Real Estate's "Pent-Up Demand"

[00:00:00]Thanks for clicking. Uh Canada's real estate market had some bumps in June, but growing affordability will unlock some of the pent-up demand we've seen over the past few years. This according to a new report coming from RBC. And yeah, while it might be difficult to trust a bank that told its customers to expect bidding wars in 2022, when that bank knew interest rate hikes were coming, they're not the only ones pushing that pent-up demand story. With the realtors, the real estate boards, and the media all pushing very much the same for the past three or so years.

[00:00:29]>> Despite lots of pent-up demand >> release of pent-up demand.

[00:00:32]>> There's likely pent-up demand sitting on the sidelines.

[00:00:35]>> to the sidelines with people coming off the sidelines and home buyers that moved to the sidelines.

[00:00:37]>> still expects pent-up demand.

[00:00:39]>> pent-up demand by >> all the potential home buyers on the sidelines.

[00:00:42]>> Toy Y'all doing each other, are you?

[00:00:44]>> And yet, all of these experts have been pushing the fear of missing out and an elusive pent-up demand in the market without defining or measuring what that pent-up demand is. Thankfully for us though, National Bank has made an effort. So, what I wanted you to say is very briefly go over the pent-up demand argument being made by the banks and why we can't trust them, go over National Bank's rebuttal, and then discuss what to look for next. Speaking of next, the end of the month is fast approaching with that we are awaiting the release of July's real estate data coming out from the local boards, and we'll obviously have an update out on that data on this channel. Make sure you click like and subscribe if you want to get those updates, but for now, let's get into the pent-up demand.

[00:01:27]On to this pent-up demand, RBC noted in a new report that although we had a slow June, pent-up demand would no doubt be unlocked going forward. Which is fine, I suppose, except that same bank was talking pent-up demand back in 2023.

[00:01:41]Pent-up demand in 2023. Just to be clear, that bank took a look at this graph with the past 2020-2021 having brought forward so much demand, sales up so much from their 10-year average, and then thought after a year everything was going back to normal.

[00:01:57]>> No, there we'll it.

[00:01:58]When they're all choking to >> And obviously we can see in the prices and the sales data that prediction from 23 didn't materialize, which made sense.

[00:02:06]As when RBC made that 23 prediction, they didn't make an attempt to define what pent-up demand was, how they measured it, etc. And see, as any first-year stats student will tell you, the thing that's doing the causing, your independent variable, needs to be defined, operationalized, and measured.

[00:02:23]Otherwise, you're just spewing trouble.

[00:02:25]>> Really? Are you sure?

[00:02:26]>> Regardless though, RBC is not the only bank telling us about all of this pent-up demand to come. TD told us at the beginning of 2026 that the recovery was coming on pent-up demand, but they also told us the same thing in 2023, that a 1990-style correction was not likely as Ontario was in the grips of a housing shortage and there is a lot of pent-up demand. Scotiabank also told us about pent-up demand back in 2023 and then again 3 years later. So, we've got RBC, TD, Scotiabank, all telling us about this pent-up demand set to come to the market, acting very much like their brethren in the real estate industry, your Shawn Cathcarts, your Jason Mercers, your Philip Sopers, all of which spoke about pent-up demand in 2023 as well.

[00:03:07]>> Even a a small interest rate decrease will unleash something of a a torrent of pent-up demand.

[00:03:18]>> There's always going to be this strong demand flowing through and >> huge increase in the demand for real estate.

[00:03:23]>> It it boosts demand >> housing at large.

[00:03:26]>> that fundamental demand there.

[00:03:27]>> for strong demand that we have >> will stimulate the the demand for for home ownership for >> Because demand is stronger than than supply.

[00:03:36]>> There's a lot of pent-up demand that's out there.

[00:03:38]>> They're our best friends.

