For those people who are actually wishing for the bubble to burst, remember that’s exactly what happened in 2008, and what happened back then. Literally the only people who won were the rich as they just bought out all the property that got severely discounted while other rich people got a massive payday from the government (aka regular Joe’s tax dollars) for fucking up. And the bubble simply got restored because those rich people could afford to sit on unproductive products for a decade at a time because they knew that without a constantly increasing supply of housing, the prices will explode again because housing is a requirement, not a luxury.
And the losers was everybody who doesn’t make 7 figures or more. People’s retirements were crushed, their savings crushed, their existing lives crushed. And the economy was set back for years and inflation skyrocketed for a little while, which never came back down.
And in places where such housing bubbles really burst, Japan hasn’t seen any growth for 30 years. They’re still in what they all the Lost Generation, because they realized that calling it the Lost Decade was premature and it didn’t end in 10 years. We’re watching China’s housing implode on itself right now with hundreds of thousands of people losing their entire investments and retirement savings. We’re watching 80 year olds going back to work so that they don’t starve to death while youth unemployment reaches levels so insane that they’ll take a job that only pays under the table because the company can’t afford to pay minimum wage!
You want a dystopia, you’ll get it if the bubble bursts. You’ll also get it if the bubble continues to inflate.
So the only solution is to slowly deflate the bubble by increasing housing construction so that it outpaces demand in a controlled manner until the prices come back down to something reasonable, then to continue keeping pace. And for that, we need the political will for both government subsidized housing and a overhaul of zoning laws to allow for mixed-use residential to replace all residential zoning.
Detached single family housing don’t belong in major cities, and suburbs shouldn’t be subsidized by the downtown core.
Detached single family housing don’t belong in major cities, and suburbs shouldn’t be subsidized by the downtown core.
Truer words were never spoken. If you want to be able to live on your own little plot of land surrounded by other people wanting the same thing - then development, upkeep and maintenance of all infrastructure and services needs to be paid for directly from your property tax. When you drive in to downtown to get to work, you should not expect to find parking. Downtown should belong to the people who actually live there, it’s crazy how far we bend over backwards to support a lifestyle that’s inherently unsustainable.
Whether you hope for it or not, all bubbles burst eventually, and the government has already proven its unwillingness to do anything about it by allowing the bubble to form in the first place.
Oh, they’ll do something. They’ll make sure the rich don’t take a haircut on their investment.
You want a dystopia, you’ll get it if the bubble bursts. You’ll also get it if the bubble continues to inflate.
Yeah, the range of ways out of this that don’t suck are small. Even if you get the mildest of fixes: property values stay steady for decades while they’re eroded by normal levels of inflation, that’s going to be hell for people waiting for the prices to become reasonable, but also hell for people who bought property as an investment and instead see it losing value. Some of those people are rich, but other people were just using it as a retirement plan.
And for that, we need the political will
The problem is that political will always aligns with the self-interest of the parties or their leaders. Since home owners vote and donate, they’re the ones who get listened to. Since property developers donate, they get listened to. Homeless people don’t vote, and definitely don’t donate to political campaigns. People struggling to make ends meet don’t take time out of their busy days to get involved in politics, they just hope someone will help them.
Since politicians invariably come from a class that not only owns houses, but often owns multiple houses, the idea that they’ll voluntarily take actions that reduce the value of their investments is pretty laughable.
It would be relatively straightforward to block Monopoly getting played should the bubble burst–legislatively speaking–but it would require governments to intervene against it’s donor class.
Hawaii’s post-disaster response is a good template: the government has threatened to buy land to prevent investors and speculators from doing the same. In Canada, this would be like a bizarro-world version of Doug Ford’s Greenbelt giveaway: where the government buys more land, and more houses, to block speculators.
I can’t see it happening, because our leaders are either feckless cowards (on the left) or complete corporate toadies (on the right), but I can dream.
When I read stuff like this I often wonder why nothing is mentioned about Canada’s lax laws on foreign ownership of multiple properties and failure to verify the legality of these owners’ funds.
