10 minutes ago, the Bank of Canada announced another half percent rate increase – and they’re not done, yet.

At the start of the year, the Bank of Canada rate was 0.25% and the housing market was humming. That’s come to a crashing halt. The days of multi-offers are pretty much over and it’s taking a number of price drops to sell a home in most markets.

Keep in mind that “average” statistics for housing across Canada are totally useless. A small stable market isn’t impacted, while Toronto, Montreal and Vancouver will certainly see the brunt of the price drops and reduced sales. In between are a vast variety of different cities with a wide variety of factors and impact.

You also need to remember that the Trudeau stress-test is still in place. At the start of the year, someone with an $85,000 income could qualify for a $500,000 mortgage. Today, that would take an income of $113,000. And that’s assuming no other debt of any kind. Since nobody I know received a $28,000 annual raise, the person needs to find a much less expensive home or stay on the sidelines until rates drop (which won’t be until 2024) or prices come down – way down.

Since the housing sector is such a huge part of our economy, you can bet on a recession. But this recession won’t have the Bank of Canada dropping rates to resurrect the economy. They’re entirely focused on inflation. It’ll be a significant slow-down in the housing market, then a recession resulting in job losses without any help from the government or Bank of Canada until late 2023 or 2024.

Much like the imbalance in the car market for the past two years, it will likely turn out to be a great decision to put off buying a home for the next year or two…