2: The Biggest Investment Risk in Vancouver's Real Estate Market with The Loonie Hour's Steve Saretsky

Introduction

Welcome to the Canadian Private Real Estate Podcast, hosted by Hawkeye Wealth President Justin Smith. Hawkeye Wealth is an exempt market dealer focused on finding and vetting private real estate investments for Canadian accredited investors and family offices. It is registered in BC, Alberta, Saskatchewan, Manitoba, and Ontario. This podcast is for informational purposes only and should not be considered legal, tax, investment, or financial advice. Now let's get to it.

Justin Smith: Hello and welcome to the Canadian Private Real Estate Podcast. Thank you for joining us. This is your host, Justin Smith, and I am excited to have Steve Saretsky here with us today. Steve's a well-known realtor in the Lower Mainland, and he has millions of views on his YouTube channel and other platforms where he covers all things real estate in Vancouver and across the country. I've always appreciated Steve's willingness to say things that could potentially hurt his business, at least in the short term. But he says them anyways. So he has my respect. And I find I often pick up an insight or two after listening to him. And I hope this conversation will do the same for you. So, Steve, it's great to have you here today. And thanks for joining us. How are we doing?

Steve Saretsky: Good, man. Let's see who we can offend today.

Justin Smith: Is that your aim for the pod?

Steve Saretsky: Yeah. Yeah. I like to mix it up a little bit. I mean, I think at the end of the day, I like to look at the data, tell people what's happening in the market. And, you know, some people enjoy it and some people don't. But I think at the end of the day, we're just trying to do a service to help people and guide them through the real estate, you know, journey, whatever that may be, whether it's on the construction side or just the average homeowner.

Meet Steve Saretsky

Justin Smith: Speaking of journeys here, just to familiarize our audience, can you tell us a little bit more about how you got started in the industry to now how you've become a prominent realtor with those millions of views I've mentioned?

Steve Saretsky: Sure. Yeah. I mean, I've been in the business selling real estate for 12 years now. So I was young when I got into it. Obviously, you know, I didn't have a whole lot to lose with building up a business, and got on social media because nobody else was doing it. Started the WordPress blog, started blogging three, four times a week, just with the market. Kind of in 2015, 2016, the media started really catching on to what was happening in the housing market, looking for stories. And I was the one writing about it just because, I mean, I had a lot of time to write. You know, I just wasn't that busy as a realtor. So that was kind of how I got my feet into the space. The media started picking up some articles and then kind of from there morphed into like a YouTube channel. You know, we've grown that to close to 50,000 subscribers now and I think, I don't know, 10 million views over the years. We're on a real estate team here now. We were consistently in the top 1% of producing realtors in terms of sales volumes every single year. I like economists. I love macroeconomics. I never wanted to be a guy though that just sort of sat in his office and commentated on the market. I actually wanted to be out there physically doing my own deals as well, and just not some guy that sort of pontificates. And so I think that's maybe a little bit of like a unique blend that I bring to it — a mix of data from the streets and data on paper. And doing your own deals. I think it's easy to talk about the market and, like I said, pontificate, but to actually go out there and put your own money on the line, put your money where your mouth is, so to speak. So that's kind of what I've tried to do. Certainly not like a massive developer by any stretch, but I've enjoyed it.

Justin Smith: So you started because you had lots of time and now you have no time, but you still have to do it.

Steve Saretsky: Pretty much. Yeah, no, it's good though. I enjoy it. I think it's just a way to give back. It's obviously been very beneficial for our business over time. Like a lot of our clients come through the media channels, just the connections that we've been able to make over the years in the industry and outside of the industry.

A Segmented, Investor-Driven Market

Justin Smith: I think it's a great way to go about it. So you're based in Vancouver, Steve, focused primarily on residential markets. Can you share with us a little bit about what you're seeing in the market across various geographies and segments?