Because that’s what started this shit show in the 90’s and nothing has been fixed.
There are foreign-ownership and vacant unit laws in all affected places in Canada AFAIK. They’re basically self-reporting driven but they exist. The BC ones came first. They put a small dent in housing prices and then prices continued their upward march, and they did nothing at all for rent because the color of your landlord doesn’t really change much.
Any solution that doesn’t involve constructing abundant housing is at best rearranging the deck chairs of the Titanic and at worst scapegoating.
Basically anything short of we’re going to expropriate land and build massive amounts of rgi’s and cooperatives will fix it on the supply side of the equation.
We need to tackle the problem at the source and that’s housing being used as an investment vehicle by wealthy people and corporations as a means of wealth extraction from the working class. It’s completely choking the economy.
The problem is, for a neoliberal government, wealth extraction is the point. They’ll look at the system and see it working as intended.
On the flip side, massive build-outs of affordable housing is all downside: it doesn’t make rich people the maximum amount of money, it requires wealth distribution downwards and there’s little to no incentive to get private sector participation.
I don’t think people realize how much government has changed since ~1979 and ~1995, or how we have had two to three whole generations of politicians and civil servants who have gone their whole careers believing that government shovelling money at the private sector is the only way to do things.
Here’s a little thought experiment:
- name me one institution implemented entirely with public funds since 1995. You can even go as far back as 1980, if you want. I’m an Ontarian, so something like GO Transit, the AGO, TVO, the Ontario Science Centre, Ontario Place, etc. The number is probably around zero.
- Now, list all the entities sold off since then. The list is long, and contains some things you probably didn’t realize, like Potash Corp, Air Canada, CN, Petro Canada and more. Think about how much money we’d have, how many services we’d still have, how much we’d be able to do about, eg, climate change if we had even a few of these.
It’s a real gut-punch to realize we sold our future to billionaries for pennies on the dollar, and now those same billionaires are squeezing us for more.
Look at our suburbs. They are immense. Immensely wasting the land for car parking and large road. We fucked up pretty 50years ago and now these are the consequences. Why the fuck do we need a parking lot for each building ? Before saying the investors are evil and all that shit, look how wasteful we are building our communities. The investors only got in the market because of the way we built our neighborhood. We wasted land, we made the house supply low and we got investors trying to make money with it. Preventing investors from buying houses is probably a good idea but is only a band aid that won’t last.
Stop wasting the land and this crisis is over.
I’m ready for this bubble to pop.
The last time a housing bubble popped, so did the entire economy.
You sure you’re ready for that?
One hundred percent.
This isn’t just some overvalued tulip in need of a correction. People need homes and can’t afford to exit the housing market entirely. If people can’t afford housing, that means they can’t really afford anything. Expect the economy to have collapsed. Wages and employment will be down. Home ownership will decline.
Only those with capital to ride out a bumpy economy will be able to snatch up the cheap housing.
The solution to our housing crisis is not to tank the economy. The solution is to tackle the supply of housing, income inequality, and corporate equity in residential real estate.
Ok, so you’re not ready for the bubble to pop then.
No one is ready for a depression. We need it tho. We can’t keep doing this.
It’s either depression or severe dystopia. Pick one.
The longer we put it off, the worse its going to be
I’m starting to think you have too much to lose to care for people not being able to live because houses are too expensive.
You think people are able to live if they lose their job because the whole economy crashes?
The only housing I own is a 3 season cottage that we paid 50k back in 2020 at the peak of demand for cottages (that gives you an idea how much of a piece of shit we bought), I don’t have too much to lose, I just realize the consequences of the bubble bursting and these consequences will most definitely hurt those who are already suffering a lot more than the status quo.
Finance is not the economy. And housing should not be a free market. That’s the whole problem with it today. When you make housing a finance product, you get what we have today. It’s fucked up and it needs to be collapsed and redone.
And housing should not be a free market.
