:50):
Now, what they're forecasting isif we end up with somewhere
around like a 12% base tariff onwhat's called a trade weighted
basis.
So you kind of average acrosseverything that we sell.
They're projecting that we endup with four quarters of
declining GDP, which is arecession and a cumulative kind
of like one point fivepercentage point decline, which

(05:12):
is certainly a recession, but isa much more muted recession than
anything we've seen since the1970s.
So not disastrous.
You go through a year of prettysoft growth.
There definitely would be joblosses.
It'll cause a rethinking of howwe structure the economy, but
not disastrous.
So we're kind of in this limbowhere we're sort of waiting to
see what's going to happen.
But I think I'm cautiouslyoptimistic that I would say that

(05:35):
the The reaction to the tariffswas so extreme from a sentiment
and confidence perspective thatit was almost unbelievable.
I think I shared this with you.
The consumer confidence hit thelowest on record in March of
this year.
On record.
So that is lower than...
the initial days of the pandemicwhen we locked everything down

(05:57):
and we thought half the worldmight die for all we know, lower
than then and lower than duringthe financial crisis when we
thought legitimately that thefinancial system might just
break down and we'd be back tolike bartering with each other.
Like lower than that.
Like that to me is anoverreaction of the extreme.
And it was the same thing on thebusiness side.
So that was an overreaction.
The problem with sentiment isperception becomes reality in

(06:19):
that as you're experiencing,once people lose confidence,
they stop making big ticketpurchases.
Once businesses lose confidence,they stop hiring, they stop
investing.
So my thinking, my high leveltakeaway is, um, the, if we get
that base tariff that somewherein the 10% range, it's not fun,
but it's manageable, right?
It's, it'll be a recession, but,but a milder recession than

(06:39):
anyone has lived through in 50years.
Um, But the impact on thesentiment and what we're feeling
today with this incredibly weakconsumer business confidence,
that in my mind is actually thebigger driver of the economic
weakness that I think we'regoing to see through the summer.

SPEAKER_02 (06:56):
Okay.
I mean, I agree with all that.
I think the overreaction is whatstands out to me.
And I think that a lot of itjust had to do with partisan
politics is that And listen, I'mnot a Trump fan by any stretch,
but anything he was going to dowas going to get the reaction,
especially with all the fanfarethat was coming.
So, I mean, I'm like you, Iguess I thought best case

(07:17):
scenario, we have a mildreduction in GDP.
People want to use the wordrecession.
Fine.
Interesting point, though, aboutconfidence, because what I'm
seeing right now, the fear ofmissing out that drove the
market.
in 2018 to 2022, let's say thecondo market specifically, I
always used to say like, what'smore powerful, fear of missing
out or fear of losing out?

(07:37):
And right now what I'm seeing isthat, you know, fortune favors
the bold.
We know that.
But I find that first-timehomebuyers, some of them, yeah,
they're getting into the market.
A lot of them don't wantanything to do with it.
But I feel like, what did MikeMyers say in Saturday Night
Live?
Denial ain't just a river inEgypt.
These guys know right now thatit's scary to buy.

(07:58):
but they're all convincingthemselves that they can buy in
a year or two and pay the sameprice.
It is complete denial.
Now's the opportunity forsomebody to buy a house for 1.1
that might as cost 1.2 lastyear.
They're scared.
They're not doing it.
And I think that they're goingto convince themselves when they
do eventually buy that, youknow, it's a zero sum game.
But yeah, I think confidence issuper low.
And then that plays intothoughts about the election.

(08:21):
Maybe we'll try not to get toopolitical here because you and I
both have a- Hey, elbows up,man.
Elbows up.
Okay, so the Conservatives lost.
Great article that I read andwrote about on my blog in the
National Post.
It wasn't that Pierre blew it,as everyone said.
He got exactly the votes hethought he was going to get.
Jagmeet blew it because all ofthose votes went to the

(08:43):
Liberals.

SPEAKER_01 (08:44):
Yeah, and the Bloc as well in Quebec.
Yeah, it's hard to overcome thatmuch of an implosion.
Yeah,

SPEAKER_02 (08:48):
right.
And so history will show thatPierre Polyev blew the biggest
lead.
He was up by 20 points and weall heard about it.
And in the end, all of the Blocand the NDP votes went to the
Liberals and they won.
So

SPEAKER_01 (09:00):
here we are.
Yeah, well, it was the highestshare of the popular vote since
Karni, or since Karni.
Mulroney won his majority backin the late 80s, I believe.
So it was...
Hey, listen, before we get on tothe election stuff, I actually
want to...
Can I backtrack for a moment andsort of bookend that discussion
around tariffs?
Because this is going to be alittle bit unlike me, but I

(09:22):
actually think this is...
Long term, this is going to be areally good thing for Canada.
Oh,

SPEAKER_02 (09:28):
there's a bold take.

SPEAKER_01 (09:30):
Yeah, no, I really do think so.
So, I mean, so a couple ofthoughts on the tariffs.
They're forcing a fundamentalrealignment that's been long
overdue.
There's money that's justsitting on the floor in Canada
that we can't pick up because noone can kind of get over
themselves to pull in the rightdirection.
So what do I mean by that?
It's like we've got internaltrade barriers that prohibit the

(09:51):
free flow of goods and servicesacross provincial boundaries.
And we've known it's been anissue for decades.
But the provinces just can'tseem to get together and sort of
like– figure out a way to justagree on some common principles.
And if they were to do that,there's evidence that that alone
could add somewhere on the orderof$200 billion to Canada's GDP.

(10:14):
You're talking about like a 7%,8% hit.
So on one hand, when I say hit,I mean an increase, a boost of
7%, 8% just from reducing thoseinternal frictions.
So on one hand, we're frettingover like this potential kind of
one and a half, percentage pointdecline in GDP if we get a 10%
base tariff.
And meanwhile, there's freemoney on the ground that's the
equivalent of somewhere like 7%,8% of GDP.

(10:36):
I think that's...
When we rewrite this...
If the provinces can coalesceand get together on this, this
is a net benefit for Canadabecause it's sort of forced us
into action.
The second thing it's going todo is for the first time in my
life anyways, you're seeing likebroad support for trying to
broaden our export base,particularly related to the
energy sector.

(10:58):
But this is the first time we'reseeing some agreement that,
yeah, we need to diversify.
We need to get pipelines built.
We need LNG.
There actually is a businesscase, it turns out, for LNG.
Like all this stuff that I thinkin time, there is a chance.
I think a pretty good chancethat we will look back on this
as being the catalyst thatforced the change that we could
never seem to get the incentiveto do ourselves.

