Is Canadian Real Estate in a Bubble?

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In Cashflow Chronicles, we explore how you, as an ambitious entrepreneur, can unlock your potential and build wealth.

We're all about exploring those tantalizing financial frontiers, including how to leverage AI to build success. Here's a glimpse of what we're diving into today:

• Exploring the Comeback in the Canadian Housing Market 🏠

• The looming elephant in the room: House Bubble USA vs. Canada and why the latter is a lot worse 🇺🇸🇨🇦

• How the tech rally revved up the S&P500 📈

Reading Time: 2 minutes 39 seconds

Let’s go!

Key Updates in Real Estate

Recovery in the Canadian Housing Market

Remember when the Canadian housing market was going through the roof?

Oh, the days of low-interest rates and the accompanying property frenzy.

But as the Bank of Canada tightened the reins to simmer down the economy, the chill of rising mortgage prices froze the market.

Fast forward to this spring, we see a recovery.

Residential real estate sales are up, with the Canadian Real Estate Association (CREA) reporting a month-over-month increase of 11% in April and 5.1% in May.

Since Canada's population recently surpassed 40 million, TD economist Rishi Sondhi says the country's "markets remain heavily supply constrained… which should keep home prices on the rise in the near-term.

The average home prices nationwide? A cool $729,000 - a rise of 3.2%. The most expensive markets are still Ontario and British Columbia - with the national average reduced by $150,000 if you remove these two areas. But overall - the frost isn't entirely off the market yet, with mortgage costs continuing to bite.

While rising valuations might sound like good news all around...our next topic shows why it might not be…

Why rising house prices are dangerous

Is Canadian Real Estate In A Bubble?

Alright, strap in because we're comparing the US and Canadian real estate markets and their striking differences.

Our friend millennial.moron has made a brilliant breakdown of real home prices vs. real disposable income from 1975 till now for both countries. Spoiler: It's a wild ride.

Analyzing the US data, it pretty much follows global economic trends. For example, when the economy crashed in 2008, so did house prices and then as the economy recovered over the next 15 years, so did house prices.

BUT the Canadian real estate market follows a very different path. Like the US trend, yes, but on steroids.

And although house prices outpace salaries in the US, it's much much more severe in Canada.

After 2008 there was no sustained dip like most other countries, and house prices have skyrocketed since then compared to income.

He says this is driven by the government giving away more 'cheap debt' to make 'housing more accessible.' Still, it could lead to the bubble bursting now interest rates are rising.

He even showed a screenshot of someone having a 72-year mortgage term so that they could keep the same monthly payment!

Check out the video for the detailed breakdown on Instagram.

Stock Market Surprise

S&P500 Rides the Bull, Thanks to Tech 📈💻

Forget last year's market slump; 2023 has brought us a robust rally, even though analysts predicted otherwise. American equities have shrugged off the pessimists' predictions and bounced back with gains that are anything but modest.

The Nasdaq index boasts a 31.8% leap, and the S&P500 is hot on its heels with a 15.3% gain. The market is now in a bull run.

The secret sauce behind this rebound? A major tech rally. This tech-driven resurgence catapulted the S&P500 into a bull market earlier this month, with the index closing over 20% higher than its most recent low last October.

The technology sector currently comprises only 28% of the S&P500, but it represents most of the gains this year.

Now folks, we've navigated the ups and downs of the Canadian housing market, compared the real estate bubbles in the US and Canada, and watched the tech rally push the S&P500 back into the bullring.

One last thing…

AI Update of the Week

Welcome to our new feature, every week we’ll be sharing a piece of AI news or tip to help you be more productive as an entrepreneur.

Our AI tool spotlight this week focuses on 'Startup Secrets'

Ever wondered about the blueprint behind successful startups? Or craved for some insider knowledge, which only comes from hard-won experience?

Simply search for what you’re trying to achieve e.g. “how to raise a Series A,” and you’ll get instant access to how-to videos and guides.

This gem is more than an AI tool; it's an invaluable resource of tested frameworks and genuine case studies from seasoned entrepreneurs.

They've been where you are, navigated the obstacles, and now share their success roadmap for you to take inspiration from.

Go ahead and take a look today.

Happy hustling,

The Cashflow Chronicles Team

Video of the Week

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