Agreed. We should regulate it. First, we should zone areas of land as only being for certain types of homes. This will ensure that the detached mansion you always dreamed of will not be usurped by some developer wanting to build condos. Next, we should regulate the structures so that someone doesn’t try to build a small/tiny home where you want your glorious mansion. Third, we enforce only one structure per property. Your mansion needs a sizeable backyard for your pool! I have more ideas, but think that’s a good start.
Oh wait.
I’ll be the first to vote in favor of a non profit crown corporation taking control over anything that has more than 6 units and to require being registered as a company to own 4 to 6 units!
Ok but I am
I don’t think you realise the consequences on regular people.
The current economic state isn’t exactly great for the average person either. Especially young people trying to start careers and leave their parent’s house.
Much better than not having a place to live because businesses are closing and unemployment is through the roof and you don’t have a job.
Regular people already can’t afford housing. Almost anyone owning a house is a millionaire, or has borrowed a million from the bank as a mortgage.
The former will survive just fine. The latter took a tremendous risk by borrowing a million dollars to buy properly in an overheated market. If it works out then they can enjoy the fruits of their high risk play. If it doesn’t work out, then they should suffer the consequences. That’s how all risks work.
If the housing bubble bursts regular people won’t have a job to buy a house. So much better 👍
I’m very very far from a millionaire and I’m an owner, it’s the same thing for the vast majority of home owners in Canada.
Heck, our cottage was for sale for months before we bought it for 50k, I’ve now sold my condo for a price low enough that with 10k you could have bought it including all the paperwork (and I still had trouble selling it!) and I’m looking to buy a house for about 250k close enough to the city that I can still commute and I still have multiple choices… And I’m not talking about bum fuck nowhere, it’s a city of over 200k with two hospitals and two universities!
Maybe people should start moving outside of Montreal, Toronto, Ottawa, Vancouver… but what do I know? Oh, that’s right, that you’re quick to point the finger and say home owners should deal with the consequences of their choices, but you are unable to point to others who absolutely want to live in the most expensive parts of the country and complain that they’ll never be able to afford anything while housing in more rural location just doesn’t sell.
I talk to a lot of people wanting to buy their first house and all of them want at least a bungalow, none of them even wants to consider that buying a condo or even a semi detached to start might be a good option… So what do they do? They continue living at their parents’ or in an apartment and complain.
Imma burst your bubble. Home ownership in cities is an anomaly in our history, it became prevalent after WW2 and scarcity of urban land means it’s not sustainable to expect to see the population increase and have everyone become an owner.
Not the same at all. The previous housing bubble was a result of widespread fraud by the banks. Now, people know very well to look out for that exact thing happening, and it isn’t.
If there is a bubble right now, which there probably is, it is a speculative bubble. People believe that housing will forever quickly grow in price, so they are willing to pay above reasonable price to not miss out on the opportunity. Which in turn increases the prices further. It’s a self-sustaining cycle, but at some point there won’t be enough capital to sustain it any longer. Can happen in a year, can happen in a decade, can happen tomorrow.
Yes, I am ready for that. I don’t buy this “but the economy” line. It smacks of “too big to fail”, and I think that occasional failure is necessary and healthy.
You haven’t lived through enough cycles then… Even 2008 saw a million people in Canada lose their jobs. The one in the early 90s was probably double that.
Besides, nobody understands what the real numbers would even be. Do you know how much of an implosion is required to return Vancouver or Toronto to “affordable” levels? Prices would need to drop something around 80-85%. That’s absolutely massive, and would wipe out the life savings of 10 million Canadians, who are now going to need more government support to make it through retirement.
There are ways to fix this problem, but they need to be gradual to not end up causing more problems than they fix.
Same. Burn it all down. I’m tired of paying my landlord the equivalent of a mortgage for fuck all security because I don’t have enough for a downpayment.
If you’re unable to save money for a downpayment while paying the equivalent of a mortgage then you’re not ready to own.
