Inflation vs Deflation - Will The Housing Market Crash?

Make Money Count

Toronto's best mortgage broker, Cannect Home Financing, returns with Canada's best Mortgage Podcast, Make Money Count. In this episode Marcus and Justin discuss the contrast of inflation vs. deflation. Is this a cycle going on for the last 100 years? How will this effect Canada's housing market?

Marcus and Justin also discuss the type of Government and Central Bank responses are used for different phases of the economic cycle. They examine the idea of the economy just needing a "catalyst" over the last few years, like a pandemic or a war, to bring the economy into troubling times. Have a listen to get the big picture.

1. Investors no longer believe we will have a "soft landing".

First, we were told that with all the money the federal government was handing out, inflation wasn't going to be a problem. Later that changed to it only being a slight problem. A transitory result of global supply chain issues. Then the central bankers said inflation is a real concern, but it can be addressed and corrected without putting the economy into a recession. Today they don't even believe that to be the case, and investors are responding.

Big business leaders like Elon Musk and Cathie Wood have stated that rates should be reduced again in order to prevent the economy going into a recession. It is clear that the longer these rate hikes continue, the worse our recession will be, and deflationary times.

2. The Cannect Mortgage Investment Corporation is in a strong position to lend money.

The health and security of a Mortgage Investment Corporation (MIC) completely depends on the quality of deals it contains. A lot of other MICs are currently in a tough position to lend more now. Cannect did an effective job at lending with caution and on a reduced scale. We were in a good position to lend now with reduced home values and increased interest rates.

Unfortunately, Home values will likely continue to drop and interest rates continue to rise. However, we feel more confident in the deals we fund today knowing that those home values have taken a beating. A lot of other lenders will be unable to lend with cash tied up. This will bring high-quality deals to Cannect's door step.

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