PodcastDavid Lin ReportRon Butler

Bond Market Crashes; Your Home Is Next | Ron Butler

Ron Butler describes a housing market under pressure from high mortgage rates, buyer hesitation, falling rents, and distressed sales that may create lower comparables. He says developer defaults pose virtually no systemic risk, but expects housing strain and falling prices could persist through all or part of 2027. A recovery, he argues, would require stronger employment, an end to the trade war, and some interest-rate relief, with single-family homes and townhomes likely to recover before tiny condos.

Real EstateInterest RatesMarket Volatility

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Key Takeaways

Ron Butler says U.S. inflation could deepen homebuyer hesitation by raising concerns about the economy and possible Fed hikes, on top of mortgage rates above 7%. Redfin’s reported 63% excess of sellers over buyers—the largest gap since the post-recession housing crash—reflects buyers’ reluctance to give up lower existing mortgage rates and is putting downward pressure on prices.

High mortgage rates and buyer uncertainty are weighing on new-home purchases, and Butler says builder incentives cannot overcome that hurdle. The State Street Home Builders ETF (XHB) had fallen 22% from its early-June peak, from $115 to $95, while U.S. residential construction completions were also declining; Butler expects construction pressure to worsen.

Butler describes mounting pressure on Ontario landlords, with many facing negative cash flow amid falling property values, rising expenses, and 24 straight months of lower Canadian asking rents. In British Columbia, court-ordered sales have reached a 10-year high and delinquencies are up 52%; Butler says these sales can close 8%–10% below prior neighborhood lows, creating comparables that pull values down, while some underwater owners may remain in their homes through the six-to-ten-month power-of-sale process.

ECONOMY

Inflation And Buyers — Ron Butler argues that a jump in U.S. inflation unsettles prospective homebuyers by raising concerns about the economy and possible Fed rate increases. That adds to the deterrent effect of high mortgage rates.

“we see inflation a big jump in inflation in the united states last this week and it unnerves people it unnerves people where is the economy going what's going to…”—

Bank Of Canada — Ron Butler says the Bank of Canada’s job is to keep inflation from getting out of control, and describes rate increases as its blunt tool—even when inflation stems from a supply shock. He cites September’s loss of 68,000 Canadian jobs and an upcoming inflation reading as context for a possible hike.

“Canada just lost 68,000 jobs in September. Absolutely. Look, there's really only one tool the Bank of Canada has, and there's frankly really only one job they have…”—

MARKETS

Seller Imbalance — Redfin reports that U.S. home sellers outnumber buyers by 63%, the widest gap since the post-recession housing crash. Butler says buyers are reluctant to give up low mortgage rates and take on rates above 7%, leaving too few buyers and putting downward pressure on prices.

“Home sellers now outnumber buyers by 63 percent. This is the biggest gap since post -recession housing crash…”—

Mortgage Terms — Five-year fixed mortgages, the Canadian mortgage industry’s mainstay for roughly 90 years, now account for only about 8% of newly selected mortgages. Butler says borrowers have shifted toward three-year fixed terms, while variable mortgages make up more than 38% of the market.

“Five -year fixed was the mainstay of the Canadian mortgage industry for more or less 90 years…”—

Adjustable-Rate Share — The transcript cites about 3.1 million U.S. adjustable-rate mortgages, or roughly 5.6% of approximately 55 million active mortgages. Butler says they remain a very small share of the mortgage-acquiring public and are not a major issue.

“So there are about 3.1 million arms outstanding, representing just about 5.6 % of the roughly 55 million active mortgages.”—

FORECASTS

Higher Bond Yields — Ron Butler says fixed-income executives have told him bond yields of all types will be higher next year and central banks will continue raising rates. He presents this as the sentiment he is hearing, not a guaranteed outcome.

“I mean, the things I hear are simply this, that all these yields of all types of bonds will be higher next year and central banks will continue to raise.”—

Prolonged Housing Strain — Ron Butler says the housing strain is not a brief crisis like 2008 and could last another year or two. He guesses that more below-market foreclosure listings could add supply and put further downward pressure on the market.

“There's financial pressure, which has been grinding for a couple of years. It's not just a short, sharp crisis like 2008, and then it's over…”—

Housing Crisis Warning

Butler says buyer hesitation and financial pressure are keeping many U.S. and Canadian households on the sidelines, and warns that housing strain may persist for another year or two.

Should You Buy Now?

Butler advises buyers who can wait to stay sidelined rather than accept a high mortgage rate, especially when a purchase is not urgent.

Mortgage Rates Going Higher

Butler expects global government bond yields and U.S. mortgage rates to trend higher, despite short-term fluctuations, and says adjustable-rate borrowers must not assume rates will fall.

Adjustable-Rate Mortgages

He says U.S. adjustable-rate mortgages remain a small share of outstanding loans and do not pose a major market-wide risk, unlike the more consequential prospect of persistently high rates.

Canada's Mortgage Trends

In Canada, five-year fixed mortgages have become uncommon as borrowers favor three-year terms and variable rates; Butler says flexible prepayments make 30-year amortizations manageable.

U.S. Housing Market Freeze

Butler attributes the U.S. housing freeze partly to owners holding low-rate mortgages who do not want to move, while high borrowing costs and buyer hesitation are pulling prices down.

Homebuilders Under Pressure

High rates and uncertainty are also weakening U.S. homebuilders, delaying purchases and reducing construction completions despite incentives offered to buyers.

Inflation & Rate Hikes

Butler says inflation anxiety could keep buyers cautious and prompt central banks to raise rates, even as economic weakness and job losses weigh on households.

Canada's Condo Crash

He describes sub-500-square-foot Canadian “dog crate” condos as the hardest-hit property type, with falling rents and rising carrying costs pressuring owners to sell.

Rental Market Outlook

Butler says U.S. rents remain supported by employment and a resilient economy, while Canadian job losses and falling asking rents are increasing pressure on renters and landlords.

Vancouver & Toronto Housing

British Columbia and Ontario are seeing the sharpest housing declines, driven by high rates, economic uncertainty, and weakness in small condos; Alberta and Atlantic markets are holding up better.

Foreclosures Surge

Butler says court-ordered foreclosures in British Columbia have risen sharply as prolonged financial strain pushes distressed borrowers to abandon properties rather than sell.

Underwater Homeowners

When homeowners owe more than a home can fetch, Butler says some stop paying and remain in the property during foreclosure; discounted sales can reset neighborhood comparables lower.

Foreign Buyers Won't Save Housing

Butler rejects the idea that Canada’s foreign-buyer ban ending in 2027 will lift prices, citing provincial taxes, weak overseas demand, and buyers’ reluctance to enter a falling market.

When Will Housing Recover?

A recovery needs the trade war to end, employment to strengthen, economic uncertainty to ease, and interest rates to provide relief; Butler expects prices could keep falling through some or all of 2027.

Buy Now Or Wait?

Butler says single-family homes and townhomes are likely to recover before tiny condos, and advises buyers to prioritize securing a lower purchase price over trying to time mortgage rates.

Canadian Banking Risks

Butler reports no material tightening in Canadian prime-mortgage underwriting and says developer defaults pose virtually no systemic risk, with investors helping clear some unsold condo inventory.

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Important Disclaimers

Not Investment Advice: For education only — not financial, tax or legal advice.

AI-Generated: Made by AI from source transcripts and may contain errors.

No Guarantees: Past performance does not predict future results; investing carries risk.

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