SPEAKER_02 (11:22):
But isn't that sad?
Somebody watching this right nowprobably is happy that we banned
plastic straws.
I don't care.
I will go on.
I'll put my thoughts out there.
I don't care.
But as far as the just kind ofpatheticness, if that's a word,
of the fact that in order for usas a country to get our act

(11:43):
together, we needed chaos.
We needed Donald Trump to comeand blow up.
So you're saying now we're goingto get our act together.
You said decades, internal tradebarriers, money on the floor.
And don't even get me startedabout the fact that we could be
so self-sufficient from naturalresources, but you have this
large population of the countrythat believes that we are

(12:04):
responsible to solve everythingGlobal climate change.
So we'll just stop.
We'll just stop with our naturalresources and then we can import
it from other countries, becomeself-reliant on them.
Honestly, I'm 44, man.
I get it.
I'm in sales.
People could watch this, hateit.
They could see my comments onToronto Realty blog.
I don't care anymore.
I get it.
Some people are highly concernedabout climate change and the

(12:26):
earth.
I'm a realist.
I'm a realist.
I cannot believe what we havedone.
We have so many naturalresources in this country and
we're shutting it all down.
We've got– what's his name?
Steven– Bilbo.
Right.
Doesn't want to build any newroads.
Doesn't want to build any newroads.
This is what we're doing as acountry.
And I don't– it's from Trudeau.

(12:47):
I get it.
Sorry.
I said I wasn't going to go offon blast.
But like see, you hit– I waspretty calm until you mentioned
that.

SPEAKER_01 (12:54):
But I'm saying it's going to be a good thing.
And what I guess I'm trying toget at is like I think we're
finally at the point wherepeople want to be pragmatic
around some of this stuff.

SPEAKER_00 (13:01):
No.

SPEAKER_01 (13:02):
No.
Yeah, I know.
And I'm cautiously optimistic.
I was deeply skeptical aboutCarney around some of his prior
work on values and the push fornet zero and all the stuff that
he seems to have abandonedbecause it's politically
expedient.
But we'll see.
But it does feel like there'smore of a pragmatic approach.

(13:22):
I mean, you're finally gettingto the recognition where
everyone goes, hey, wait aminute.
there's massive demand for LNGglobally.
And if we can get our LNG tosome of these countries, you
know, first, second worldcountries that are still
primarily reliant on coal, andthat switch over from coal to
natural gas is relativelyseamless.
And if we just did that and gotsome countries away from coal

(13:43):
and towards LNG, we will offsetmore carbon than Canada can ever
produce, right?
So it's like from a globalperspective, it makes enormous
sense to get that demand LNG tointernational markets, and it
ends up being a net benefit forour economy.
So like, what are we doing?
So finally, I feel like, youknow, we're getting progress on
that.

SPEAKER_02 (14:02):
I mean, I'm going to stop there because if I.
Yeah, I

SPEAKER_01 (14:04):
agree.
I agree.
Let's

SPEAKER_02 (14:05):
get let's get into housing.
If I talk anymore, I'm going tosound like an anti climate
change zealot or something likethat.
No, I think it's important.
I just think pragmatic is theword you use.
And it's like maybe we shouldn'tbe throwing cans of paint at the
Mona Lisa and protest of globalclimate change.
Like, OK, so let me go back tothe elections here.
Like we've got Mark Carney.
Fine.
It is what it is.

(14:25):
I think Pierre had some ideas.
The other candidates had ideas,but none of them matter because
they never had a hope.
I don't know why.
the Green Party even advances aplatform.
I'd love to know what would theGreen Party do to advance the
Canadian economy?
So what are the implications,the high level, big
implications, especially as itpertains to housing?
I'm a cynic of the mindset thatthe public sector is so

(14:48):
incredibly inefficient.
If you gave the public sector adollar and it went through the
filter of government, they'regoing to crap out 30 cents.
So the government wants to buildhousing.
We want to get back to the1950s.
Where is this headed?

SPEAKER_01 (15:00):
Yeah.
Okay.
So a few high-level takeaways.
So, okay.
All else equal.
So you're not going to agreewith me at all.
I'd first pass, but hear me out.
A party government is going tobe better for economic growth in
the near term because they'rewilling to run larger deficits.
And deficits are stimulatory inthe near term.

(15:21):
They just are.
You can't get around it.
What about the

SPEAKER_02 (15:23):
ones that go on forever in

SPEAKER_01 (15:25):
perpetuity?
Well, that's a separatediscussion.
The longer term implications isa different discussion.
But if we're talking about thenext year or two.
Yeah.
Look, Polly Everett, there was achance we could be looking at
something like a Doge Light,like a Doge North, which
arguably is overdue because theshare of the public sector as a
percentage of the total laborforce is the highest it's been
in 30 or 40 years.

(15:46):
So you could certainly make theargument that.
We need to trim things up.
That likely would have happenedunder Polly Everett.
Now, the problem with that, theproblem, as it were, is that
that is a constraint on growthin the near term.
Over the long term, it's adifferent discussion.
A Carney government isdefinitely more pro-growth in
the near term, without question.
The flip side to that is that italso means that rates are going

(16:08):
to stay slightly higher underCarney than it would have under
Polly Everett because thegovernment, in an economic
downturn like we're likelyfacing, a Carney government will
be more willing to underpingrowth through spending than a
conservative government mighthave been.
And so that gives leeway to theBank of Canada or it relieves

(16:28):
them from the obligation oftrying to underpin the economy
through lower rates.
So all else equal, you're goingto get slightly higher growth,
slightly higher rates underCarney.
I know you're going to disagree.
I'm just telling you in theshort term.
To me, that's a no-brainer.
You're also going to getslightly stronger population
growth, I think.
I think there was the potentialthat a conservative government

(16:48):
would have a really tight in thetabs.
We can debate whether that's agood or bad thing.
I personally think we need to,you know, a bit of an overhaul
on our, on the way we've thoughtabout immigration over the last
few years.
Yeah.
Around the specifically likeincentivizing new construction,
I think they were broadlysimilar.
Like I would argue that theliberal platform kind of just
waited for what the conservativewas going to say.
And then they kind of like, oh,yeah, we like that, which

