A Deeper Dive into CREA's 2025 Housing Market Forecast – Shaun Cathcart

Shaun Cathcart: Prices went up a lot during COVID and they were expensive. Then interest rates went up and those were expensive.

Shaun Majumder: What do you think is going to happen to the Canadian housing market?

Shaun C: I think they're waiting for the bottom to know that now is the time to lock in.

Shaun M: Where is the Canadian housing market headed? This is a question everybody wants an answer to, but unless someone invents a reliable crystal ball, we're never going to have a firm answer. Data, and when I say "data," I don't mean what my kids call me all day every day, "Dada, dada, dada." No, I'm talking about data. Data can certainly paint a telling picture of what's to come along with expert assumptions and risk analysis. Today, we are being joined by Shaun Cathcart, CREA's Senior Economist. We're going to dive deep into the Canadian Real Estate Association's housing market forecast for 2025. There's a lot to get into, so let's get started.

This is my very first episode of hosting REAL TIME. I'm so stoked. I'm very thankful that not only did they present me with my first guest that has the exact same name as me, but to ease me in, they wanted to make sure they scoured the internet. The only person who was available that had the same spelling as me was Shaun Cathcart, senior economist for CREA. This works out so perfectly.

Shaun C: It does. How does it feel to have a super common short name that has three different spellings?

Shaun M: I know, Shaun, Senior Economist for CREA. Wow, this is a great way to start my tenure here because you are the man that holds the key. You are the gatekeeper to this year's forecast. I've watched your presentation on the big stage in the parliamentary bureau office, wherever that was. It was pretty powerful. How did that feel, first of all? That's got to feel like a lot of pressure on your shoulders. You're the one coming out with the forecast. You're the one presenting it to the world. How did that feel doing that?

Shaun C: Well, one thing that was tough about it was I tend to go on and on. I do presentations around the country all the time. I say 45 minutes is the perfect amount. I can go on that long. Otherwise, I'm cutting out important stuff. For this one, I only had 10 minutes. That was difficult to figure out how to jam that much into that time without talking way too fast, which was also something I was told not to do.

Shaun M: Right.

Shaun C: Then in behind the scenes of that thing, you're in these wood-paneled rooms, way in the dark corners of West Block. You're walking through this maze to get to it. Then there's all these flags and you got to go be quiet. You get counted in and then you walk in and then you do it. It was definitely much more formal than what I'm used to.

Shaun M: You know what it is? It is serious. It's very important. Canada is in what they call a housing crisis. We're going through major heavy changes all over the world right now politically, economically. There are so many things that seem like are actually happening. I watched you present this information. You did a great job. For me, not being immersed in the weeds of data, you presented it very clearly. I was really excited to come and talk to you today. I did have some questions about the data. Tell me, where this data comes from? Who sources it? How do you pull from it? Which data do you pull from to present this forecast?

Shaun C: Sure. Well, the first one is the data that we're actually forecasting, which is data that we at CREA, and real estate boards, and associations across the country produce and put out into the world. That's the data that comes off of all of the transactional listings and sales that are happening on all of Canada's MLS systems. That's the entire existing home market.

The big chunk of the housing market that really tells the story is the data that we and our boards and associations across the country collect and aggregate and then we put it all together into one big Canada database. That's the data that we actually forecast, but the data we pull in comes from everywhere, right? It comes from CMHC. It comes from Statistics Canada and the Canadian Housing Statistics Program. It comes from the Bank of Canada.

It comes from private sector forecasts for all of the things that affect housing like population growth and GDP growth and income growth and mortgage rates. There's other people that are experts in forecasting that stuff that put that out into the world that we bring in as inputs to our forecast. We're really going out there and finding every piece of information that can help us do that that's out there, but the data that we're mainly talking about in forecasting is the data that we put out into the world.

Shaun M: When we talk about forecasting in the housing market, is it a forecast or is it more of a state of the union like state of the industry, "This is where we're at and this is where we can see ourselves going over the next year"? Do you focus on a year? Do you focus on quarters? How does that work? What's a forecast and what's, "This is where we're at"?

Shaun C: Best forecasting advice is the further you go out, the bigger your error term gets. We don't want to go out five years from now when who knows what's going to happen, as you mentioned, one or two weeks from now? We typically, as is a practice around the forecasting world, forecast for the current year out to the end of that and then the next one.

The main focus is always what's going to happen this year because that's where you have the best current information about the trends exactly where we are. Like you mentioned, where we are is so important, right? What's a starting point for this? Are we starting at a decade low? Even if you got a big increase, you're still not doing that great. Are we starting at a record high and ticking down a little bit? Ooh, it's a decline, but it's still a really strong year. That's all context that goes into this and that's important to know as well.

Shaun M: Take me through. How are we doing? What's the forecast?