You guys believe you just buy a house and that’s it, you know how much you’re paying every month and it will be the same for the next 25 years or something? Freaking hell, some of you are in for a big surprise the first time a pipe bursts and you need to pay to redo a bathroom!
That’s ridiculous. I do put money away. The problem is that the size of downpayment needed is growing way faster than I could hope to save. How often do these adverse affects actually happen? Once or twice? You can also DIY.
Other things you can reliably budget for, new roof is every 20 years, maybe new appliances every 10 years. General upkeep? Renters do that already but you can DIY and you have a say in what happens.
Your argument is basically if you can’t save for a home while already paying for a home you can’t afford a home.
That’s ridiculous. I do put money away. The problem is that the size of downpayment needed is growing way faster than I could hope to save. How often do these adverse affects actually happen? Once or twice? You can also DIY.
Other things you can reliably budget for, new roof is every 20 years, maybe new appliances every 10 years. General upkeep? Renters do that already but you can DIY and you have a say in what happens.
Your argument is basically if you can’t save for a home while already paying for a home you can’t afford a home.
A downpayment is 5% minimum, you’re unable to save 15k to 20k to buy a house because you’re paying the equivalent of a mortgage? Then sorry bud, you just don’t have the finances to own, it’s that’s simple. I do everything myself and a bathroom still costs thousands to renovate when it’s not an emergency, if you need to redo everything? Add a couple thousands again.
Your argument is basically if you can’t save for a home while already paying for a home you can’t afford a home.More like if you can’t save for a house while already paying for a house you won’t be able to maintain a house.
You’re saying this but no you’re not.
The riskier mortgages are guaranteed by the government, that means everyone pays if people stop paying their mortgage.
Retirement for most owners without a pension fund depends on being able to sell their property, that’s also something the whole country would end up paying for through safety nets.
If prices crash that means even more easy to snatch properties for the richest, so even less supply.
The housing bubble bursting would lead to the same social crisis they had to go through in the USA, wishing for it to burst is wishing for people to die, more than are now because of the bubble.
We really have to be taxing the hell out of the rich like we did in the “make Canada great again” days, if we want a cushion for this crash.
Yeah, this.
A crash isn’t a bad thing if you can build a firewall against profiteering. Governments could buy property, instead of allowing the wealthy to, and governments could force the rich to take a haircut and/or tax the hell out them and then spend our way out of recession.
It won’t happen, but it isn’t impossible or even improbable.
Except in the US it brought prices back down to “normal” levels. Their were still expensive but they remained more affordable than here.
The housing situation in the USA and in Canada are different though. You would be shifting the cost from those able to snatch the good deals while the crash happens to the whole population having to pay back banks through increased taxes over decades.
Don’t forget all the job losses that come with that, can’t buy a cheap house if you don’t even have a job!
Government decides who pay taxes. Shitty governments decide everyone pays the same. Good government redistribute.
In the early 20th century people responsible for crisis, bubbles and stuff were severly punished. It can be done.
Also, you should get familiar with the story of the boiling frog. Wishing things won’t get worse will only get you dead eventually.
Side note: the boiling frog analogy is actually false, when the frog gets hot it will jump out of the water regardless of how slowly you increase the temperature once it hits a critical heat threshold. Also in the original experiment they had removed the frogs brain (because science?).
It is true in human psychology though – humans will not notice small enough changes. Like when my cat slowly creeps onto my lap and I don’t notice her.
when my cat slowly creeps onto my lap and I don’t notice her.
Every damned time. Replace ‘lap’ with ‘counter’ and ‘notice her’ with ‘stop her from knocking something off’ #ragdoll
I’ve trained my cats to not go on the counter, which means 15 minutes after I go to bed I hear a cat jump down off of it.
TIL how to poach brains
Our housing market as a whole is worth 6.1T
You think you could tax the rich enough to compensate for the insurance on… $400B worth now insured by the CMHC…
Good luck refunding this without impacting everyone in the long term and good luck not getting all those houses in the hands of those who already have a fortune to buy them!