Steve Saretsky: Yeah, I mean, gosh, how much time do we have? I mean, it's bad. There's no way to sugarcoat it. I think last year in 2025, you had a 25 year low in annual home sales. So I think you put that in context when you factor in how much the population has grown over those 25 years — yeah, it's incredibly weak. You know, I'd say the market is kind of segmented, right? It's very segmented. I think what we're seeing is there's a lot of really strong weakness in the condo segment. Basically what has happened, I think over the last sort of 10, 15 years, is the growth of the investor, right? We drove interest rates down to zero, that pushed people out on the risk curve. So mom and pop decided to build investment condo portfolios. And so they were a huge part of the demand curve. Now you can borrow mortgages at 2%. You're earning nothing in a GIC. Like, people build out condos. And then every year when your condo goes up seven or 8% a year, it just kind of reinforces that view. And so I think that's what we had over the last 10 years. So I think demand was supercharged by the investor. And obviously through record immigration, you know, 1.2 million people a year coming to this country, it's supercharged rent growth as well. And so what we've seen is kind of just the reversal, right? It's like, okay, hold on. Interest rates went up 500 basis points in 18 months. All of a sudden, nobody wanted to be a condo investor anymore. Immigration went from a million to zero. And so what we've seen basically is the reversal of all those things that were sort of tailwinds for the housing market.

So what I'm seeing today on the ground is anything that is sort of catered or geared towards the investor is the market that is being impacted the most. So your entry-level single-family house in like prime neighborhoods, that's still selling okay. You know, the prices have come down a little bit, takes a little bit longer, but it's still selling. I think when you look at downtown condos in particular, those are really soft. You know, small suburban condos, there's just a plethora of these units, I think those have really gotten hit hard. And obviously the pre-sale market — I mean, the pre-sale market, quite honestly, it's completely dead. And that's because what, 70-plus percent of that pre-sale market is typically sold to investors.

Justin Smith: That 70 data is coming from just your experience?

Steve Saretsky: Yeah, yeah. I think if you look at relevant industry reports, I think Urban Analytics has commented on it in the past. I think if you talk to anybody that focuses on that segment, that's like a rough guideline. It's not like a perfect science behind it, but I'd say in general the majority of pre-sales are typically sold to investors.

What Shifts the Market?

Justin Smith: You think we're going to be in this same situation for a little while? What do you think it's going to take for the overall market sentiment to shift positive and get this thing going again?

Steve Saretsky: Yeah, I mean, I think it's going to take some time. I think we have an overhang of supply, right? I think if you look at completions, completions are running near record highs. The government's already told you that they're going to keep basically population growth effectively at zero through 2027. You know, the immigration numbers aren't going to change. You know, like, we look at Vancouver, CMHC says we have a 31 year high in the vacancy rate. And you still have a record number of purpose-built rentals under construction in the pipeline. So if you have no immigration and you have basically a 30-year high in vacancy with a full pipeline of new supply still coming, I don't think that rental market's going to improve. So again, the question is how do you entice the investor back into the market? The bull market thesis for the investor has been everything that we've talked about — immigration, low interest rates, rising prices, rising rents. And today, we have none of those. And so I think until that sort of slowly starts to shift back, I think it's going to be a couple of years.

Justin Smith: Do you think the trade policies or the trade negotiations with the US have much to do with it? Or do you think that's kind of a sideshow?

Steve Saretsky: No, I think it does. I think it definitely plays on sentiment. You know, I think people are nervous. I think people are uncertain. Obviously, if you're making, you know, a million dollar transaction, that's most people's largest transaction they're ever going to make financially. And so you want to go into that confident. I mean, I see it day to day just talking with people — like nobody's in a rush. Nobody has any urgency. They're waiting, they're watching, they're reading the headlines as most people do. And, you know, the headlines are obviously overwhelmingly negative today. You know, I think if you get some clarity with CUSMA and an extension there, I think that can certainly increase confidence. And I think that you'll start to see maybe a little bit more urgency from buyers. But the reality is, you know, to go from a 25 year low in home sales to some resemblance of normalcy, that's going to take time. So I think we'll have more sales this year at some point. But again, we're coming off 25 year lows.