Shaun C: Well, that's a tough question. Let me start at the Canada level. We're going to have to get into some regional stuff because there's vast differences right now as there always is, although this is a bit of an Uno reverse card compared to history. I'll start with the Canada numbers. We are starting off on the sales side low because we've been in an inflation crisis. Prices went up a lot during COVID and they were expensive. Then interest rates went up and those were expensive.

People couldn't afford to borrow enough money to buy homes. A lot of people couldn't. The market has been very quiet. I called it a market in hibernation. Our forecast is that we think that's about to wake up probably this spring, but we're already seeing evidence of that in some parts of the country. On the sales side, good increase, but still a couple of years away from just getting back on track with what would normal would be. On the price side, we're going to see some gains there too because we still have a supply crisis in this country.

Shaun M: Right, so there's a supply crisis in the country. A lot of people are still on the sidelines because of inflation, because of the interest rates. What are happening with interest rates and how do you think that is going to affect these sideline buyers, central buyers?

Shaun C: If you go back six months, everyone was making predictions about how the Bank of Canada would-- when they would start. Everyone wanted to throw their hat in about like, "When the first one's going to be," even though it's more of a psychological thing. Then it was really the pace of how many they're going to do over what time period, and when are they going to stop. A lot of that has already played out.

Shaun M: You're talking about cuts?

Shaun C: Cuts, yes.

Shaun M: You're talking about mortgage rate cuts, right?

Shaun C: Exactly. From the inflation-fighting peak to where we are now is most of that has already happened. We're currently at 3.25% on the overnight rate. Between 2.25% and 3.25%, that's what the Bank of Canada considers neutral. As of the most recent cut, that's their foot basically off that brake pedal on the economy. We're still at the high-end of that, but I think there's only one more cut at this point penciled in for this year, which could be more, depending on how various other things I'm sure we'll talk about are going to play out in the months ahead.

For now, that would be a neutral interest rate. Where I think the important milestone is going to be is when the bank signals that they're done cutting because Canadians typically are risk-averse. They love their five-year fixed-rate mortgages. The time to lock that in is when the rates aren't going to go down again next month. When they're done falling, that's the best five-year rate you can lock in. You lock in and that's when people are going to buy houses in big numbers, I think.

Shaun M: Okay, can you explain to me someone who has been cross-border quite a bit between America and Canada and trying to even just see what the horizon looks like in America versus Canada? Explain to me this thing where in Canada, there's a five-year limit on a mortgage rate versus in America, you can get a 30-year fixed and there's no limits. Explain that difference between Canada and America and how they do their mortgages, please.

Shaun C: Yes, sure. One of the biggest differences between mortgage lending and housing in the United States and Canada is the way mortgage terms work. In Canada, you could go full-on variable. You could take a one-year fixed. You could take a two-year, a three-year. Those have been popular during COVID because everyone knew rates were going to go down. You don't want to lock in for five years. Historically, the five-year is the most popular and I think that's going to be the case again.

Whereas in the United States, the most popular term, the most common one is a 30-year mortgage. Depending on where interest rates are, here, people's interest rates reset. If you buy your home at a tough time when rates are really high, well, in five years from now, we can renew at a lower rate, hopefully. That's what people would hope for. Whereas in the United States, you're committing to that rate for a very long time.

The difference in the level that the markets went into hibernation during this high interest rate period was much more acute in the United States, where sales were at multi-decade lows because people were all saying, "Well, I'm not going to lock in this rate for 30 years when I know in a couple of years from now, it's going to be a lot better. I'm going to wait." Whereas more people in Canada were able to say, "Well, I could just take a two-year and do it now and then we'll renew in a couple of years." That's the biggest difference in how it's impacted the market over the last few years.

Shaun M: What is that? Tell me again. What do you think is going to happen now when the Bank of Canada says, "Okay, that's it. We're done with the lowering of the rates. This is the bottom"? What do you think is going to happen to the Canadian housing market?

Shaun C: Sure. Well, this is why I think our forecast is conservative because what have people been waiting for? They've been waiting for lower rates. They've got those. We're not quite to the bottom yet. I think they're waiting for the bottom to know that now is the time to lock in. They're waiting for, like we saw in September, a big burst of fresh new listings. You're going to the website every day. You're saying, "This is the year. We're ready to go."

It's January, it's February, it's March. You're looking and there's not a lot going on yet because it's the winter. Then all of a sudden, you hit the first week of April and, boom, the website blows up with all of these great new homes to go after. After years of record population growth and all these people waiting on the sidelines and looking for these particular things that are all going to happen all at the same time, that's why I think our forecast is conservative. I think we could see, actually, a real explosion of activity this spring.

Shaun M: Wow. What are the ages of people that are going to be jumping back into this market if they've been holding off on the side? Because something that I've been hearing a lot about is that for young people, it's near impossible to even get into the market right now, both in America and in Canada. How is that going to affect the younger consumer out there?