(17:09):
whatever to their credit, that'show the game is played.
You find the policies that arepopular and you adopt them.
And so I don't think there'smuch different from that
perspective.
The only other thing I would sayis I do think that.
There was a chance that under aconservative government, they
may have sort of rolled backsome of the changes under CMHC
that we saw under the lastgovernment with regards to a

(17:29):
million and a half insurance capon purchases.
I just got the sense that thatwas something that they maybe
were not super...
super big fans of.
And I could have seen a scenariowhere that was back on the table
for being rolled back.
And that's clearly not going tobe the case in the current.
So I think all else equal, it'sprobably slightly better for

(17:50):
growth, slightly better forhousing over the near term.
I think over the longer term, Iwas a big Pierre fan.
I know personally, I was pullingfor him hard.
I thought he had a betterplatform for the longer term,
but

SPEAKER_02 (18:01):
that's where we are.
So, okay.
As it pertains to housing, Wekeep hearing everyone wants to
talk about building housing.
So again, I go back 10 years,and I feel like I don't want to
toot my own horn, but I wasahead of maybe a couple of
things.
The demand, that's all the CMHCever looked at was demand.
Everything to, quote, cool thehousing market was, let's

(18:22):
increase CMHC premiums.
Let's increase down paymentminimums.
Let's, right across the board,make it more difficult for
people to buy, because if we caneliminate demand, then we can
stop housing prices.
I started saying 10, 15 yearsago, what about the other half
supply?
Five years ago, maybe four,three.
I don't know.
It's been very recent.

(18:42):
The government has finallystarted to talk about supply.
And now it's all they talk aboutto the point where I think it's
absolute nonsense.
I want to get your thoughts onwhat can the federal government
actually do to increase supply?
And because we know that thebottleneck is at the municipal
level, and I've told so manystories, both off camera and You
know, things I can't reallymention about local city
councilors shutting downdevelopments because their

(19:04):
residents don't want it.
The bottleneck is at themunicipal level.
We've heard about thegovernment, quote, working with
the municipalities, and we'vealso heard ideas on how to
punish them.
What do you think the governmentcan do to get housing built and
how can they work withmunicipalities and maybe the
province?
Because Doug Ford wants tobuild, like Dr.
Evil, a billion houses.

SPEAKER_01 (19:22):
Yeah, they were sort of in broad agreement that there
was sort of underutilizedfederal lands that could be
turned over to development.
And so that was kind of acrossparty lines.
That's going to move the needlea little bit.
Like, you know, with thishousing thing, there's no silver
bullet, right?
It's just going to be a lot oftargeted, smaller measures that

(19:45):
over time are going to move theneedle.
So like that's one you can say,okay, yeah, that's going to be a
little.
I agree with you 100%.
The issues at the municipallevel, the feds have got to find
a way to incentivizemunicipalities to become more
pro-development.
And they've had differentapproaches to it, but in
general, the approach has sortof fallen along the lines of
like, you know, sticks andcarrots.

(20:05):
And with the idea being that,you know, we're going to try to
tie various forms of funding totargets around development.
Like, It's hard to know.
I think at least I'm encouragedthat they recognize that that is
the pinch point.
And they're sort of trying tofigure out how to get
municipalities to pull in thatdirection.

(20:26):
And so, you know, the Kearneygovernment promised they were
going to cut municipaldevelopment charges in half.
But how

SPEAKER_02 (20:34):
can the federal government stop the municipality
from charging what they want?

SPEAKER_01 (20:39):
Well, I don't know.
I don't know.
We're going to get more of thesedetails in the next budget, but
I could see, I don't knowwhether it's going to be some
sort of literally just like aslush fund where they offset
some of the lost.
Like, I don't know what it'sgoing to look like.
But.
No one wants to say it inCanada, but the reality is that
property taxes are relatively,everyone's going to hate this

(21:01):
and I get shit on every time Isay it, but just pull up the
mill rates in any US city and inany European city and compare it
to Canadian cities, especiallylike the Vancouver's and the
Toronto's and everyone goes,Mike, my property taxes are
super high.
Yeah, they're high on anabsolute basis, but in terms of
the mill rate percentage,they're not high.
They're not high.
Toronto's the lowest ofanywhere.
It's crazy low.

(21:22):
And so the idea that we aresubsidizing existing owners by
keeping property taxes low andthen putting that tax burden on
new development is completelyass backwards.
And all that you're doing isyou're enriching the incumbents
who already own those assets.
And that's fucked up.
And we got to figure out a wayto change that taxing dynamic.

(21:43):
But good luck getting elected onthat platform.

SPEAKER_02 (21:45):
No, but it's the same thing with, I don't want to
move on from that point, but thecomments last week from Gregor
Robertson saying that we can'tallow home prices to fall.
My argument on my blog was, whywould anyone be surprised by
this?
The liberals were elected byseniors who own houses, who have
the biggest share of equity ofanybody in the planet.
Why did anyone think they weregoing to let or force home

(22:05):
prices to fall?
But I'd be remiss if I didn'tcircle back and say that, well,
yes, our property taxes are low.
We're taxed to death oneverything else.
I can't buy a TV without beingcharged an environmental fee,
making the assumption I'mgetting rid of an old TV.
53% in taxes.
And when you said slush fundearlier, you know me when it
comes to economics.

(22:26):
I think that the average persondoesn't understand.
Free is not free.
Free dental care, free daycare,free everything.
It's not free.
It's paid for by tax dollars.
So when there's a quote slushfund, it's made up of tax
dollars.
The government can't subsidizeeverything.
I remain convinced that 90% ofpeople.
I don't even want to label, youknow, Gen Z or what have you.

(22:46):
90% of people don't understand,quote, the government can't just
go and pay for stuff.
It comes from tax dollars.
So, you know, what's thesolution?
I mean, stop spending money.
Stop spending money on stupidstuff.
Be more efficient.
Have fewer government jobs.
100%

SPEAKER_01 (22:59):
agree.
I'm not in favor of...
Listen, I'm not...
I paid taxes like everybodyelse.
I have zero interest to see mytaxes go up.
But if we're talking aboutsomehow finding a more equitable
way to redistribute it, the ideaof having your current
incumbents sitting on massivepiles of housing equity,
including myself, I count myselfamong that group, that somehow
we're passing that burden ontothe younger generation that's

(23:22):
trying to get into the market,it's just not right.
So listen, I'm not an advocatefor higher taxation.
We waste so much money at thefederal level.
It's insane.
And so I'm completely in favorof seeing a rethinking of our
spending first such that we canget some of those taxes lower
and incentivize development.