The Best Time to Buy Since 2012?

Justin Smith: So when someone comes and talks to you about buying a house, do you unload all of this on them and tell them it's a really bad idea now? Like, how are you guiding your buyers?

Steve Saretsky: I mean, I talk about it on the YouTube show every week, so I just lay it out there. I think it's funny, right? Because people take away different information from every show. Like, you know, online, social media, I have people telling me that I'm like doom and gloom. And then I have people telling me that I'm a shill and, you know, I'm just pumping the market. So it's really interesting that people have different perspectives of the information and they interpret it differently. Like, in my view, if you look at it, statistically speaking, it's the best time to buy since 2012. So if you look at the sales-to-active ratio in Greater Vancouver, it sits at 9%, which statistically is the lowest since September 2012. So if you want to buy real estate, statistically speaking, there has not been a better time to buy it in terms of market conditions since 2012. So I think that's one way to look at it. Everybody thinks they're going to time the bottom, right? Everyone's classic kind of like following the herd, right? There's a reason why most people buy at the peak, that's why you typically have record sales volumes at the highs of the market. That's why most people very rarely buy at the bottom of the market, because everybody just kind of follows each other, right? You're listening to like their family or that like deranged uncle that's telling them it's a bad time to buy. And the reality is I think you want to take advantage of sentiment. And I think sentiment right now is some of the worst I've personally ever seen. And again, I think when you look at it and say, well, you had a 25 year low in home sales, that seems like a good time to probably enter the market.

I think one other sort of way I would contextualize it — I don't know if you want to compare this to Canada's housing correction and compare this to the United States and the GFC, kind of '08. I think that's probably a bit of an extreme example. But if you look at it and say, okay, let's just assume if we want to go apples to apples, let's just assume it is: in the United States, the housing market peaked in 2006. It technically bottomed in 2012. So it was like a six-year correction. But I'd argue that if you bought in 2010, you were probably pretty happy. Like, prices technically kept falling for another two years. But I think if you zoom out, people that bought in 2010 are pretty happy. So I'd argue today, the market peaked in February of 2022. It's been basically four years. And so you're four years into a housing correction. You know, can it go another couple of years? I think there's actually a decent probability that it will. I still think you can negotiate some really good prices today.

Leading Indicators and Realtor Hype

Justin Smith: Yeah. And like you say, if you're kind of waiting for the lagging indicators, you're probably past the bottom. What would be some leading indicators that you'd be looking at that give you a sense that the green shoots are emerging?

Steve Saretsky: Probably sales-to-active ratios, or sales in general. Data by nature lags, right? So I think if you're looking for leading indicators, it's typically going to be on the ground, feeling it out, right? It's going to be like, well, hold on a minute, all of a sudden our listings are getting a whole bunch of showings, all of a sudden the open houses are busy. Like, those are going to be your real leading indicators, but it's hard to report on those because it's not a data point. It's like being on the ground and watching the market. So that's kind of what I would be watching for.

Justin Smith: I do see posts talking about open houses being very active. Is that realtors trying to will the market back to life, or is that what you're seeing as well?

Steve Saretsky: Yeah, it's kind of my running joke these days. Like, realtor TikTok that I come across seems to be promoting the strength of the housing market. I personally am not really seeing it. I think if you look at the data that then gets reported, you know, three, four weeks later, it looks really bad. Like, January home sales were lower than last year. I think they're still running 30, 35% below the long-term average. You know, a February number — as we're recording this, they're going to track in lower than last year as well. So, I mean, I'm not seeing anything to suggest that the market is suddenly bouncing back.

Justin Smith: I always say that, you know, any realtor or anybody out there that's telling me that I should be buying now because the markets are poor — well, I kind of look back and see if there's any evidence that suggested they were telling me to sell in 2021 or early 2022. I very rarely find those two calls in the same person. There's just always people telling you to buy or transact.

