When we look back at 2025 will we all agree, “It was the best of times, it was the worst of times”, maybe no truer words have been spoken in the history of our two countries. Charles Dickens wrote A Tale Of Two Cities in 1859, it takes place in the last quarter of the 18th century (1775-1793) and follows the lives of several families and individuals, from London and the other from Paris. His book highlights the diverging paths of Paris after the French Revolution and London, which at the time was relatively stable having just entered the Industrial Revolution and licking their wounds after losing its American Colonies (American Revolutionary War 1775-1783).

The political unrest at this time, be it underlying and at times overbearing, had a huge effect on the British citizens of the time. The effects of the Industrial Revolution as the British economy transitioned with the emergence of new technology in manufacturing (AI tech revolution of today) and the war with revolutionary France in 1793 under the famed Napoleon, sound familiar? (US/Canadian trade war of 2025).

By no means am I comparing this tumultuous time in British-French relations to what is happening with US-Canadian relations, but I thought it would be interesting to study the current state of the housing industry, finance and the overall health of our two markets, which may or may not be closely aligned.

ARE WE RICHER THAN WE THINK?

Statistics Canada released a survey of financial security of Canadians back in the fall of 2024, and there were some very noteworthy tidbits of information which I was surprised to read. 39% of Canadian families had a mortgage in 2023, not just for their principal home but for cottages and investment properties. The median mortgage for all these properties was $205,000, down from $219,500 in 2019. 1 out of 5 families in Canada in 2023 had a variable rate mortgage with a median interest rate of 5.7% with 80% of fixed mortgage holders had a rate well below 3%. While in the US for the same period approximately 70% of families had a fixed rate of under 4%.

The median net worth of Canadian families as of 2023 was $519,700 up from $381,100 in 2019 mainly through inflation of housing values. The number of young families who rented their principal residence but owned an investment property and had a net worth greater than $150,000 tripled from 2019, with nearly 20% of those under 35 in Canada did not have a mortgage at all (wealth transfer from parents and grandparents). According to FRED (Federal Reserve Economic Data) while the numbers may be very different in the US vs Canada, the increase in median net worth in the US grew by 37%, almost exactly what it did in Canada, however, the dollar amount in US Dollars was just shy of $200,000, and was made up of real estate and other investments.

ARE EXISTING HOME SALES AT HISTORIC LOWS?

Without a doubt there is one word which can clearly define what is happening right now on both sides of the border… chaos. In Canada we have economic uncertainty tied to tariffs being threatened, and in the US there are federal employees being laid off in droves coupled with the repercussions of an impending trade war. 2025 was to be the breakthrough year for real estate, like 2020 was to be the year of hope and promise (we all remember how that turned out). Many real estate organizations and financial institutions had pegged this year for growth, with inflation at bay followed by a period of falling interest rates in both countries.

So far we are seeing an abundance of listing inventories coming on the market in the first two months of 2025 in both the US and Canada with existing home sales being flat in most markets. Re-sale home sales in the US were at record lows in 2024, and were slightly higher than they were in 1995. At least in Canada we do not have to go back nearly 30 years to find the bottom of the market. In 2024 our unit sales were 14% higher than they were in 2018, the inaugural year of the stress test, one of the lowest existing home sales numbers in our history.

IT’S ALL ABOUT THE BOND

I think Donald Trump is switching his theme song of “God Bless the USA” by Lee Greenwood and going for another theme song and this time he is taking his next one from Meghan Trainor. ’Because you know I’m all about the bond, ‘bout the bond, no Powell’. Trump and his band of Merry Men and Women have decided it is very difficult to control the Federal Reserve and in turn, Jerome Powell the Chair of the Federal Reserve, so they have turned their sights on the 10-year Treasury yield.

The T-note as it is affectionately known, is the debt security issued by the US government, which since the election has ranged between 4 and 5 percent. For the last 20 years this rate has hovered just below 3%, and spurred tons of economic growth. So in order to get this rate to drop which affects everything from car loans, to credit card debt, to long-term mortgage rates, the US government must reduce its reliance on issuing debt through the T-note to pay it’s bills. So that’s where Mr. Musk comes in slashing and burning plus the derived income to the federal government from tariffs. 

So, if all this works, then consumers will find relief from interest, jump into the housing market and buy their way to US economic growth. If it works is truly the question, and how much chaos will be endured to get them there? 

SO WHAT DOES ALL OF THIS REALLY MEAN? 

For years our two markets kind of went in lockstep. I have been attending real estate conferences in both Canada and the US for decades and there was always a pattern of similar consumer behaviour, except for the over supply of housing stateside which lead to the crisis in 2008. In the US a generation has been shut out of the real estate market due to the subprime lending which occurred in the latter part of the 2000’s. Canada escaped unscathed by what turned out to be a far reaching global financial crisis. As a result the noise of the market is different in our two neighbouring nations, tariffs are of lesser concern than the handiwork of Elon Musk for Americans, but Elon is on the minds of Canadians as seen in the Google Trends graphs below. 

[INSERTTARIFFSSCREENSHOT]

HOW DO MAKE SENSE OF ALL THIS NOISE? 

Buying and selling property is a massive financial decision… but is it really? The numbers may be bigger of course, but I believe that financial sentiment stretches the gamut from; are we going to buy a new car this year, maybe we skip going out for dinner this weekend, or postpone that family holiday, to buying a home. It’s all about consumer sentiment, if people feel good about what is on the horizon they move with their wallets. I was fortunate that I had many conversations around business with my maternal grandfather, as I remembered his legacy recently on his birthday (February 22nd) I recalled a saying he told me “La Fame fa usire il lupe dal Bosco” which translated means hunger drives the wolf out of the woods, (Italians have a fascination with wolves, people from Rome believe a wolf raised 2 children who eventually became the founders of Rome). What my grandfather was trying to tell me is that necessity compels people to take action, in other words when you need something or you see an opportunity you will always make it work. 

My grandfather who was a successful retailer in the home furnishing business enjoyed sharing his experiences with me, so when I asked him his secret to success, he uttered that Italian proverb and when I looked puzzled, he went on to say how each individual is different and sees things in their own light and under their own circumstances, and once you unlock that you will find true success. He focused his retail prowess on segments of the market, one being soon to be married couples. He knew that no matter what was going on in the economy (layoffs, strikes, high interest rates, inflation, etc.) that the parents of these nuptials in the 50’s, 60’s, 70’s and 80’s would do everything in their power to give their respective children a good start, “They just made it work”. 

WHERE DO WE GO FROM HERE? 

As we look on the horizon of the tale of our two economies, most would say that we are now moving into an era where the real estate buying and selling public of our respective countries is in a state of divergence. But is it really? We may have some differences from a financing perspective like 30-year mortgages in the US, and our ability to port our mortgages in Canada. But the fundamentals are almost a mirrored image of each other, slow housing starts, a shortage of supply of new housing going forward, a growing inventory of properties for sale, and maybe, yes maybe, lower mortgage rates on the horizon. Let’s take control of our market destiny, no matter the economy of the day, there are going to be those people who will thrive and transcend all of the market noise, it is beholden upon us to identify those niche buyers and seller’s, and provide them with the best information along with high level strategic advice to help them make those life decisions for the medium- and long-term. Remember chaos does not last forever, and when the dust settles there is no better way to build wealth than real estate.