SPEAKER_02 (23:39):
So then where are you seeing housing supply?
We've talked a lot about housingstarts, pre-construction, which
we'll get into in a momentbecause that's a sexy topic.
But in terms of know resaleobviously we know the absorption
rate is near all-time lows ibelieve in the condo market last
uh where i look in the condomarket so specifically c1 c8 um

(24:00):
you know rental market is softabsorption rates lower gta and
905 condo market absorptionrates at like 25 so anything
less than 50 people know signalsa buyer's market we're at 25 the
absorption rate in the overallmarket is hovering around 30.
so resale Okay, it looks likethere's such little demand that
the supply is fine, but newhousing.

(24:21):
I don't have those stats.
I always go to you for that.
Where are we on housing startsand housing completions?

SPEAKER_01 (24:26):
Yeah, it's this weird time.
It almost feels like that kindof Wile E.
Coyote moment where the coyote'sgone over the edge, right?
And the coyote being...
home, like new, new housingconstruction.
Yeah.
But the resale market stilllooks very well supplied.
And so it's this weird dynamic.
I agree with you.
Like, if you look at somethingjust to frame it for the
listeners, so something like thesales to new listings ratio,

(24:48):
which you refer to asabsorption.
So just a simple measure ofsupply and demand.
We're at levels currently thatwe have not seen since the early
1990s.
Yeah.
Now that's lower than duringCOVID.
That's lower than during thefinancial crisis.
So like, you're right.
This is a, this is just anabsurdly weak market.
Yeah.
The problem, and so because ofthat, you're getting an
accumulation of inventory and itlooks like the market's well

(25:10):
supplied.
What I'm a little bit concernedabout is when I look at the
trend in new construction.
So I'll use, for example, singlefamily building permits.
Of course, you have to get apermit from the municipality
before you can startconstruction.
So it's a pretty good leadingindicator for where development
and construction activity isgoing.
Permits are at 40-year lows inOntario.
If you just look at them on likea 12-month rolling basis, we

(25:32):
have not been this low since the80s.
And in BC, we have no precedent.
Like we have data going back to1980.
It's never been this low.
That's single family.
And so I think you could getinto a situation.
I wouldn't be shocked if a yearfrom now, the single family
market is definitivelyimproving.
Sales are probably still goingto be weak, but better than

(25:54):
currently, but the inventorymight start to really normalize
come next year.
Little different situation inthe condo market.
There's still a lot of newsupply still to come.
If you look at what's currentlyunder construction, we've got
two, we probably have one moreyear of record high deliveries,
and then they start to kind oftaper off once you get kind of
towards the back half of 26.
Where it gets interesting,though, is if you look at new

(26:15):
condo sales.
And here I'm leaning on datafrom, I think it's Altus.
It's reported by Build, which isthe industry group.
And on a 12-month rolling basis,we've only seen 3,600 new condos
sold in the last 12 months.
So there's this great chartwhere if you look at condo
starts versus sales, new condosales starts lag by about 18

(26:37):
months, which makes sensebecause developers have to
pre-sell units, go get theirfinancing, start building.
And that's about an 18, 12, 18month process.
So in other words, with newcondo sales running at sub
4,000, you can pretty muchpencil in that 18 months from
now, condo starts will be inthat same range.
Now, just for context, you know,at peak two years ago, we were

(27:01):
looking at 36, 37,000 new condosales.
So we're talking about like a 90plus percent reduction.
Now you roll that forwardfurther.
So we're talking 18 months fromnow starts will be down sub
4,000.
Roll that forward a couple moreyears.
Now you're getting into like 28,29, maybe even into 2030.

(27:22):
That's going to be the level ofcompletions in the new condo
market.
So we're going to be looking atsub 4,000 completions.
Now for context, Even in areally weak market like we have
currently, we've still had like16,000, 17,000 condo sales in
the resale market in the last 12months in Toronto.
So you can kind of get a senseof the discrepancy there between

(27:45):
future supply.
Now, there's not a story for acouple of years, but that future
supply being dramaticallycurtailed.
such that I think that market'sgoing to be quite undersupplied.
But that's not going to be astory for at least three or four
years.
The market's going to recoverbefore that, right?
But I wouldn't be surprised if ayear from now, like I said, I

(28:05):
think the single family marketnext year at this time would
probably be firmer, I thinkalmost certainly.
I would not be surprised if thecondo market still looks really
soft.
I think you've got another atleast year or 18 months where
this market the direction forcondo prices is probably down.
And the big unknown in all thisis going to be the employment
situation.
If the wheels come off inemployment, then that's really

(28:29):
going to drive for sales and youcould really start to see prices
come under pressure.
But barring that, I think, youknow, if we get just the kind of
run of the mill, modestrecession, a couple quarters,
you know, and we're back to jobgrowth by the end of the year
type thing, I think by spring ofnext year, the single family
market is going to look quite abit different.

SPEAKER_02 (28:47):
And so it's just speaking of sales.
So we're talking about obviouslyhousing supply, the other half
of that sales.
I made a lot in 2023 of the factthat I always say of all time,
here's where it gets tricky.
The stats for Treb start at2002.
And my argument is also, well,hey, the city was half the size
in 1999.
So when I say of all time on myblog, 2023 lowest sales of all

(29:10):
time, they were a little morethan half of the peak in 2021.
So you had around 122,000 salesin Treb And that went down to
about 67,000.
Last year, 2024, was moderatelymore than 2023.
So we're talking 66,000, 67,000sales.
I came into this year, I ranthis contest on Toronto Realty
Blog, prediction-based.

(29:30):
I had like 40 people submit,which was great.
The average number of sales,which was one of the questions,
right?
The average prediction among30-something-odd readers was
around 78,000.
We're all going to be wrong.
I think we are going to see...
less than 60,000 sales thisyear, which is mind-blowing.
And so I've run the databasically through April, which

(29:53):
is only four months, but gradingon a curve to previous cycles,
if you look at where we are,Jan, Feb, March, April, as an
average in relation to kind of arolling average of the last few
years, I'm looking at 57,000 to58,000 sales, which is Crazy to
me, not just the lowest of alltime, but way, way below what we

(30:16):
saw in 2023, 2024.
So, I mean, I've kind ofanswered this, you know, and
obviously I'm the one that'sselling real estate out there,
but like, why do you think we'reseeing fewer sales?
I mean, interest rates are beingcut.
Like, what is it?
Is it panic?
Is it media?
Like, what's your view on that?