Steve Saretsky: It's always a good time to be buying and selling real estate.

Justin Smith: Yeah, I bet. It's got to be one or the other.

Steve Saretsky: It's got to be one or the other, though. It can't be both, right? It's either a buyer's market or a seller's market. And I think you just give people the data, cut through the BS and let people make an educated decision. And the reality is, you know, I put out a lot of this information. A lot of our clients will come through our social media channels, say, hey, I follow you, seems like you have a lot of great advice. And then we sit down with them, we give them that advice, and go, oh, no, no, I can't sell for that. You know, I can't list my property for this price and take that price. And it's like, well, you've heard everything I've said about the market, I'm giving you the advice it takes to sell. And then oftentimes you'll see someone will just sort of anchor on the price of what they could have, should have, would have got, you know, a year ago, two years ago, and then really ultimately shoot themselves in the foot, which is like too slow to reduce, chase the market lower, and then, you know, capitulate 18 months later.

Overbuilding and the Rental Pivot

Justin Smith: No, it makes a lot of sense. What risks out there do you think investors are underestimating? And on the flip side, what risks do you think are being overblown? What things are not as bad as the headlines might have you believe?

Steve Saretsky: I don't know. The thing that we've heard in Vancouver especially has been like, you know, you can never overbuild. I think we have overbuilt. I think that you're seeing that a 30-year high in the vacancy rate is pretty telling. Are we under 4%? Yeah — I'm always a little skeptical with that number. Like, CMHC does their best, but you look at some of the government data, like I look at StatsCan's jobs data, take the data with a grain of salt. But I think what we're seeing is: yes, you're technically still under four, which for a major metropolitan city, that's actually still really low. But when was the last time you saw developers of newly constructed units offering three months rent, free internet for a year, chopping rents, taking two or three months to lease out places, arguably longer now? I think it's interesting. And I think when you look at the number of purpose-built rentals under construction — because what's happened, right, is everybody, if you lost the ability to pre-sell condos, everybody's pivoting to the free money at CMHC, you know, through their CMHC MLI Select program. And that's the only reason why these projects are getting built. But they're getting built in an environment where you have no population growth and you have falling rents. And in an economy — let's be honest, like in BC, I don't know, I'd argue that we're in a recession here. Nobody is sitting here in BC and saying, wow, the economy is doing so well.

Justin Smith: Yeah. It's funny you mentioned that, you talk about pivoting from condo to rental. Where do you pivot if rental doesn't work?

Steve Saretsky: I think you put your shovels down. But I think the challenge is obviously a lot of developers — I mean, I don't know if you put your shovels down, but I don't know if you put them into the ground in BC. I mean, obviously we've seen a lot of people moving to Alberta. I think Alberta is now saturated. I do projects in Alberta myself. Like, I think it's going to get overbuilt. I think it's in the process of being overbuilt. I mean, you know, you work with a lot of these developer clients as well. I think we're seeing a lot of sophisticated Vancouver developers that are just allocating more capital and developments in the United States.

Justin Smith: Yeah. You know, it's not politically popular to do so, but the math doesn't really care.

Steve Saretsky: Well, you look down the line with the new inventory that's not going to be coming on. You know, eventually the numbers don't work. You get to a point where the rental numbers — once you input a certain vacancy number and a certain rent number and, you know, you're not applying your usual 2%, 3%, 4% rent growth metric, you're applying zero, minus one, minus two, minus three, you know, minus five, whatever the number is — you just stop building.

Justin Smith: Part of my concern is there's not really anywhere else to pivot to in BC here. So do you get in a situation like the US did during the GFC, where people put down their shovels and they take up jobs in other industries, and all of this institutional knowledge on home building just essentially leaves the sector? And once you've been burned like that, once you've gone through a cycle like that, do you come back? Which I guess if you have a long enough time horizon might bode well for values.

