Last week was “forum week” in Toronto. (That is, it was the Toronto Real Estate Forum.) And as is the case every year, Benjamin Tal, deputy chief economist of CIBC, opened up the event with his usual macro view of the world. For those of you who missed it (as I did), here are some of his key points (via RENX):

• The Bank of Canada’s overnight rate will ultimately/likely settle into the 2.75-3% range (currently it sits at 5%). He expects rates to start coming down this summer.
• Inflation is down, but we’re not yet at the 2% target. The “last mile” is always the toughest.
• But as we know, the BofC will take a recession over high inflation, any day.
• The mortgage market has fallen faster than in the early 90s recession. Tal said that the residential real estate market in Canada is right now facing “the biggest test” since then.
• Canada is in what he calls a “per capita recession”. But for the million or so immigrants that the country accepted over the last year, we’d be in a full-blown official recession.
• Finally, he called this correction in the housing market both “real” and “healthy”; he spoke about normalcy returning in 1-2 years; and he posited that the market will be “crazy” when it does return because of a supply deficit.

This last point is an important one. New housing supply is mostly shut off right now. I say mostly because there are obviously still projects under construction, and there have been and there will continue to be some successful launches. But by and large, most developers are waiting right now, principally because the absorption isn’t there. They have no other choice.

But Canada continues to grow. People from around the world continue to want to move here. And there continues to be a need for a lot more new housing. So when the market does return — and it, of course, will — there is going to be a supply-demand imbalance. And as is always the case in real estate, there will be a lag in responding to this imbalance.

This is what Tal means by “crazy”.

Photo by Wiktor Karkocha on Unsplash