SPEAKER_01 (30:33):
Well, so, I mean, I look at it, so I generally look
at the same data you're lookingat.
So when I look at sales on a percapita basis, We are at the lows
that we haven't seen in 30years.
So you're right.
Sales are just unbelievably lowand have been now for a couple
of years.
Now, you got to remember thatcoming out of COVID, we went

(30:53):
through a two year period wherethey're exceptionally high.
So some of that weakness we'veseen is sort of a payback from
where we clearly pulled somedemand forward.
But we're way beyond that now.
Like we're to the point nowwhere sales have been so low for
so long that we're clearlythere's an element of pent up
demand building.
And it's hard to know what'sgoing to get that to unleash.
So I have a view that I actuallythink home sales adjusted for

(31:17):
seasonality probably bottomed inQ1.
Wow.
Yeah.
And so and the reason for thatis so you look at.
OK, so let's let's talkaffordability.
I think everyone knows whathousing is really unaffordable.
That's we get that.
OK.
So if I look at something like,okay, so a simple calculation I
do is, okay, let's take thetypical house in Toronto and you

(31:40):
use something like the houseprice index benchmark price,
just as a proxy, okay?
And you do a simple analysis oflike, well, what's my monthly
mortgage payment if I buy thathouse, finance an 80% loan to
value at current rates?
What's my monthly mortgagepayment?
And so you saw from kind of 2016to 2020, it was actually
surprisingly flat, right?

(32:01):
that as house prices were goingup, it was being offset by
falling rates.
Then, of course, pandemic hit,and then we had this insane
run-up in prices coming out ofthe pandemic, and then rates
started going up.
And so it looks like a hockeystick, but it's rolled back over
quite a bit.
And what's interesting is whererates are currently, the monthly
mortgage payment is back tolevels that we last saw in the

(32:22):
first quarter of 2022.
And if the Bank of Canada cutsone more time in June, which I
think is...
Right now, markets are sayingkind of 30% odds, but I think
it's probably higher than that.
I'm expecting a cut in June.
That'll put us back to levelsthat we were at in the fourth
quarter of 2021.
Now, for context, sales in thefourth quarter of 2021 were 50%

(32:45):
higher than currently, 5-0.

SPEAKER_02 (32:47):
That was the record year, 2021.

SPEAKER_01 (32:49):
Yeah, well, even you go into the first quarter of
2022.
Yeah.
We're still talking 15, 20, 25%higher than currently.
So it's not that affordability,like affordability was shitty
back then.
It's still shitty today.
But sales were dramaticallyhigher back then than they are
today.
So what is it?
Well, I think there's two thingsdriving it.
The first is, which wediscussed, is confidence.

(33:09):
You need confidence to comeback.
Now, one thing to note is in thelast three weeks, we've seen a
dramatic rebound in the weeklyconfidence readings.
In fact, it's the steepestthree-week increase we've seen
since coming out of thelockdowns and COVID.
So we're seeing sentiment isimproving.
I think that will start totranslate into slightly higher

(33:31):
sales.
But we're not getting back tothose highs from 2021 and early
2022 because the investor marketis dead, as you know.
The investors were 30% to 40% ofthe buying pool.
back in 2021, 2022.
They basically round to zerotoday.
And of course, why wouldn't theywhen you've got you know, the

(33:54):
rental market is pretty soft.
Prices are going against you.
Cap rates still don't, like it'sreally hard to carry unless
you're willing to put a lotdown.
So it's still, from an investorperspective, it still doesn't
make sense.
And so I think you will see endusers start to re-engage.
And so there will be an upwarddrift in sales through the year,
but we're not getting anywhereclose to being back to those key

(34:15):
levels for, or those highs for acouple of years because you need
those investors to re-engage.
And that's going to be a longprocess, I think.

UNKNOWN (34:21):
Yeah.

SPEAKER_02 (34:22):
Okay, yeah, I mean, that's, I think it all goes back
to the confidence.
That's what I'm feeling outthere.
Like I said, don't want to soundrepetitive, but the fear of
missing out drove the market afew years ago and people are
just so afraid.
I've had a few people reach out.
I had an investor reach out, aguy I've been talking to off and
on for years.
He said, you know, what'shappening with condo prices?
He said, can I get a two bedroomfor under 500K?

(34:42):
And I was like, no, I mean, ifyou want to go to Joe Schuster
Way, not the best building,forget about, you know, Abel and
Lisgar, the people that are fromToronto know what I'm talking
about.
And I said, yeah, you know,maybe around 500.
And he said, you know what?
I think it's going to dropfurther.
I'll reach out in six months.
So, yeah, listen, if you're along-term investor and you're
looking for 20 years, I don'tknow that it matters whether
it's today or six months fromnow.

(35:03):
But I feel like the sentimentout there, even among the
investors and specifically withthe end users, like imagine
being a 25-year-old and you'rethinking about, okay, I've been
in my job at a law firm forthree years.
I'm going to go buy a downtowncondo.
You are scared beyond beliefthat if you go buy something for
520 that was trading for 640 in2022, well, you're going to look

(35:23):
like an idiot because yourcubicle mate is going to pay 470
for the same thing.
So I would remind people, Idon't want to sound salesy, but
it's an investment.
Yeah, but you're still livingthere.
So if you want to move out withyour parents, you know, or get
out of the rental or whatever itis, or you want to buy that
really great condo in King Westwith your nice terrace.
Now I'm really selling it.
But, you know, I think peopleget too involved in the
investment aspect when, ofcourse, it is for, you know, for

(35:46):
use.
So, okay, let's segue into,because I think this could
potentially be a longconversation.
Actually, you know what?
You know what I'm going to openwith?
Okay.
You know what I'm going to openwith is a yes, no question.
Okay.
Do you ever wake up in themorning and think, my God, are
David Fleming and I just likeMichael Burry was in 2008?

SPEAKER_01 (36:08):
You're looking for a yes, no answer?
That's never, that particularthought has never crossed my
mind.
I definitely, I mean, I've been,as you know, like you and I have
had this discussion for years,bearish and way early, and now I
find that I'm probably kind oflike, well...
I don't know how much worse it'sgoing to get.
I think there's going to be abit of a downward grind in

(36:30):
pricing from here.
But you really need the wheelsto come off in the economy to
get it, I think, to really grinddramatically lower.
I

SPEAKER_02 (36:35):
mean, my reference was with the pre-construction.
Oh, that's a shit show.
Oh, yeah,

SPEAKER_01 (36:40):
man.
That's what I mean by me and youbeing Michael Burry.