Shaun C: Right, that's a tricky question. If you think about the number of first-time buyers that are out there, a lot of them can and will get into the market. A lot of them, to your point, will not still be able to. The affordability, especially in places like British Columbia and Ontario where housing's expensive, there will be people that just feel priced out. As some surveys have said, they feel that forever.

Some of them are moving around the country because of that. Even if a fraction of that demand that's on the sidelines comes off all at once, that's still going to look like a really big increase, just not as big as it otherwise would have been if housing wasn't still pretty unaffordable. I guess that's how I'd answer that. In terms of ages, I would guess early to mid-30s for first-time buyers who otherwise would have bought a few years ago and then rates went up. There's a bit of delay in that typical first-time homebuyer purchase.

Then also potentially people closer to my age in their mid-40s to 50s, who may have wanted to be move-up buyers. Even taking on that extra, whatever it is, $200,000 in mortgage debt to get that extra bedroom would have tripled your mortgage payment in the last few years. Those move-up buyers too, which is good because you need those guys to free up the starter home for the first-time buyer to buy. As long as we can get some movement happening there, lower rates lubricates the housing market always.

Shaun M: Good, and that seems to be happening. Inflation is down obviously. It feels like we are coming out of that tight COVID time. What are the risks then when we talk about-- you can look at your crystal ball and you can say, "This is probably where this is going." However, these are the potential risks that may completely flip it upside down, or what are those risks?

Shaun C: The one I mentioned on the high side is that if the market just goes on a tear again like it did during COVID because of all that pent-up demand that it's going to very quickly overwhelm already limited supply. You'll have price growth that is headline-grabbing again. That offsets all of the affordability gains that lower interest rates offer. That's a high-side risk. It's just not a good situation. It's just where the data would be higher.

Then on the downside, obviously, the big one right now looming is a trade war with the United States that everyone's trying to put numbers on, but you can't put numbers on that. There are so many moving pieces to that one, right? If those tariffs come in the way that they've been suggested they might, but then there's the Canadian retaliation, and then there's what the Canadian dollar does, which offsets a bunch of the tariffs, and then there's what the central bank does that they lower rates even more.

Historically, sometimes you get into bad economic times in Canada. The central bank lowers rates and the housing market does really great despite everything else not doing so well. Then people are like, "Oh, housing's holding up the economy." To your point, if you're not fearful of losing your job in a recession, then if rates go down another 1.5%, 2%, that is what's going to allow a lot of those first-time buyers to get in. There's a lot of moving parts there. Ultimately, it's bad.

Shaun M: Yes, risk-wise, especially that trade war. Something that's been really insightful to me as I've done research and immersed myself more into understanding the general real estate market is how everything is connected. It's not just, "I would like to save to buy a house." It's so inclusive of all these pieces. Like you say, employment rates, the dollar interest rates, the relationship with America. We've had such an interesting relationship with America for many, many years.

Now, with the new administration and the outgoing potential change in Canada, people's heads must be spinning, and especially REALTORS^® trying to manage, "How do I work with my clients to be able to get this person the dream that they've always wanted." That's what's been incredibly insightful. You talked a bit about Ontario and BC. Let's talk a little bit about the regions across Canada. I'd like to know. We talk about Canada generally, but is Canada just Canada and it's all the same across the board? Tell me a bit about that.

Shaun C: Absolutely not. I'll tell you what, there's a lot of people that get frustrated when we sometimes hit on those Canada numbers first as the headline number, which often doesn't represent any region very well. The average price in Canada right now is $700,000, but you know how many provinces are $700,000? None of them. Two of them are way above it and the other ones are all below it.

You really do have to go region to region. I know that most people would say in the last 10 or 15 years, "Well, we're not all Toronto and Vancouver. There's other things going on in Canada." If you go back to 2015 and '16, the first two markets that really got way ahead of this supply crisis trend seven, eight years ago was Toronto and Vancouver. The oil price crashed, all of this migration that had all been going to Alberta where you could make $200,000 driving a truck.

Suddenly, those jobs all evaporated and all of that went out first immediately to the lower mainland and GTA. Those markets went first, but it was really part of a bigger trend. That's why I referred to that. There's a meme online of the hand flipping the Uno reverse card for something. What you're seeing now in the housing market is the two coolest markets in a high interest rate environment are BC and Ontario that are the ones that are way below average for sales.

Price is not really doing anything for a very long time. If I wanted to name the ones that are pretty hot right now, it's everybody else. It's Alberta, it's Saskatchewan, it's Manitoba, it's Quebec, New Brunswick. Majorly for sure. Nova Scotia, a little bit less so because they've got Halifax in there, which is a bit more of an expensive market, with the high interest rates that holds them back a little bit. PI as well. Even Newfoundland and Labrador, you see prices just taking off.