The Condo Sales Collapse

Steve Saretsky: Yeah, I do look at the data and you're probably at like 2030. Like, I think it's interesting, the data in Toronto is really fascinating, but Vancouver is not far behind, which is to say — I'll give you the numbers right now. So in 2025 you had 2,800 new condo sales in the entire Lower Mainland, as per Altus Group data. 2,800. That's down from 19,000 in 2021. All right, so you had the peak of 19,000 to 2,800. It's the lowest since at least 2017, which is as far back as the data goes. But basically what that tells me is, of those 2,800 new condo sales, the irony is the numbers are probably going to cut in half from there, which is to say just because you pre-sold 2,800, it doesn't mean that that developer hit their pre-sale requirements to get financing to get off the ground. So there's a high likelihood that a whole bunch of those units are actually going to get projects canceled, deposits returned to the buyers, and those 2,800 sales are in reality probably more like 1,400. And so when you sort of start zooming out you say, wow, okay, well let's fast forward three or four years, that means your new condo completions are going to basically be zero. And so yeah, I think if you're looking at like the next bull market, it's pretty easy to see that if you have no new condo sales today, that transpires into no new condo completions, and call it three to five years from now. So that's probably when your next term is whether the demand is going to be there.

Steve Saretsky: Yeah. And I think obviously the reality is, we're going to have immigration growth again — not this year, but we will have it again. It will come back. It certainly won't be a million people again, I hope not, but it'll come back. And so yeah, I think if you look at it from a cycle perspective, zoom up to 2030, I mean, that would be like an eight year housing correction, or an eight year sort of softness patch. Which I don't think is unprecedented. I mean, we went through that in the 90s. There was no growth in the 90s. Good decade, but not for housing price growth. I don't know, people are always like, oh man, this guy is so negative, he's saying no price growth for a lost decade. But you've already had a lost decade in the west side of Vancouver. Detached single-family houses, which is the best real estate in the Lower Mainland, it's prime, prime real estate — those valuations peaked in 2016. It's 10 years later, there's no growth. You know, you go to West Vancouver and most pockets of West Van, they haven't moved in 10 years. So I think it's already playing out. And my view is, if your west side house hasn't gone up in 10 years, why does your condo in Surrey and King George Hub have to go up every year? At the end of the day, yeah, I might get it from a negativity perspective, but I'd flip it on the head and say, well, listen, Canada has an affordability problem. I think it's probably not the worst thing if you have relatively stagnant home prices for five to 10 years. Give incomes a chance to catch up. Let's call a spade a spade — the brain drain that's leaving Canada, because young people can't afford to live here anymore and then have families, it's real. So I think I don't think it's the worst thing. I mean, it sucks for us in the industry that obviously make more money off of rising home prices, but you have to look at the bigger picture too.

Justin Smith: Yeah, you know, I get often asked why we don't just do our own projects, like why don't we just become a developer. My answer is usually it's a lot easier to move money than to move teams and operations. You know, if you've developed in Vancouver for 30, 50, 80 years, to go and all of a sudden say, oh, I'm going to be a Calgary or a Saskatoon or pick any US market, that's a real big undertaking, right? Whereas the capital can pivot quickly. And as you alluded to, you know, in the conversations I have, that's already happening. It's going to be hard to fund. You know, you got to get the pre-sales, yes, but you also have to have investors that are willing to go and take a bet that the pre-sales will occur, and capital is not there for it right now.

Policy Levers That Could Move the Market

Steve Saretsky: Yeah, it's interesting, right? Like, I had this conversation with a good friend of mine in the development space. He made a really interesting comment, which he said: the reality is, do you want the bull case? Like, you could really stimulate demand tomorrow if you wanted to. Okay, like — you're in Vancouver here — but the stroke of a pen, that's all it is. You could remove the foreign buyer ban, you could remove the foreign buyer tax, you could remove the BC speculation tax, you could remove the City of Vancouver empty homes tax, you could remove the Airbnb ban, you could remove the mortgage stress test. These are all strokes of a pen, right? So a lot of these decisions today, I think, largely could be changed overnight. I don't think they will be, but it's interesting because, yeah, if you really want to stimulate demand, stimulate housing, in theory you could do it pretty quickly.