SPEAKER_02 (36:44):
For the people that don't know, Michael Burry, of
course, played by Christian Balein The Big Short, was the person
that saw the financial crisis of2008 happening.
Mortgage-backed securities,they're junk, they're going to
fail.
And he sounded the alarm, andeveryone just kept buying and
trading.
Me and you, for 10 years, havebeen warning people about
pre-construction.
That part's a disaster.

SPEAKER_01 (37:04):
Yeah, yeah.
And kudos to you.
Kudos to you, because you, Ithink, were the first person to
articulate this whole concept ofthis growing gap.
this growing premium, I shouldsay, between the new condo
market and the resale market,you're the first person to flag
that.
And at the time, it wasrelatively modest.
It was whatever, 10%.
And then it blew out to thesecrazy levels in kind of 20, 21,

(37:25):
22 to like 20, 30%.
And that's the vintage that'scompleting now.
And it's just so dramaticallyoffside.
And people are just so screwedon those.
It's brutal.
But one day, they're going tomake a movie.

SPEAKER_02 (37:37):
And I'm wondering who's going to play me and you.

SPEAKER_01 (37:39):
Oh, yeah, yeah, yeah.

SPEAKER_02 (37:40):
Because I forget who played the other.
There was Michael.
Anyways, I'm the weirdo.
So it'll probably like theChristian Bale, Michael Burry
character.
But it was Steve Carell thatplayed

SPEAKER_01 (37:48):
Isman.

SPEAKER_02 (37:49):
So jokes aside, you know, for those people that
haven't been following us forthat long.
Look, once upon a time,pre-construction prices were
lower than resale, which madesense because you're taking on a
risk.
You're buying an unknown.
You're waiting for something tobe delivered.
And that made sense.
And then Prices drew even.
And that's when I said, whywould anyone buy
pre-construction?
This is absolutely crazy.

(38:09):
Then prices went up.
You're paying more for somethingthat could be canceled, could
have major deficiencies.
There could be material changes.
The elevator directly into thesubway that they promised, they
just didn't do it.
The rooftop pool, nope, theydidn't do it.
There's so many issues with it.
Or just prices go flat for a fewyears.
And that's the crazy thing isthat when we started to see a

(38:31):
10% premium for...
New construction, it made nosense.
When the premium is 40%, andlet's use some numbers here,
Ben, you're paying$1,800 a footin pre-construction.
Resale next door is$1,200 afoot.
I'm saying, why would anyone dothat?
And everyone's telling me, shutup.
I'm getting blasted on everysocial media by every new condo
agent.
And I'm getting absolutely tornapart.

(38:52):
And then it's like, forget ifprices come down.
If they just stay flat, you'rescrewed when this thing's
finished.
Now prices have come down.
You paid$1,800 a foot.
It was worth 1200 on the resalemarket next door.
Now it's a thousand.
Me and you were calling this foryears.
It's fucking

SPEAKER_01 (39:09):
nuts, man.

SPEAKER_02 (39:09):
And

SPEAKER_01 (39:10):
here we are.
Like the stupidity of that.
So like you think, okay, what ifyou just go back to a normal
market where you get four or 5%,three, four or 5% appreciation,
which is a good market.
Right.
So if you, you know, if you, ifyou got a four or five year
construction timeline, you getin 4% price appreciation.
Like, so maybe you get 20%.
Yeah.
Your deposit's gone.
Like you've just lost yourdeposit in a normal market.

(39:32):
I don't know what people werethinking, but it's shocking to
me how many people kind of drankthat Kool-Aid.
Everyone thought they'd be ableto assign it.
and not have to close.
And now we're finding thatmarket is completely frozen.

SPEAKER_02 (39:44):
Welcome back, guys.
So we just had a technicalglitch there, but Ben, let's
continue this conversation aboutpre-cons.
So me and you were basicallygoing on about how great we are
and we all saw this coming.
I think the other conversationhere, which we wrote about on
the blog, I say we, I chattedwith you and some other folks,
the blanket mortgage appraisalsthat are coming through.
And so in layman's terms, guys,you pay 700 for a pre-con and

(40:07):
you get an approval at the time.
Now that thing's worth 550because the market's dropped and
it was never worth 700.
But guess what?
RBC gave the whole building ablanket appraisal for 700.
So Ben, to me, this is eitherthe worst thing I've ever heard,
which I like, and I'm going backto Michael Burry.
S&Ps and Moody's continue tograde all these mortgage-backed
securities AAA because what?

(40:30):
They were afraid that they wouldgo somewhere else.
If RBC is going to give blanketmortgage appraisals, they're
going to basically circumventthe bank act.
They're going to tell peoplethis is worth 700 and it's worth
500.
And then they're going to have aloan based on that.
And they're going to screw theirshareholders to publicly traded
company.
This to me is yet anotherexample of how the
mortgage-backed security crisisin the United States will over

(40:52):
time be likened to thepre-construction condo crisis
here in Toronto.

SPEAKER_01 (40:56):
Yeah, look, I think it's a terrible idea.
I'm not a fan of these.
I understand in principle whatthey're trying to get at through
that, trying to providestability for pre-construction
buyers and all this.
I think they're really playingwith fire.
I think you touched on tworeally important points.
The first is that we have a bankact in Canada that has served

(41:17):
Canadians tremendously wellthrough multiple crises
precisely because we insist oncertain things like If a bank is
going to make a residentialmortgage loan and it's not
insured.
Yeah.
it can't be more than 80% loanto value.
And so consequently, when we getinto times of kind of economic
turmoil, our banks generallyhave done very well compared to

(41:40):
global peers.
You're kind of screwing withthat.
I don't think Canadians shouldbe comfortable with that.
The wording of the Bank Act istremendously clear.
You cannot make a loan that isnot insured for more than 80%
loan to value.
Clearly, that's what these banksare doing.
Now, they're then representingto their shareholders and
regulators that this is not an80% LTV loan, but that's

(42:03):
bullshit.
We know that's bullshit.
Where I think it becomesproblematic, if we rewind, you
remember the case, remember thewhole fiasco with Home Capital
Group and the whole mortgagefraud thing?
It ended up that they neverreally took losses on those
loans.
But what happened was peoplelost confidence in that
particular company, inmanagement.