Shaun M: Shaun, what constitutes a hot market? When I think about a hot market, does that mean prices are going up or does that mean prices are coming down and everybody's buying a house?

Shaun C: All right. Well, I don't want to put our viewers to sleep here, but I am going to give you the technical answer. What we do is--

Shaun M: Yes, we want some technical. We can have fun and juice and some tech. That's what you do best, is the data.

Shaun C: All right, so we have a metric called the number of months of inventory. It's taken from the industrial world where let's say you're building up your inventories in a factory or at a warehouse and you say, "At this rate that we're selling these things, if we don't manufacture anymore, how long until we run out of supply?" We're applying that same thing to the housing market.

It's all of the active listings that are out there on the market divided by the monthly pace of sales. If we didn't have any more listings, how long would it take for us to run out? It's a measure of how tight that market is, how strong demand is relative to supply. A hot market would be, you take the long-term average for that. In Canada, that's five months of inventory. You take a standard deviation below that, which in Canada is 3.6 months of inventory.

Once you hit that standard deviation below, that is a seller's market. It's the difference between one buyer and one seller negotiating that listing price down a bit and more than one buyer showing up and then battling it out amongst each other to bid it up to see who's going to win that multiple offer. That's when prices tend to really start to go up is when you have that imbalance of buyers and sellers.

Shaun M: Right. Right. If we were to go regionally now, let's start in the East. How would you define the East, the Maritimes, Newfoundland? Sometimes included in the Maritimes if you watch the weather report. Sometimes they're not. They're just Newfoundland and Labrador sitting out there all by themselves. Then you've got the Atlantic provinces, but let's put them all together. Would you classify them as a buyer or seller's market or is it even micro-specific as to what regions within the Atlantic provinces are buyer and seller's market? Take me through the Atlantic provinces.

Shaun C: Sure. They all behave a little bit differently and a little bit the same. Quebec, New Brunswick, and Nova Scotia act as this one group where their trends are always very similar over time. A PI is a different animal altogether. It behaves like cottage country almost or like a ski vacation area. There are so many vacation properties there. Newfoundland and Labrador is linked to natural resources and oil. It behaves like Alberta and Saskatchewan.

In general, everything east of Ottawa right now is a seller's market. Because they haven't had these really tight markets in the past, it's the first time a lot of them have ever experienced this, their natural number of months of inventory is higher. Even though their seller's markets and prices are rising, there's also scope for sales to keep going up because there's still a good amount of inventory for people to buy. That would be that group.

Shaun M: I think a lot of people, I found that interesting too, knowing, I'm from the Maritimes, originally, I'm from Newfoundland and spent lots of time in Nova Scotia, this trend right after COVID like how COVID has transformed so much of what we're talking about. Nova Scotia, housing market, pre-COVID versus after COVID, what a difference in pricing because everybody flocked to the east. They wanted to get to the ocean. They needed space. You could work from home.

Then boom, prices started going up because there was a high demand there. I don't know if that happened. Was everybody flocking from the big centers to Regina? I don't know if that was happening or not. I find that very interesting. Take me through central. You talked about Ontario. When I'm looking around and I'm thinking, "I love Ontario." For me, if I were to buy a house there, if it's a single-family home, it's outrageous how the prices have gone up there.

Shaun C: Right. The story on Ontario is the story that's been going on all over Canada. Really, it was less able to do this in the Lower Mainland because of geography. In Ontario, I always think of it as the concentric rings. First, it was Toronto that was expensive. They went through a period in 2010 where that was the first time that they had all these multiple offers and people weren't used to it. They didn't know how to handle it.

I remember the news stories at the time. It's like, "What's going on here?" They, in the space of one year, got much more expensive. Then we went into the winter and everything went quiet. The next spring, what happened was, boom, the exact same thing happened in Mississauga. We were like, "Oh, okay." Year after that, I wonder what's going to happen this year. Boom, Guelph does it and becomes much more expensive in the space of one spring and summer, fall period.

Then it was St. Catharines and then it was all the way up to Kingston and London and up to cottage country. It was basically all of the greater Golden Horseshoe before COVID. Then as you mentioned, COVID hit. You'd have to go to work or a lot of people didn't. That trend had been going on, I would say, for 15 years in a sense. Then it was just able to really go even further. If I like the sea, I'm going to go live in Interior BC. Prices there went up.

I like the ocean. I'm going to go live in Halifax. Prices there went way up during COVID. They were probably going to go up anyway, just from those markets becoming seller's markets. Then all of a sudden, you've got people who've just sold homes in Toronto or something, or bringing their Bay Street salaries with them, who are like $500,000. This is super affordable to us, right? Then also the double-edged sword of competing against the locals in all those places.