Justin Smith: Yeah, another big part is the municipal fees. You know, what's the right number there? As real estate was always going up, the developers could always make it work in spite of the rapidly rising fees. That environment doesn't work anymore. So do cities lower those fees to allow projects to start and get something rather than, you know, 100% of nothing? And I do think that some of those negotiations are already starting to happen. We're hearing a little bit on density bonuses that the city gave out — you know, you pay us X number of dollars and we'll give you Y amount of density for that. But the market's shifted, projects aren't viable, cities coming back with some concessions on that to try and kickstart projects. That's the big one I've seen online, and I'm sure it varies market by market. But I've seen posts of up to 30%, give or take a percent or two, on the percentage of overall costs that are government fees of one type or another. That's a pretty big chunk of cash.

Steve Saretsky: Yeah, I mean, that's the easiest one. You know, you want to change developers' pro forma overnight, I mean, you just change your development charge fees, right? I mean, that's easy to do. And I think in theory you would imagine those should be sort of counter-cyclical, right? If you want affordability — you know, we're getting closer to affordability now than, like you said, we were a couple of years ago, right? But if you want to continue in that direction, you can't expect developers to keep developing and keep this momentum up without any profit motive.

Justin Smith: And this notion that government's going to come in and make up for what developers aren't developing is dubious.

Steve Saretsky: No, it's — yeah, it's difficult to have. I mean, you know, again, in theory, you could remove the 5% GST on all new homes. I think they did it for first-time home buyers, but you could do it across the board. I mean, it's funny because, like I said at the beginning of the show, most of the buyers of new homes are investors, not necessarily first-time home buyers. And so you could make pre-sales 5% more competitive tomorrow by removing GST. So there's a lot of things they could do. I mean, it's interesting, right? Like, you look at rental units under construction in Canada, and there's a reason why they're at all-time record highs right now, the number of purpose-built rentals being built. And it's because they created the CMHC MLI Select program — effectively 95% loan to cost, 50-year amortizations, very, very cheap government financing spurred that construction side of it. And they also removed GST on rentals as well. So yeah, it's interesting, right? I mean, these are all mostly policy levers, right? The policy levers were going in real estate markets' favor for 10 to 20 years. So it's interesting to sort of see them reverse.

Interest Rates and the Mortgage Renewal Wave

Steve Saretsky: You asked me earlier about one thing I felt was overblown. To circle back on that, I'd probably say the mortgage renewal wave. I think everybody was really, really worried about it. And obviously that came at a time when mortgage rates got up to like six, six and a half. So if you're renewing from 1.5 to six and a half, that would have been a real problem. I think now today you're seeing these mortgages at one and a half renewing at three, eight. So it's still a jump, but three, eight's a hell of a lot better than the six, four. So yeah, I think it didn't fall apart with that one.

Justin Smith: Five to six, four. I mean, you saw delinquencies increase somewhat, but —

Steve Saretsky: I think there's an asterisk on that though. So I think if you look at the data, part of the reason why the market held up for as long as it did is actually sellers stopped listing. So for the first half of 2023, I think new listings collapsed to like 20 year lows. People just like, ah, the market sucks, I'm going to hold off, I'm hearing that mortgage rates will eventually come back down again, it's not a good time to sell, take it off or just don't list it. Overall inventory levels are actually still relatively tight, despite demand being obviously weak from the high mortgage rate, so it kept prices relatively in check. And I think what we see now is now you're seeing new listings running well above long-term averages, because I think people have sort of — I would say capitulated is the right word — but it's time to move on, like four years into this correction, and prices aren't getting better, they're actually getting worse. So it's like, if you want to sell and move on, you just have to accept what the new price is.

Justin Smith: Do you have any opinions or thoughts on where interest rates may be headed over the next year?