(42:24):
They no longer believed thatthey were being told the truth.
And what I worry about withthese Canadian banks, because
they are priced relatively highglobally compared to global
peers.
One of the reasons for that isthey are viewed as being these
extremely trustworthyinstitutions.
But I worry that when they aremaking representations to their

(42:44):
investors that their uninsuredloan book is on average 60% loan
to value or something like that.
you know, if it starts comingout that actually they've got
these loans on their book thatthey're representing it being
80% loan to value, but inreality, they're like 100, 110%.
Yeah.
I just don't know that that'sgoing to sit well with
investors.
And, you know, investors canvote with their feet.
And when you're dealing with alevered entity like a bank

(43:06):
that's reliant on funding frominvestors, you know, I just
don't think you want to beplaying with that game.
It's not in the best interest ofCanadians.
And I just think that wholeprocess...
The other thing that's juststriking to me is we have not
gotten clarity from OSFI, thebank regulator, on their stance
on this.
And every chance I get, I'm likeCCing them on Twitter.
Like, hey guys, can we get yourofficial take on this?

(43:28):
And they're not saying anything.
So...
You at least need to get theview of the banking regulator of
like, well, how are you going tohandle this?
How are you going to provisionagainst that?
What are we going to allow?
Is this a temporary thing?
We just need some claritybecause this is a crazy act to
see from a Canadian institution.
And is it just RBC that you knowof?
I know RBC is doing it.
No, there's a couple of themthat are doing it.

(43:49):
RBC is sort of the big one, butthere's a couple of them that
are doing it.
They're the ones that are outthere publicly.
It's in their advertisingmaterial online.
So it's like it's very much outthere, but they're not the only
one that's doing it.
There's a couple others.

SPEAKER_02 (44:01):
Yeah, it frustrates me because, you know, again, I'm
going to go back to thegovernment.
I should put my tinfoil hat onhere.
But I feel like in Canada, let'sbe honest, we are extremely
socialist and there's a role ofgovernment that's taken on a new
meaning.
And I feel that the solution toeverything is for the government
to bail people out.
So I wrote on my blog the otherday, when Trump tariffs were
announced, Trudeau stood up andhe said, don't worry, we will

(44:23):
make everyone whole, whichagain, I would say you can't.
You're making it whole with taxdollars, which are supposed to
pay for things like schools,which suck, and medical, which
sucks, et cetera.
But point being that if The ideahere is we can't let these
people lose money, so we have tocircumvent the Bank Act to,
quote, make them whole onceagain.
Then what are we really doing asa country?

(44:44):
No one's allowed to makemistakes.
No one's allowed to lose.
No one's going to beresponsible.
And one of the quotes in one ofthe newspapers that I basically
pulled seven articles aboutGregor Robertson's comments last
week.
And you get the Toronto Starsaying, of course, we have to
allow home prices to fall.
One of the authors saidsomething about how we need to
make home prices fall, but wealso need to protect any of the

(45:04):
buyers that are affected.
And I'm like, how can you doboth?
You're saying that home pricesare going to fall, but you're
going to make sure that there'sa safety net.
And then it would be what?
Young people or disadvantagedpeople, financially
disadvantaged.
You can't have it both ways.
But

SPEAKER_01 (45:18):
I can tell you what I think is going to happen.
Yeah.
I think that this wholepre-construction condo issue is
enough of an issue for thebanking sector.

UNKNOWN (45:29):
Yeah.

SPEAKER_01 (45:29):
Um, this whole, you know, inability to close, like
we're going to get a point.
I think this summer we could seea big development where they
have more than half of thebuyers potentially.
It's already happened.
And this is also, but this isthe thing.
So then how do you, you can'tform a condo corporation.

SPEAKER_02 (45:45):
No.
So there is a development whichshall remain nameless.
I have this in authority from abuilder told me about another
builder on, on, on the day that,you know, registration and
everyone's supposed to line upwith their lawyers and close 76%
of buyers.
either refused or couldn'tclose.
What happens there?

SPEAKER_01 (46:03):
So, okay, that's fascinating.
So this is what I've beenwaiting for.
I'll give you offline, I'll giveyou this.
Please, please, I want thosejuicy ideas.
I love it how developers arealways willing to like throw
everyone else under the bus.
Everyone's like, well, they'rehaving problems.
We're not seeing it, but I'veheard these guys.
And then you go talk to thoseguys and you're like, well,
actually these people over here,it's kind of this funny game.

(46:23):
Here's what I think is going tohave to happen because I do
think this is a big enough of anissue.
And again, David, I'm not sayingthis is what I think is the
right approach, but if you putyourselves in the hats of the
government, you know they'regoing to try to do something.
So what will they likely do is Ithink you will see an inventory
loan management scheme, probablybackstopped by CMHC, a zero

(46:45):
interest inventory managementloan where the developers can
take on this financing thatallows them to repay their
development lenders so thatbanks don't have to take huge
provisions on these massivedevelopment loans.
And then that allows thedevelopers to sort of trickle
the release of those units intothe market so as to not like
crush the value of their ownproperties.

(47:05):
And I don't know there's any wayaround that.
So, you know, I think that'swhat's ultimately going to be
the solution here.
And I'm no fan of that.
But, you know, we've seen thisplaybook before and you know
that, you know, there's thatsaying, it's like, hey, I'm from
the government and I'm here tohelp.
Like, you know, that's whatthey're going through.
They're going to do somethinglike that, Dave.

SPEAKER_02 (47:22):
Well, I was going to say that the benefit of this is
that if we try really hard, wecould probably create another
10,000 government jobs here.
You know, like we could create awhole wing.
I mean, I think the solution,you know, the government's taken
over, you know, let's see,alcohol, cigarettes, cannabis,
they should just take over realestate.
They should just oversee allbuilding, all sales, all

(47:44):
purchases.
They should just take overabsolutely every aspect of our
lives here.
So, yeah, I figured that's goingto be the solution is the
government needs to step in.
But, you know, in fairness, Idon't actually have another
suggestion other than to let itall implode.
But, you know, they're not goingto do, David.
I know.
Well, it's real estate is toobig to fail.

(48:04):
And that's why, you know, you'renot wrong.
But among other reasons, for thelast, like, you know, here,
2004, I got into the business,okay?
So in 2004, people are callingfor the collapse.
And I've written about this onmy blog so many times.
04, the collapse.
05, 06, right?
We get Garth Turner.
We get all these people.
Hilliard McBeth, the collapse,the collapse.

