Episode summary
Bond Market Crashes; Your Home Is Next | Ron Butler
The David Lin Report
· · 38 min · Hosts: David Lin · Guests: Ron Butler
Summary
Ron Butler argued that the housing downturn is being driven less by a normal cyclical slowdown than by a structural affordability shock: mortgage rates are high, long bond yields look set to stay higher, and buyers are increasingly unwilling to transact. He said many would-be sellers in the U.S. are locked in by 3% mortgages, while many buyers are waiting on the sidelines, which is widening the gap between sellers and buyers and pushing prices lower.
On Canada, Butler said the pressure is even more visible in Ontario and British Columbia, where falling prices, weaker rents, higher property taxes, and rising condo fees are squeezing landlords. He highlighted so-called “dog crate” condos under 500 square feet as the most damaged segment, and said court-ordered sales are creating new low comps that drag neighborhoods lower. He expects foreclosures and forced sales to keep rising because more owners now owe more than their homes are worth.
Butler’s outlook was not for a quick bottom: he said a meaningful recovery may not begin until 2028, with 2027 likely still weak. He argued the key catalysts would be lower rates, a calmer trade environment, and better employment, and he said buyers should prioritize lower home prices over trying to time mortgage rates.
Key takeaways
- Ron Butler said the housing slump is being reinforced by higher long-term bond yields and rates that he expects to stay elevated into next year.
- He said many U.S. owners with roughly 3% mortgages are refusing to sell, while buyers are waiting, which is helping create a shortage of listings and weaker transactions.
- Butler said Canadian “dog crate” condos under 500 square feet are the most damaged segment and will stay under pressure longer than ground-oriented homes.
- He said court-ordered sales in Canada are typically 8% to 10% below the lowest prior neighborhood sale, which he believes is dragging local comps lower.
- Butler expects little real recovery before 2028 and said the first sign of healing will be prices stopping their decline rather than a sharp rebound.
Notable quotes
“the sentiment is becoming very very bearish in terms of the movement of bond yields right across the globe”
“You better be. Uh because it it can you know, it can come around to bite you as well”
“This is a a a a really interesting feature of the fact that many people almost 40% of the market in in the US these mortgage holders still have a mortgage rate that looks like 3%”
“It is certainly the most beat up single category of real estate in Canada”
How the episode opens
There's financial pressure, which has been grinding for a couple of years. It's This looks like it's going to go on another year or two. Go crazy.
Like just just go 20% less on everything. When the borrower gets in trouble, they just throw up their hands and say, "Well, I guess I'm just going to stop paying because I cannot sell this house even close enough to the amount of the mortgage to allow me to get out with any money. And I'll just live for free."
This is possibly the worst housing crisis since 2008 across both Canada and the US. US mortgage rates are at a nearly 3-year high. Freddie Mac's 30-year average has hit 7.4% versus 6.27 just a year ago.
Housing costs keep climbing, too. The shelter component of the CPI rose 3.2% year over year, but downside pressures are already building. Redfin counts 62.6% more sellers than buyers, the biggest gap in its records.
And housing completions are down, and the XHB home builders ETF is down 22% from its June highs. In Canada, the cracks are in full view. Court-ordered foreclosures in Vancouver are at the highest level in years, decades even, even higher than 2008.
And as central banks around the world continue to raise rates, homeowners face even higher interest rates down the line, which eventually may be passed down to renters. So, how high do rates go, and how do the housing market survive? Right now, on Kalshi, traders are predicting 65% chance that the 30-year mortgage rate will go above 7.5% by the end of 2026.
If you agree with those odds, a $50 trade could yield $77 if you're correct. And our next guest will give us his outlook, so stay tuned. This video is sponsored by Kalshi, the largest prediction market in the United States.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- mortgage rates
- foreclosures surge
- home price declines
- housing market recovery timeline
- canada housing crash
Companies and tickers mentioned
- Butler Mortgage
Watch the episode
Watch “Bond Market Crashes; Your Home Is Next | Ron Butler” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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