Steve Saretsky: My bias is still for like lower. It's interesting. Like, I think there's two things, right? I think obviously you look at government debt and, you know, it's the same issue all around the world. Government debt issuance is overwhelming the private sector's ability to ultimately absorb that supply. I think that's why you're seeing bond yields have pretty much been range-bound for the last 18 months, 24 months. Like, it's been really hardly any movement, and fixed rate mortgages basically haven't moved. That's what I kept telling clients, you know, a year ago: oh, you know, let's not reduce our price, we keep reading in the Globe and Mail the Bank of Canada is going to cut rates. I was like, yeah, it doesn't mean fixed rates are going to move lower, and 70% of the mortgage market uses a fixed rate. I still think the economy is really weak. I think that AI is very disinflationary. I don't know, my bias still tilts towards slightly lower rates, but —

Justin Smith: Yeah, it's such a tough game to play. I remember the argument when rates were low, that rates would stay low, was something along the lines of, you know, like you say, the government's got all this debt, how could interest rates go up in any large fashion, the government just couldn't afford it, right? That was the argument, you know, it was an argument I very much bought — I was variable rate on all of my mortgages. And by the time you realized, oh, you know, maybe it can move more than one or two percent, the bond rates had already jumped so much that to go flip from your variable to your fixed, you were going to still have to pay another one, two percent above what you were paying on your variable. And you're like, no, it surely couldn't go higher. And then, of course, you kind of just rode it up, right? And so I don't know, I kind of always feel, after being surprised to the upside on interest rates — I'm sure we've got some people that are going to tell me they lived through the 80s, and, you know, I don't remember what that was like, you haven't seen high interest rates, six percent interest rates aren't high interest rates — and then I always give them that, well, your house didn't cost one, two million bucks either. But interest rates — and this isn't a guess here — but interest rates can surprise you to the downside too. They can surprise both ways.

Steve Saretsky: Yeah, they're hard to predict. I think anyone that says with an extreme amount of confidence where it's going, I think I'd be pretty skeptical. But I don't know, I'd say I got a little humbled too in 2022 to see the pace that they moved. I mean, like I said, the Bank of Canada raised rates effectively 500 basis points. And I remember, I actually just got married, kind of on a honeymoon, and then like the BNN Bloomberg calls and it's like, can you do this media interview, the Bank of Canada just raised 100 basis points at one meeting. And yeah, it was just crazy, man. I'll never forget that, you know, 100 basis point move. And that obviously just rocked the market. Buyer demand obviously just completely collapsed.

Justin Smith: Yeah, not too long after Tiff had gone out and tried to give everyone the confidence to buy new homes because the interest rates would remain low. I'm kind of paraphrasing there.

Steve Saretsky: Totally. Yeah, yeah, exactly. I mean, they got it wrong more than anybody. And I don't know how many PhDs they have on their payroll, but it's a lot. I think the lesson over the last couple of years has been, yeah, I feel like a lot of people didn't really appreciate the real risk of a variable rate mortgage. And I feel like that's probably scarred a few people. I'm very reluctant to tell — I always try to preface now, like, okay, just so you know, these are the risks. It's kind of funny.

Sentiment, Speculation, and Hard Lessons

Justin Smith: Everyone's on their own journey. I stayed variable throughout the whole process. I read these articles about, like you say, the mortgage renewal wall or whatever it is, and I'm like, no, we're on the downside swing now, I'm just loving it here the last couple of years. So everyone's experience is a little bit unique that way. What's one disciplined principle you think investors should anchor to right now when emotions, narratives, and noise are quite loud?

Steve Saretsky: I think it's just ignoring the noise. I don't know, like, I'm a big sentiment guy, I love sentiment. I love, for example, if you just chat with other realtors, you chat with people that come through open houses, or like, hey, this deal's collapsing, well, why is it collapsing, oh, you know, they're just worried about the market, their uncle told them not to buy. You know, I just remember in the bull market when you had 30, 40 pairs of shoes at the open house and everyone's just desperate to buy anything.