(48:25):
And all along, I've beensaying...
it's too big to fail.
The entire country would implodebecause CMHC is backstopping the
banks because of the equity thatseniors have in their homes.
It's a tax recap.
This system, you could say it'srigged, but I've been saying
this all along.
I feel bad for the guy in 08,read Garth Turner's book, and
he's like, yeah, I'm waiting forthe 80% collapse and now prices

(48:47):
have tripled.

SPEAKER_01 (48:48):
Well, okay, but I think you've got to define what
fail means, right?
So when you say it's too big tofail, what I would say is, we've
now seen a price decline frompeak of 18% nationally.

SPEAKER_00 (48:59):
Yeah.

SPEAKER_01 (48:59):
And that's 29.
That's yeah.
Almost 30% in real terms.
Yeah.
Man, that's a pretty big fuckingdrop.
Now, you know, after a 20 yearbull run.
Right.
Sure.
Sure.
But but eventually like so I youknow, I don't know.
It's not like we're not livingthrough the midst of a historic
downturn in prices off a peakalready.
Like we are.
This is the worst downturn thatwe've seen in 2017.

(49:22):
And during the financial crisis,it's actually worse decline
nationally than we saw in theearly 90s.
That was primarily like aToronto, Southern Ontario
phenomenon.
The rest of the country wasprobably, was mostly fine.
And today we're seeing realpockets of issues around the
country, but most, like to befair, mostly Ontario and BC.
But this is a real drop, man.
Like, I don't know what, youknow, too big to, I don't know
what fail means, but a 20% dropoff peak, a 30% decline in real

(49:46):
terms is not nothing.

SPEAKER_02 (49:47):
No, and I would say that, not to minimize what
happened in the 90s, but onrelative terms as a percentage,
sure, we're past that.
But if the average home pricewent from$190,000 to$160,000,
yeah, it's a lot.
But now you're seeing peoplelose.
I mean, look, I've had somebodywho didn't buy through me.
They paid$1,480,000 for a house.

(50:08):
And when I went and met themlast year, I was like, guys,
this is a 1-4 house.
And they were aghast.
And you factor in their landtransfer fees and their real
estate fees.
These guys took$150,000 loss.
Now, mind you, they boughtanother property outside the
city, which they got for apittance.
But we are seeing real losseshere.
And so you go back to thearticles in the Toronto Star
about this sad sack guy thatbought pre-construction, thought

(50:28):
he couldn't lose.
And he's actually got quotesthat say, I didn't think anyone
could lose money in Toronto realestate.
That was your first mistake.
And then you get people sayingthings like, well, I assumed I
could assign the agreement ofpurchase and sale.
And that's a whole other topic.
I don't

SPEAKER_01 (50:43):
want to throw this guy under the bus too badly, but
fuck it.
He put himself out there.
Let's do it.
So there's this Toronto Stararticle about this guy whose
deposit is tied up in thisfailed condo development.
And he's kind of like, hey, man,I want my deposit back.
And what's hilarious is thisguy, well, two things.
First off, doesn't realize thathad that development gone ahead,
he would have lost his depositand then some, because that dude

(51:06):
bought at peak.
So he's kind of like cryingabout, hey, my deposit's tied
up.
I'm like, dude, you dodged abullet here.
That's the first thing.
The second thing is that, youknow, this dude works as a
financial planner for a bank.

SPEAKER_02 (51:19):
Yeah.
And he went on record.
He went on record.

SPEAKER_01 (51:22):
And he's out there like talking about this.
I'm like, dude, you're advisingpeople.
how to make smart financialdecisions.
And you're out there likespecking into pre-con at peak,
like, This is crazy, man.
Canada's a crazy place.

SPEAKER_02 (51:35):
You know what the answer is?
You know what the answer is?
The government should bail himout.
So have that project gone ahead.
Because listen, cynically, Ibelieve that everyone in Canada
thinks that if they get intotrouble, the government's there
to save them financially.
Yes.
You know, when I was on CTV yourmorning the other day, I was
talking about, you know,pre-construction and all these
people now that are saying like,this isn't fair.

(51:56):
I said, look, you were gambling.
If you went in the casino, youput all your money on the
roulette wheel.
And your number didn't come up.
You wouldn't turn to the pitboss and say, actually, can I
have that back?
But everyone that boughtpre-con, they're now saying it's
not fair.
I can't assign it.
Prices are down.
I want my deposit back.
And then to your point, if theproject doesn't go ahead, all
you lose is your deposit.

(52:16):
If the project goes ahead andthey expect you to close,
they're going to sue you for thelosses, which is what we saw.
Who's the developer?
I can't recall.
Starts with a C.
Yeah, they're suing all of thebuyers, right?
Yeah.
Which they have

SPEAKER_01 (52:30):
the legal right to.
They're well

SPEAKER_02 (52:32):
within their rights to do that.
All right.
Well, listen, I said I'd get youout of here.
I know you got some work aroundthe property.
Just working on homes, man.
I went home last night and Imowed my lawn at 8 o'clock.
I look forward to it all day.
Just crushing the front lawnright

SPEAKER_01 (52:46):
now.
It's a good way to just kind ofunplug right yeah

SPEAKER_02 (52:52):
all right listen i appreciate it ben thank you so
much um we're gonna put thispodcast out put it up on the
blog as well and uh i'll catchyou next time thanks buddy
sounds good buddy okay take carebye Well, there you have it,
folks.
I hope you enjoyed the precedingbanter between me and Ben
Rabideau, just two guys chattingunscripted for an hour about all
things real estate, economy,politics, housing demand,

(53:13):
supply, and oh my God,pre-construction.
If you happen to be watchingthis on YouTube, feel free to
drop a comment down there.
Don't feel like you need to benice because you know all those
comments go to my phone.
Sometimes I'm like putting mydaughter to bed.
There's a comment that's like,yeah, well, you're just a
scumbag real estate agent, pieceof crap.
I'm like, yeah, no, that's 2025for you.

(53:36):
Seriously, though, don't stopleaving comments in the YouTube
section.
And if you happen to belistening to this podcast on
Apple or Spotify or whateverother cool things there are that
I don't know about, like ICQ,uh-oh, if you're under 40, you
won't get that, or MSN Messengeror wherever you get your
podcasts, please remember tolike, comment, and subscribe.
We'll see you next time here onThe Last Honest Realtor.

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Ep. 48 - Special Guest Ben Rabidoux on Toronto’s Condo Market

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Ep. 48 - Special Guest Ben Rabidoux on Toronto’s Condo Market