Shaun M: Ontario, as those rings went out now, where would people leave to go? If affordability became too much, where were people headed?

Shaun C: Let me give you what's going on right now. There was all that migration during COVID, which was more of a remote work thing, but it's continued. StatCan only releases this data once a year, but it's migration by age group. There's a really neat trend there. It's people from Ontario moving to various other parts in the country, but by age. People from Ontario who say, "I'm never going to be able to afford something that's on the ground," the term is called "ground-oriented," so not a condo in Ontario.

Where's their opportunity to do that? Alberta. That's your younger buyer, your millennial buyer. Our friend, David Coletto, at Abacus Data has amazing staff that they do in their presentations, which is the most common age of people in the last couple of years moving from Ontario to Alberta. I get people in the audience to guess, "You think it's 27? Do you think it's 34 or something?" The most single--

Shaun M: I'm going to guess. I'm going to guess. I think it's, yes, in the 21, when you come out of-- Maybe 23, 24, fresh out of college or seeing what's out there, "We got to get out of here. We can't afford that single-family home." No, I'm going to go a little older. I'm going to go 20, 28.

Shaun C: Basically, from the early 20s to the early 30s is the bulk of it. The most common single age is zero. Between zero and one-year-old infants. These are young people who are saying, "We'll never be able to afford something in Ontario." Once you have that first kid in a one-bedroom apartment, it's like, "Well, that's it." Another really interesting Ontario migration trend is Ontario to the Maritimes.

You know who that is? It's people basically 55 to 65. My prediction on that one was people that are close to retirement that have got expensive homes paid off in Toronto and their work called them up in 2022 and said, "Hey, we're all coming back to the office." "No, we're not. See you." They sold their home and they're living it up by the sea with early retirement. There's a lot of interesting trends coming out of COVID.

Shaun M: I love that. I love it. People are really caring about their own health and well-being. Imagine that.

Shaun C: Oh yes, self-care. Very important.

Shaun M: What about the middle, like right in the middle, Manitoba all the way over to the edge of Alberta, or is Alberta its own thing? It sounds like because of the oil sector and that industry and Alberta, generally speaking, they seem to do their own thing. Is there something between the prairies and Alberta or would you lump them all together as well?

Shaun C: They're somewhat the same and somewhat different like the Quebec and the East Coast. Yes, Alberta is different. They're more expensive. They have a bigger boom support. Calgary and Edmonton are bigger cities than Winnipeg and Regina and Saskatoon. In general, that natural resources from oil through to mining all exists in there. They've all had fairly boom times in the past unlike the East Coast, which lowers their natural average months of inventory.

For them to be a full standard below that, which they are, so their seller's markets now too, you're going to get price growth. Inventory is more constrained. There's less scope for sales to go up when you're already setting sales records today. Alberta was before interest rates even started to go down. What's going to happen there when all this additional demand comes into the market? It's going to mostly, I think, play out on the price side. It's going to play out as more buyers showing up for that listing unless they have a whole bunch of people list homes this year. The trend has not been in that direction the last little while.

Shaun M: Right. Then let's talk about BC because BC is such a unique, interesting place. There's the province and then there's Vancouver. When I'm looking at houses and I see any pricing that pops up in Vancouver, I'm just like, "What?" A single-family home. I can see why you think about Ontario and Vancouver or British Columbia being these outliers. Why are prices so high in Vancouver and in British Columbia?

Shaun C: Sure. Well, prices are high in British Columbia because of Vancouver and the Lower Mainland and Victoria, where the main cities are, that are expensive. You've been out there. It's gorgeous.

Shaun M: It's amazing.

Shaun C: It's also very geographically constrained. They didn't have the ability. When Toronto was doing those concentric rings for a decade, Vancouver did it for a couple of years up the Fraser River Valley to Chilliwack and ran out of any more rings to go. From there, prices just keep going up. Vancouver has always been expensive. In a sense, BC behaved very similar to Ontario with very high interest rates is that they're very cooled down. You almost think because they're the most expensive province that they would have cooled the most. To your point about Vancouver, it's unique in that it's so expensive.

It's not like first-time buyers are like, "Oh, I can't qualify for a $4 million mortgage." No, it's wealth that's changing hands for ground-related stuff out in Vancouver. Actually, another interesting tidbit about that that I've been thinking about a lot lately when we think about the Toronto condo story versus condos everywhere else is, there's some Canadian housing statistics program data that came out that was comparing the average size of condos across the country. The median condo in the last 10 years in Vancouver is 200 square feet bigger than the median condo in Toronto.

