Seven months ago nobody thought mortgage rates in Canada would ever go up, or house prices down. B20? That sounded like some wicked drink, opiod derivative or Bombardier product. And on March 3rd, when the local real estate board announced 32.5% year/year increase in real estate sale prices the story was obvious: way more demand than supply, as desperate buyers clamoured over every slanty piece of junk that got listed.

“The listing supply crunch we are experiencing in the GTA has undoubtedly led to the double-digit home price increases we are now experiencing on a sustained basis, both in the low-rise and high-rise market segments,” said realtor-analyst Jason Mercer. “Until we see a marked increase in the number of homes available for sale, expect very strong annual rates of price growth to continue.”

And continue it did. For two more months. Now we know interest rates can go up unexpectedly, politicians can be capricious and the B20 is a weapon of mass market destruction. Sales and prices are down, listings are up and the next six or 12 months are a complete mystery.

Well, not exactly. Not to blog dog Nick.

“I put this together for fun, based on TREB data to October and assumptions made for the remainder based on trends we’ve seen in the last 6 months,” he explained, when he sent the chart below.

“Key points: new listings will drop in the winter, however active listings will remain high as sales/removals from the market are not large. Due to a higher winter active listing number, starting point for the spring market in terms of total listings will be extremely high compared to last winter. Uptick in new listings in the spring as usual, followed by some increase in sales. As new listings occur at a medium-high pace over the spring/summer, sales won’t keep up, total active listings will build to new highs not seen in 2017. YOY sales numbers won’t be terrible, but months of inventory will be ugly, which would indicate a strong buyers’ market, and would generally be followed by declining prices in a normal market.

“Add in B-20, rising rates, worsening sentiment, and YOY declines in prices to be reported in Jan-Mar, 2018 is shaping up to be ugly for real estate IMO.”

Here it is. Makes you happy you sold four months ago, right?

So how bad could this get? Well, going into last autumn (October) there were but 10,563 properties listed on MLS for the entire region of six million house-lusty souls. That plunged to just 7,800 in March, when the buying frenzy hit its zenith. By April new listings were flooding in as buyers retreated, and today there are 18,859 properties to choose from – a 78.5% explosion over this time a year ago. Meanwhile sales for the first 10 months of the year reached 80,198, or more than 19% below the same period in 2016. And, yes, we already know detached house prices are lower by 15-20% depending on the region.

By the way, it’s not just the Big Smoke. All of southern Ontario is shrinking faster than a dude in a lake. For example, the median price in Hamilton, where valuations were berserk in the first months of the year, is now 15.4% lower. Same pattern as Toronto and Vancouver – detached house sales down (12%) and condo deals up (23%), as the move-up market vanishes.

Speaking of Hamilton, where men are still men even when they’re realtors, the industry’s head guy is being blunt about the impact in a few weeks of B20, the universal mortgage stress test. For buyers: “It is going to put some people out of the market, they’re just not going to be able to afford to quality at that higher rate.” For sellers: “It may take longer or they have to be more aggressive on their pricing.”

We also know this: the Fed will be raising its key rate again in December, bringing to four the number of increases in 12 months. That won’t be the end. With US corporate profits making double-digit gains, the jobs machine churning out new positions and some form of Trump corporate tax cut a near-certainty, there is more growth, inflation and rate action to come. Without any doubt, our guy Poloz will be following suit. Long-term mortgages now at 3.25% will creep closer to 4% in 2018. With the stress test, remember, borrowers must qualify at the central bank benchmark (4.89%) or the market rate +2% (now 5.25%), whichever is greater.

So, we’re going into the next spring market with 80% more inventory, less buyer momentum, rising mortgage rates and a stress test nobody can escape. That suggests prices are still too high. Let the melt begin.