Recently in Canadian real estate, we’ve seen:
~ GDP numbers fall, shifting predictions for December rate cuts
~ Consumer insolvencies returning to pre-pandemic levels
~ Canadians saving at near-record rates

Fresh GDP numbers are in, and they’re weaker than expected. Canada’s economy grew just 1% year-over-year in Q3. GDP for September expanded by only 0.1%. On a per-capita basis? It actually fell by 0.4%. That’s the 7th straight quarter of decline.

The quarter matched expectations, but September’s growth disappointed. Economists had predicted 0.3% growth. Real estate, retail, and transportation saw gains. But construction, mining, and energy dragged the numbers down.

Looking ahead, early Q4 data looks weak. Swap traders now see a 33% chance—up from 25%. But I still believe a 0.25% cut is more likely. BMO’s Doug Porter agrees.

Now, for an interesting twist. People are saving at near record levels. Are people spending less because they can’t afford to? Or is something else at play? Perhaps they are preparing for something?

Consider this:
~ The household savings rate hit a 3-year high—7.1% in Q3.
~ Disposable income is growing nearly twice as fast as spending.
~ People are saving instead of spending.
~ Uncertainty is driving this shift.

I think, Canadians, familiar with recent tough times, are preparing for more rainy days ahead. But while saving is up, so is debt. Credit card balances hit a record $110 billion in September.

Consumer insolvencies? They’re up 8.8% year-over-year—and 18.4% in Ontario. We’re back to pre-pandemic levels. If this trend continues, we could see 2008-style insolvencies by 2025.

Monthly mortgage payments are showing some relief. The payment for a typical home dropped $10 in October. Not much, but, that’s down 20% from the peak. But let’s be real— Payments are still 90% higher than in 2021. The average monthly payment now stands at $2,975. Guess what it was in 2021? Just $1,600.

Mortgage rates play a key role in real estate sales. When rates hit record lows in 2021, sales volumes hit record highs. As rates climbed, sales fell. Mortgage rates have been on a stead decline for some time now:

Variable is now 4.49%.
Fixed is 4.4%

Markets are pricing in a 90% chance of a 0.25% cut on December 11. And rates could bottom at 3% by mid-2025.

Let’s talk about broader economic shifts. Don't forget about Trump’s proposed tariffs. He’s eyeing 25% tariffs, which could slash Canada’s GDP by 2-3%. This would push us into an all-out recession. And, would force the Bank of Canada to lower rates further.

Meanwhile, inflation "looks" well under control. The shelter component still makes up over half of CPI. But with falling rental rates and new units coming online, this influence should decline over time. Without shelter, inflation today would be just 0.9%.

Now, to Canadian businesses. We’re seeing record-high business closures. The small business delinquency rate hit 1.5%— up from 0.35% pre-pandemic.

Ontario is bearing the brunt: Business insolvencies up 26% year-over-year. 300% higher than 2021.

Covid loans are strangling already struggling businesses.

Can we recover? I certainly hope so

That's all for now.

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Is Canada going into a recession, or are we already in one?