I was thinking, that's because Vancouver has been so expensive for so long, that culture shift that you have all kinds of other places in the world where people are like, "Yes, we live in apartments." Happened in Vancouver long ago, but I don't think it's really happened elsewhere in Canada just yet, which is why end-users show up to buy condos in Vancouver. They tell the developer, "Yes, I want 750 square feet or more." Whereas in Toronto, a lot of it's been investors showing up and being like, "Yes, I'm paying by the square foot here, so make it small." Maybe that doesn't affect prices as much, but they would be more expensive condos if they're in Vancouver and they're 30% bigger.

Shaun M: Right. Right. I hear about trends in condo markets, but I don't know enough about it. These trends would take away from the fact that, yes, there's no space to raise a family in these small condos. Are single-family homes the thing that we need more of and is that the source of the crisis? Let's talk about this crisis because I keep hearing crisis as well. First, just touch on the condo market and then I want to work into talking about this idea of what is a housing crisis.

Shaun C: Sure. Well, the condo market story you've been hearing about is coming from Toronto. A big part of it has to do with the size of the condos that they've been building. Not all of them, obviously, but a lot of them have crossed over this line of, "It's harder to live in here. It's harder to live in here. It's harder to live in here. I can't live in this. Too small." Maybe going forward, it makes sense to consider the person who's actually going to be living in the thing when you're designing it.

Shaun M: Take me into this idea of crisis because I know this is something that I'm hearing a lot about. You see it on social media all the time. Housing crisis, housing crisis. Politically, you see it thrown across in the House of Parliament, "We're in a housing crisis. We must solve this housing crisis." How much of it is hyperbole? How much of it is real? What constitutes a housing crisis? Is Canada really in a housing crisis?

Shaun C: I think so. It's only been called that for a few years. I certainly didn't coin the term, but it seems to be that way. I heard somebody say it really eloquently. If you go back to the 1950s, you can have a family of six on one income that could afford a detached bungalow in Midtown Toronto. I don't think that it's ever gotten more affordable. I think that just with the amount that prices went up during COVID and the amount that interest rates went up right after, we crossed a line where it went from less affordable, less affordable, less affordable to not affordable.

That's a difference not in degree, which we've had for decades, but in kind. That's where the crisis piece comes from. Do we need to build a lot more homes faster? Yes. There's different numbers out there. They're all really, really, really big, and I think the crisis part. Also, if you look at what we've been building over the last 20 years, we stopped building those big detached homes. We still build some of them, but not nearly as many as 20 years ago.

They're even bigger because, obviously, they're going to the people with a lot of money who are able to afford 15% to 20% of new builds that are detached. What we did was we talked a great game about the missing middle, townhomes and semi-detached and three-plexes and four-plexes. We shot right through and built all high-rise condos initially. Then in the last 10 years, tons of purpose-built rental apartments.

I think it's that missing middle that's still missing. If I'm a young person looking to raise a family, I can't afford one of these big single-detached homes that sits on this big piece of ground that could probably house three families but only houses one unit. I also can't go to the apartment side of things, whether rental or condo, because we haven't really been building these 1970-style big condos or things like they have in, well, all over the world, but you can think of Brooklyn.

If you live in Brooklyn, you're not going to have a detached home. You're going to have one of those brick walk-ups, but the apartment has three bedrooms in it, right? You raised a family in one of those things. You leaned out, yelled out the window. They had the clotheslines. There's a culture shift that happened long ago there and in the denser parts of cities before World War II, when people actually had to walk places, so it had to be walkable. Really, it's that missing middle piece.

Shaun M: What's happening with ownership? Is ownership down? Is it up? Then where do you see ownership leading in the next five to 10 years? Officially, you can't state that. You live inside this data. You're using data from 30 years ago. You're seeing trends from a long time ago. Where do you see that going? What do you think is the solution to this housing crisis?

Shaun C: Sure. Well, if you look at the homeownership, the main source of that is census data. It comes every five years. It'd be nice if it was a little bit more frequent. That starts in 1971 from a consistent basis that you can get from StatCan. That's 50 years ago. For 40 years, it went right up from about 60% to about 70%. Turned a quarter about 12 years ago, 13 years ago, and it's going straight down.

The last data point was 2021 when we sold a record number of homes in the ownership market. I think in the last couple of years, we don't have census data again until 2027. They run the census in 2026. We get the data in 2027. If I had to guess where it is now in 2025, it's probably gone from 60% to 70% all the way down to 65%. It might even be lower than that. Think of it as an upside-down check mark, but it's very odd for society-wide data.

This is every household in Canada, whether they are owners or renters, amongst the currently 17 million residential units we have. It's very odd for society-wide census data to behave that acutely. You think it would just be gradual and steady over time and boring. I think one of the big reasons is at the beginning of that data in the '70s, we were building a ton of purpose-built rental. Then for about three decades in the '80s, '90s, and early 2000s, we built almost none. What we were building, stuff that people can own.