[00:03:39]>> Yeah, it's almost like it's coordinated, like there's some centralized body, the banks, the real estate industry, the media, all pushing this pent-up demand story with nary a mention of what it is, how it works, or how it's measured. But the 2026 report coming from National Bank sought to do just that, estimating the number of new households that would have been created since 2021. Using data coming from Stats Canada, the bank found that there were 77,000 fewer households created post-2022 than the bank had initially thought, which was 208,000.

[00:04:10]And yet, household formation just fell off a cliff post-pandemic. If people can't afford to form new households, they don't buy homes. In looking forward, National Bank doesn't see any big changes, noting that 50,000 in 2026, 90,000 in 2027, the lowest ever recorded for a 2-year period. Meaning, just not a lot of pent-up demand is waiting in the wings. New households are not forming.

[00:04:34]And it's not just that home ownership has gotten so expensive or that rent increases have far outpaced wage increases over the past few years. It's also that young people have been hit exceptionally hard by the economy. See, National Bank is talking about the demand curve. Demand at what price, which we talked about so much before on this channel. As the price, and hopefully the monthly payment, drops, the demand for homes increase, which is, in fact, a problem for RBC, a bank that's pushing the pent-up demand narrative, as its own affordability index suggests that affordability has bottomed. Meaning, as a percentage of income, homeownership costs are the best that they're going to get, at least according to RBC. Which, actually, I think we've heard that before.

[00:05:16]>> And that means affordability is about as good as you're going to get right now, POTENTIALLY.

[00:05:20]>> THAT'S MY BOY.

[00:05:21]>> AND LOOKING at RBC's own graph, the monthly payments as a percentage of income are roughly right back where they were in the first quarter of 2022.

[00:05:29]Now, you guys, RBC, you remember 2022, right? The first quarter? Back when you told people that rising interest rates would cool the housing market, but it would continue to stay strong as unmet demand remained and would continue to fuel activity. You even told people to expect more bidding wars. And since then, the market has done this. So, RBC is making the point that pent-up demand is coming back to the market as affordability has returned to where it was right before the bubble burst. Now, like we did at the beginning of the year when we went over bank motivations in trying to get people to lock in their interest rates as according to the banks, interest rates probably weren't getting any better, let's take a quick look at possible motivations for RBC's pent-up demand nonsense. I can't say for sure, but it could have something to do with RBC extending all of those loans based off fake appraisals, using old prices rather than current market prices, when it lends out money in Toronto. And it's not just RBC in Toronto. Satori Homes in BC has recently noted that TD, the same TD as the eve of a trade war is a great time to buy a home, is said to be using blanket appraisals in the Vancouver condo market.

[00:06:35]>> I'll take all of them.

[00:06:36]>> But yeah, as all of the assets that are backing RBC's $500 billion worth of residential mortgage loans, RBC definitely has an interest in getting the value of those assets back moving in the upward direction. As does TD, as does Scotiabank, as does the Bank of Montreal, as does National Bank, but I don't know why they issued that report.

[00:06:56]>> We can't have them here in our social club no more.

[00:06:58]>> So yeah, as we've seen over the past 3 years, we have the banks joining their real estate brethren in the pent-up demand story. Joining Shawn Cathcart, Phil Soper, Jason Mercer, and the media in pushing this elusive pent-up demand, which, as we saw, is neither measured, defined, or operationalized in all of these reports coming from these authoritative banks.

[00:07:21]>> There is no doubt that there is pent-up demand.

[00:07:23]>> Again, as we discussed at the beginning of the year when they were pushing that no rate cut nonsense, which, absent a war, we almost most certainly would have seen, as we mentioned, banks are not your friends. Banks are out to make money. They're not out for the everyday person. A simple report from the bank without any comparison or data analysis is just content. So, as always, do your own research. The banks, the media, the real estate industry, they're all out to get your money.

[00:07:51]>> It's all been arranged just for us to get your [music] money.

[00:07:55]>> With all that said, we will obviously continue to disentangle bank reporting from the actual data on the ground. If you want to get those updates, make sure you click like and subscribe, but for now, thanks so much for watching.