Justin Smith: I remember I went to a presentation, I think it was 2011 or 2012. I was just married and we were renting. Wife and I were looking at buying our first place, and this presentation went through every graph on why buying real estate was the worst thing you could possibly do. And there was also a stock portfolio manager at that same event. You know, the idea was, after you sell your house, here's all the great stuff he was going to do for you in the stock market — which might not have actually been too bad of a move, honestly, either. I'd be curious to see how someone would have done had they sold their house in 2012. The stock market's been on a pretty solid run. But we were a little bit scared because of the graphs. So we'd buy the most affordable place we could get at the time. And it was actually standing inventory, a townhouse. And, you know, previous to this most recent downturn, I think that was the last — I don't want to say there's never been another piece of property that's been standing inventory, but there was a decent amount of it. From my recollection, that was the last time. So that turned out to be okay for us.

Steve Saretsky: Yeah. I don't know. It's funny. Like, a lot of really good friends and portfolio managers I know, like most portfolio managers naturally don't like real estate, which is fair, I mean, competing interests, but — I don't know, I don't think there's any right or wrong. It's funny, there's still an ongoing debate today of buying or renting and which one is more financially sound, and I think you can make really good arguments on both sides. And yeah, I think everybody has to sort of self-assess their own situation. Obviously the one mistake I see — just super simple stuff, but I think there was a fallacy that real estate always goes up. Right? It's like, you know, the mistake I saw people make was like, oh, we're going to buy this one bedroom and we're planning to get pregnant, so we're probably going to have kids and we'll probably move out of the space in a couple of years. And I was like, well, a couple of years, you know, you got to factor in all your taxes and fees on every move. I mean, a couple of years, like, will you be able to sell and trade out of this house or this condo in a couple of years? Like, people just assume that, well, yeah, it's going to go up 8% and next year it'll go up another eight, and we'll more than cover all the fees and taxes. I think what you're seeing now, obviously, is you bought in '21 or '22, there's a lot of people that are just stuck. You can't sell, because in order to sell, you might be looking at realizing a $200,000 loss or whatever, right? I think it's been a good lesson. I think part of it too is just a lot of parents passed on the advice that worked for them. Which is like, this was the best trade, I bought this house 30 years ago and now I'm a millionaire, like you can too, right? And it's like, well, these are different environments. I mean, mortgage rates from 20% down to 1% — literally, you know, at the peak of the market you could get an HSBC five-year insured mortgage for 0.99%. So it's like, you can't apply what worked for you 30 years ago and expect it will naturally continue to work.

Closing: "Focus on What Is, Not What Might Be"

Justin Smith: Those were the days, Steve. Maybe a point for a future podcast here — I like the idea of being able to write off interest on your principal residence and giving the next generation a leg up a little bit more that way, more similar to what the US does. Anyways, we'll revisit that one maybe on a future discussion. But last question here. Can you share one piece of advice you received early on in your real estate investment career that's made an impact on your life and you're grateful for?

Steve Saretsky: I think just not to speculate. You know, I think people, when they're trying to make a deal work, they'll add in a lot of, well, if this happens and that happens, right? If the rent keeps going up and I get this rezoning and I get this favorable financing, it's a good investment. It's like, I think you have to look at the asset today. Does it make sense today? And then obviously you can speculate on the future, but that's kind of like the cherry on top. Focus on what is, not what might be.

Justin Smith: I like it. Perfect. Thank you very much, Steve. Really appreciate your time and the information that you've brought.

Steve Saretsky: Yeah, man. Thanks for having me on. Appreciate it. It was a good chat.

Justin Smith: Thank you for listening. As a reminder, this podcast is for informational purposes only and should not be considered legal, tax, investment, or financial advice. Any forward-looking statements are based on opinion and are not guaranteed. Hawkeye Wealth has no obligation to update them. Investing in private equity is generally considered high risk, with potential for illiquidity or a loss of capital. Most of our investments are only available to accredited investors. As such, a suitability assessment is required prior to any investment through Hawkeye Wealth.