That's what people had access to. People bought that stuff and owned it at higher rates. In the last 10 years, like I said, the main category of housing completions that's really gone from very low to dominant, something like 40% of completions, is purpose-built rental apartments. Structurally, within our 17 million units, there's just more stuff that is available for rent versus stuff that's available to buy. I think a big part of the homeownership rate story is just purely structural. It's people occupying what's available to be occupied.

Whether they're paying the bank a mortgage and some back to themselves or whether they're paying the owner of the building in rent is a function of the tenure of that building. That's not up to them. I don't know where that needs to land or what the policymakers' priority should be on that number. It seemed to me that a 70% homeownership rate is one where that's a really big middle-class owning homes, which does tend to be that forced savings plan and really build a lot of middle-class wealth for a lot of people historically.

Shaun M: When we talk about crisis, where does the crisis lie? It sounds like it's inventory availability to purchase these units. You said within the condo market, they may be on a lower price point, but they're also on a lower square-footage point. If I'm a young single family, two kids or a kid on the way, I'm not going to get that. I don't want that. I don't want to put the money into that. We're going to rent for a little while. Where do we rent? I don't know where to rent. Where do I want to live? Where do I work? I can work from home. Where do you see the opportunity for Canada to hedge this problem? How can we get out of this crisis in your opinion?

Shaun C: I see a lot of scope for growth in some of the stuff that we're missing, which is good. The first thing is the missing middle. The fact that we call it that, the word "missing" is right in the name. There's a lot of scope to do the thing that we all agreed for the last decade and more we should be doing and haven't done at all, which is larger apartments like a three-bedroom-type apartment, whether that's in the rental market or in the ownership market, but just generally missing middle.

That could be a lot of things. That could be a three-plex walk-up. I know they're changing zoning rules around, "You don't have to have two staircases anymore," which was the thing that was restricted. You can zone and say, "You can put a three-plex here now." If you have to have eight parking spots for it and two staircases, it doesn't make sense. It doesn't pencil for a developer, right? They're changing a lot of those rules. I think they're going through and finding those hurdles.

You got to get them all out of the way in order for these things to happen. A four-plex, whatever it is, a mid-rise-type apartment building with big apartments in it. Whether that's rental or ownership, it could be either one. Then the big thing that we've really been on is manufactured housing. You look at the numbers from CMHC or the parliamentary budget officer. The low one is double what we're currently constructing and then the other one is way bigger. You can't just double--

Shaun M: Wait, explain that to me. What does that mean? What is the low one and it's double? I don't understand what that means.

Shaun C: Oh, sure. The parliamentary budget officer, a current estimate was we need 1.4 million more homes by 2030, I think, or by the next decade to just catch up to the deficit we have. That's before we can go on forward to keep up. The CMHC number that's been around for a while now that everyone knows gets repeated the most but often misquoted is three and a half million over that same period.

If we're on track to build 1.5 and that's optimistic, 1.5 million, we'd have to go from that to five. It's completely not going to happen, but that's to rewind affordability back to what we enjoyed 20 years ago, whereas the PBO, the parliamentary budget officer one is just to play catch-up. They're measuring different things. That's why I say the low one, which is where we double our construction, that's the low one.

How do you do that? Do we double the amount of land that we have to build on and put all those roads and sewers in the next five years? Who's going to do that? Then we got to get double the number of construction workers and laborers and electricians and plumbers and carpenters and all the rest of it, right? Impossible. You can't do that. The idea of using the immigration system where we target skills that Canada needs, which we've done forever, is a good one.

Now, we're reducing immigration targets as well. I think that automation and productivity and Canada's got a major productivity issue, why not solve it in service of solving one of our biggest crises? You build in a giant factory with an assembly line with robotics and automation doing a lot of this work. You can build 24/7, 365. There's no noise bylaw when you're in a factory from 8:00 PM to 7:00 AM.

It doesn't matter if it's -30 in a blizzard. You're working the same. It's all about doing it faster. There's also mass timber and 3D printing and different technologies that we don't take advantage of that are operating here and there on very small scale. I think 2% to 3% of construction right now is these things when it should be half, but not as a zero-sum game taking away from the traditional stick-built detached home.

Those guys can build that over there. Over here, we can have people doing a big concrete building. In the middle, we can have this entire new industry filling in that middle piece. I think that there's a lot of money to be made in it. I think it makes a lot of sense. I think it's potentially an exportable thing, although maybe not. We'll have to wait and see how it plays out over the next little while.

Shaun M: Yes, exactly, depending on which way, which direction.

Shaun C: We're not going to raise this up overnight. What's really interesting is that a lot of these technologies actually lend themselves really well to building the exact kind of housing that we need. Modular units that are basically completely complete, you crane them into space to stack up a three-plex. You can put it on site. You can have it up in two weeks, or mass timber to build a mid-rise building. That's a bit of a match made in heaven there, I think. At this point, it's really about getting that into the conversation.

