There was widespread fear at the onset of the pandemic, for obvious reasons. Among the likes, was Stephen Poloz, then head of our central bank. Could central bankers save the system once again? Was there enough monetary juice left in the tank to stimulate the economy?

In an interview with the Globe & Mail, Poloz recounts, “Reporters were asking me, ‘What’s the maximum, how big could it be?’ I said, ‘Well, it’s unlimited. … It’s whatever the market needs.’ ”

Sure enough, $5B of Quantitative Easing per week later and it worked. Financial markets are humming along, credit is flowing, and Canadas national housing market is enjoying record high prices, officially up 17% on the year, a necessary side effect says Poloz.

And so far, policymakers have been unwilling to intervene for fear of undermining the economic recovery. “One of the concerns we’re having is there’s starting to be ‘fear of missing out’ … and that might be driving some of the expectations,” Deputy Governor at the Bank of Canada Toni Gravelle noted in a recent speech.

Yes, extrapolative expectations are running high, and why wouldn’t they? When policy makers intervene to prevent natural price corrections you create speculative feedback loops. People believe house prices never go down so they take even bigger risks, ultimately creating even larger systemic risks that require even more intervention down the road.

Per the Bloomberg Nanos survey which measures Canadians expectations for house price appreciation, it is now running at record highs, surpassing previous highs set in 2016/17. Everyone is on board, betting on higher prices. Perhaps this is a sign we are nearing the top, or perhaps we are set for one more face ripping rally higher first.

As I have mentioned before, national home prices are almost guaranteed to hit record price acceleration this spring/summer, it is essentially baked into the cake already.

Extrapolative expectations are certainly rising, and that bodes well for the pre-sale market which is essentially a futures contract. Developers are already noting rampant sales activity, and jacking up prices in lieu of that. I would not be surprised to see a repeat of 2016/17 where it was not uncommon to see eager buyers camping outside of pre-sale launches.

FOMO is back, don’t shoot the messenger. This is all par for the course according to the bankers.

Three Things I’m Watching:

1. Canadians view on house price appreciation has never been more optimistic. (Source: Bloomberg)

2. Greater Vancouver property flipping remains very low, but is now rising off the lows. (Source: REBGV, Steve Saretsky)

3. The Bank of Canada is winding down some emergency measures, but remains committed to $4B per week of QE, mostly Government of Canada bonds.

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