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Huzzah! Have you heard the good news? A Big Six bank has declared the bottom of Canada\u2019s real estate markets. RBC announced the bottom of the market in its August update<\/a>, turning the industry into messengers of the prophet on social media. It\u2019s unclear why it\u2019s caught steam this time around, as the bank first called a bottom just a few months after the peak. The bank continued to make the call at least twice annually for the past 4 years. While we aren\u2019t saying the 8th time isn\u2019t a charm, it\u2019s not exactly clear they\u2019re grounding these calls in reality.\u00a0<\/p>\n Earlier this week, RBC declared a cyclical turning point for the market. The bank\u2019s vision was inspired by a seasonally adjusted monthly rise in home sales. \u201cIt also increasingly appears that home values have already hit their cyclical bottom,\u201d wrote the bank.<\/p>\n \u201cThe national aggregate MLS Home Price Index increased for a second time month-over-month. Such back-to-back advances haven\u2019t been seen since early 2024,\u201d they explain.\u00a0<\/p>\n It\u2019s worth mentioning here that unadjusted home prices slipped for two months. At the same time, unadjusted sales were lower year-over-year. For those new around here, seasonal adjustments seek to eliminate predictable fluctuations. Professionals don\u2019t use them for asset prices, as it violates the efficient market theory. This fundamental theory states that prices reflect all known data. If prices fell 2% every October, arbitrageurs would try to capture the profit. The price of assets would reflect this opportunity, resulting in nothing to eliminate.\u00a0<\/p>\n We digress. The point stands: RBC and Canada\u2019s real estate industry do this, and when viewed this way the bottom is in. Though the bank is hedging its call. \u201cThe market\u2019s recent winning streak is encouraging, but the reality is that it\u2019s still generally soft. The rate of improvement is incremental\u2026 This isn\u2019t a fast track to recovery to say the least.,\u201d explained RBC economists. To reiterate, they see the market at a bottom, but the recovery will be slow.\u00a0<\/p>\n Most people are unaware of just how often the bank has declared a market bottom. It happens so often that it may be a nervous tic or a form of OCD that requires professional help. This addiction began just a few short months after the initial market peak. Yup, before interest rates had even reached their peak, the bank announced it would be over soon.\u00a0<\/p>\n \u201cThis is consistent with our view that a cyclical bottom is approaching\u2014likely in early-2023,\u201d wrote the bank in December 2022. Fewer than 9 months after prices peaked, they anticipated only a year of declines. They called one of the fastest corrections in history, not factoring in rates or credit. Feels a little disingenuous, but that doesn\u2019t matter if they\u2019re right. They weren\u2019t.\u00a0<\/p>\n When early 2023 rolled in, the bank pushed its timeline out. \u201cThe Canadian housing market correction has yet to run its course but it\u2019s gradually letting up. We think activity will hit bottom sometime this spring,\u201d wrote the bank in its March 2023 report<\/a>.\u00a0<\/p>\n Interest rates had yet to peak, and the impact of rate hikes had yet to work its way through the market. Bank of Canada research shows it takes between 18 and 24 months for monetary policy to be fully felt. But fundamentals be damned, this is economics\u2014not finance.\u00a0<\/p>\n Spring came, but the bank didn\u2019t acknowledge that conditions hadn\u2019t improved. It was busy warning of a supply shortage crisis that required a \u201csignificant boost in stock.\u201d<\/p>\n As the leaves changed colour, RBC acknowledged a Spring 2023 recovery was unlikely. It warned that \u201cthe housing market downturn spread further.\u201d They expected \u201csluggish activity [would] linger into 2024,\u201d the recovery delayed until Q3<\/a>.\u00a0<\/p>\n \u201cWe see prices firming up after activity has turned and demand-supply conditions have tightened sufficiently\u2014possibly sometime in the third quarter [of 2024],\u201d wrote the bank.<\/p>\n Only 4 months later, the bank had already felt vindicated by its call. In February 2024, it declared \u201cearly signs of a housing market upturn emerge across Canada.\u201d It moved its call of a bottom up by months. \u201cWe expect prices will reach their bottom this spring and gradually recover over the second half of 2024,\u201d wrote the bank.\u00a0<\/p>\n After two months into the second half, RBC didn\u2019t see the activity it anticipated. It pushed its forecast back<\/a>, noting a \u201cslower housing market recovery with a potential acceleration towards the end of 2024 and into next year.\u201d\u00a0\u00a0<\/p>\n By December, it must have forgotten what the fall looked like. The bank declared<\/a>, \u201cLower rates stoked Canada\u2019s housing market momentum this fall.\u201d<\/p>\n \u201cWe expect the upswing to continue into 2025, as interest rates fall further,\u201d added the bank<\/a>. Spoiler: the upswing did not continue into 2025.\u00a0\u00a0<\/p>\n The bank was undeterred when 2025 rolled around. This was the year all of those rate cuts would finally boost the market. \u201cWe believe further interest rate cuts by the Bank of Canada will stimulate homebuyer demand in 2025\u2014keeping the rally going in most markets,\u201d explained the bank in January 2025<\/a>.