Shaun M: We're heading into a future that is pretty amazing. We just need to incorporate that in the Canadian market, it sounds like.

Shaun C: It's nice to have a source of optimism on this file because, for a long time, being really immersed in the numbers, like you said, I am, and seeing these numbers like this is how many million more houses we have to do for a while there. I was just saying, "Well, that's not going to happen." Sometimes it is a light bulb like that idea when we started doing a lot of research at CREA on that. Our policy analyst that was doing that, I started going over to his desk.

We started talking and I was like, "Tell me more about this. Tell me more about that." I had clued in. Then as soon as the idea started getting traction in my head, I was like, "This is it." It's like eight years ago, we said, "We just need to build more houses." It's not simple to do, but it's a simple idea. Just start building more houses because that's where we need to have our focus on. Now, the next phase is, "Okay, how do you do that?" This is that.

Shaun M: I love this idea. I do love the idea of an optimistic outlook. There've been some dark times that we're coming out of. I think, collectively, we're traumatized by a lot of this stuff. I do see that even REALTORS^® watching this right now, we're looking at something that could have a real good uptick in the economy and in the housing market. On that, let's talk about REALTORS^® real quick. What does this mean for REALTORS^®? All of this, when we take your forecast information, how can REALTORS^® take this information and then put it to work with their clients, with their businesses, in their communities? Talk to me a bit about that. How can REALTORS^® take this information and unleash it?

Shaun C: Sure, provided cooler heads prevail and not thrown into a massive recession that changes all of this. Our forecast for things to wake up this year means that members all across Canada should be busier in 2025 than they were in the last few years. In Ontario and BC, it means you're going to be busier in a normal market where you get a client and say, "There's a lot of nice houses out there for you to look at right now."

You're not probably going to be in a multiple-offer situation. That's what we think of as a normal market from maybe before COVID or maybe you have to go back further than that. What does it mean if you're on the prairies or Quebec and the East Coast basically? All of that stuff that you were watching happen while your market's during COVID. In Ontario and BC in the last decade, that now is going to be your reality.

Part of that is learning and managing multiple-offer situations and your clients just understanding that prices are going to go up. In fact, it's easy forecast for me to make because all those places I just named, prices already are going up right now. We're going to hit the spring market. Like I said with that Ontario story, you have to wait for the spring to see what the story is going to be in the fullness of time. We're not too far away from that, so get ready.

I think the bigger picture here is we're going to have a market that wakes up. We're going to get away from the inflation story and we're going to come back to this housing crisis story. If that's a major topic that everyone's talking about, getting some of these new ideas in there is going to be critical to not just going on about how it's a crisis but actually doing something productive to actually start moving towards maybe solving it.

Shaun M: That's amazing, man. Listen, again, how thankful I am to have this be my very first episode of REAL TIME with the king of kings of data in Canadian real estate.

Shaun C: Where?

Shaun M: Shaun, thank you so much for this conversation. It's you, buddy. It's you, it's you. This has been so insightful and I'm really thankful. It looks like there is a lot of energy potentially about to be thrust into the market. That's really exciting. I can't thank you enough, man.

Shaun C: That's been really fun. I love doing this stuff. This is my life outside of my home life. I've been doing this for a very long time. It did get dark there for a while with the whole crisis talk and I think that we are entering into-- In some ways, it feels like we might not be out of all the dark times. I think that on this particular domestic issue that we have, that also is not just a domestic issue but an issue that countries all around the world are facing because they have the same demographics and the same issues. If we can be the country that starts to solve it and is an example for all those other ones, I think that'd be a really cool thing to be a part of.

Shaun M: Yes, Team Canada leading the way. I love it. Well, thanks again, Shaun Cathcart. We should definitely do a follow-up.

Shaun C: Yes, a lot of fun.

Shaun M: Awesome. There's a lot to be positive about when looking at Canadian housing markets as we head into, as what Shaun describes, a likely booming spring market. Of course, there's going to be unknowns but also trends and expert analysis to help paint a picture of what's to come. As always, if you want to know what's going on in your market, head on over to CREAstats.ca for the most up-to-date information.

REAL TIME is brought to you by the Canadian Real Estate Association and produced by Alphabet^® Creative. If you liked today's episode, make sure you head on over to your preferred podcast network. Give us a like. Write us a review. It's super appreciated. This was a lot of fun. I had a blast. This is my very first one. Guys, thank you so much for joining us today on REAL TIME and we'll see you next time on REAL TIME. Really. No, really, I mean it. I'm Shaun Majumder. Thanks so much.

Shaun M: That was awesome.

Shaun C: Is that the practice? Are we going to do it again now?

Shaun M: Yes, that was the--

Shaun C: I felt great.