\u00a0<\/p>\n Those high winter hopes turned into a summer depression by mid-year. \u201cOur January outlook anticipated that interest rate cuts would spur activity and push prices slightly higher in 2025. However, market conditions have been weaker than expected,\u201d said RBC in August 2025. At this point, most would pull back and acknowledge that this market is harder to call than previously assumed.\u00a0<\/p>\n Not RBC. The bank showed the kind of resilience typically reserved for a naive puppy. It called a bottom for a third year in a row<\/a>, declaring a \u201c\u2026rebound in home resales next year.\u201d They saw improved affordability and pent-up demand driving a recovery in \u201cearly 2026.\u201d Sure, why not?\u00a0\u00a0<\/p>\n Tragically, early 2026 didn\u2019t cooperate with that call. In its March 2026 update, the bank warned that Vancouver\u2014a market it cited leading the recovery\u2014made its steepest annual drop since 2023.\u00a0<\/p>\n As you know, that didn\u2019t matter by the time this month rolled around. A streak of seasonally adjusted monthly gains was enough to inspire its bottom call. That brings us to the August 2026 call that the real estate industry has been excited about. After 4 years of calling a bottom, maybe this is it? Let\u2019s see what they\u2019re working with.\u00a0<\/p>\n The bank\u2019s calling the bottom of the market, but it\u2019s not exactly clear that RBC understands where the market is. The bank often attributes a lack of buyers to steep prices, but that hasn\u2019t changed. Even if the composite data suggests it did, a regional breakdown reveals that\u2019s not quite the case.\u00a0<\/p>\n CREA\u2019s national benchmark isn\u2019t quite what it seems. Since peaking in March 2022, the price of a typical home has dropped 21.3% (-$179.3k), with Ontario 25.5% (-$257.3k) lower and B.C. down 15.5% (-$161.7k). Those are the only two provinces in the index that show any material correction for prices. The rest of Canada\u2019s provinces show prices either at an all-time high or just off.\u00a0<\/p>\n The price of a typical home across Canada, by province.\u00a0<\/em><\/p>\n Source: CREA; Better Dwelling.\u00a0<\/em><\/p>\n<\/div>\n<\/div>\n The bank frequently attributes the delayed recovery to a lack of affordability. Most provinces are within 3 points of record highs, showing that the issue remains. Other provinces may be cheaper than Ontario and B.C., but they remain out of reach for local incomes. Another Big Six bank recently shared data showing that no market is affordable in Canada, requiring double the median household income to buy a home<\/a>. If the bottom is in while most of Canada couldn\u2019t afford these prices, who drives this activity?\u00a0<\/p>\n Taxpayers are footing the bill for multi-billion-dollar loans to help institutions buy homes<\/a>. It will boost demand temporarily, but it isn\u2019t a sustainable market solution. In fact, it\u2019s more likely to extend the market inefficiencies and worsen the problems. Ditto with cheaper financing and extending leverage, which Bank of Canada staff researchers recently warned makes affordability worse<\/a>.\u00a0<\/p>\n Forecasting is hard, and we appreciate that. It\u2019s even harder to forecast following a wave of exuberance, since irrational markets are\u2026 well, irrational. A call that doesn\u2019t materialize isn\u2019t necessarily a bad one, and most people in finance would agree. Especially those who have training in forecasting and understand what a forecast actually is.\u00a0<\/p>\n Forecasting is an art, not a science. It\u2019s an educated guess based on a snapshot of time, using inputs from that moment. There are a lot of moving parts, so when those inputs change, the outlook needs to be updated to reflect the changes. That\u2019s the problem with RBC\u2019s forecasts in a nutshell here. The bank didn\u2019t use credit or interest rates, nor did it try to measure demand that was pulled forward. It didn\u2019t factor in liquidity, and what happens when more than half a country can\u2019t afford to actually buy at this level.\u00a0<\/p>\n If we didn\u2019t know any better, it would appear that Canada\u2019s largest bank is sharing wishful thinking as a forecast. Whatever their methodology is, it hasn\u2019t worked for the past 4 years, but maybe this time is different.\u00a0\u00a0<\/p>\n Huzzah! Have you heard the good news? A Big Six bank has declared the bottom of Canada\u2019s real estate markets. RBC announced the bottom of the market in its August update, turning the industry into messengers of the prophet on social media. It\u2019s unclear why it\u2019s caught steam this time around, as the bank first […]<\/p>\n","protected":false},"author":1,"featured_media":7046641,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[99],"tags":[2261,263,2027,14072,4856,26457,63661,482,1231,1003],"dealstore":[],"offerexpiration":[],"class_list":["post-7046640","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate","tag-8th","tag-bottom","tag-calls","tag-canadian","tag-estate","tag-nears","tag-rbc","tag-real","tag-time","tag-years"],"yoast_head":"\nCanada\u2019s Largest Bank Calls The Bottom of The Market\u2014Again<\/strong><\/h2>\n
A Rolling Bottom: RBC Sees More Bottoms Than Sir Mix-A-Lot<\/strong><\/h2>\n
2023<\/strong><\/h2>\n
2024<\/strong><\/h2>\n
2025<\/strong><\/h2>\n
2026\u00a0<\/strong><\/h2>\n
Bottom of The Market? Most Provinces Have Home Prices Near Highs\u00a0<\/strong><\/h2>\n
RBC Calls A Bottom For Canadian Real Estate With Prices Near Highs In Most Provinces<\/strong><\/h2>\n
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