Remember 2008 in the USA? The people who ended up getting their hand on the cheap houses were those that already had a stack, including foreign investors, regular folks came out of that worse off because they lost their house and couldn’t afford to buy another one, in the end you just increase the number of people in the market for cheap housing! 👍
Insurance can collapse and their owners die in an alley. The mistake in 2008 was to save their asses. In early xxth century they would have. Now we pay them billions so they would have the courtesy to retire.
Also congratulations on discovering about how fucked up a free market is for things people need to live. Housing should not be a market.
Dude, that insurance is US! The government insures mortgages with less than 20% in downpayment because banks don’t want to loan money for mortgages because they don’t want to deal with repossession and having to sell them!
You can’t buy a house if it’s not a free market. That’s the whole point.
It is a free market though, it’s even advantageous to people who don’t have that much money because they can still get a mortgage without a huge downpayment. Back before CMHC mortgages were private loans, the previous owner would be the one financing the new owner at whatever rate they felt was appropriate and at whatever downpayment they felt was appropriate. Today you need 5% and if your credit score is good enough then the bank can’t say no.
But you wouldn’t know that because you’re in Europe and you’re here talking about the Canadian housing market like you had any idea how it works.
Sorry, but depending on location prices bounced back and surpassed pre-crisis levels within few years in US. Same issue that many already highlighted - folks lost their houses during crisis to the ones who can afford it but they still need place to live. Population grows and so are the real estate prices. Investment firms are busy buying up properties and oh boy will they go wild this time, now that this turned into a very targeted industry. So those prices going down only means some people will lose their homes, others their jobs and corporate investors will gain big time. Selected few with sufficient financial cushion will weather it out and the cycle will repeat itself… because nobody builds housing to keep up with the pace of population growth. With a caveat: some rural areas are still underappreciated and if housing is what you seek - go rural, mind you job selection might be limites if any… so gotta be financially independent… oh guess what? Another pass for the average folk. So yeah… new construction is the only way out of it. Bursting the bubble will hurt folks below median a lot more than status quo. (mind you escalation of institutional investors activity would be as tragic as bursting the bubble).
They remained more affordable, for a time. And then housing prices went right back through the roof.
I bought a foreclosed house in 2012 for ~280k. It had been purchased by the previous owner for about 480k.
I put about 150k into it, 100k the first year to make it a liveable property, and 50k or so over the next ten years.
I sold it last year for about 850k…
I then bought a new house that cost about 450k when it was built 4 years ago, for about 680k, in a less expensive market.
I’m ready for it to pop and the consequences thereof. I know I will have to shoulder some of the burden. Too bad that businesses love to privatize gains and nationalize risks, but that’s the mess we’re in.
To copy another of my comments, I don’t buy this “but the economy” line. It smacks of “too big to fail”, and I think that occasional failure is necessary and healthy.
We’re not talking a dip in the stock market.
We’re taking millions of jobs just disappearing, people’s savings gone, most banks going bankrupt…
I know it’s hard to imagine, but the housing bubble can’t burst in a vacuum and in our country it’s taking everything with it and could mean decades to come back to some form of normalcy.
Heck, you would probably not get to enjoy the potential drop in price because you would have had to move to another country to find a job, just like the Quebecois had to do at the beginning of last century.
Hello from Australia. if you’re expecting this bubble to pop, don’t.
Yeah I’ll believe it when I see it, I’ve been hearing this since 2012
Thanks for always being there to show us what our future is like. It’s the time zone thing, and it’s great that you’re always a step ahead. Will these fires consume us or will we find a way out? What will the rains and the stampede of spiders be like?How’s Thursday going so far?
“I could never get the hang of Thursdays” – Douglas Adams, writing for Arthur Dent
Especially because the people who own houses have much more political power than the people who want houses. Any government that wants to have and use political power will cater to the people who don’t want a crash.
It seems like the only realistic hope (and an outside chance at that) is for prices to stagnate for decades. If that happened, your grandkids might be able to afford houses on normal wages (assuming their parents didn’t emigrate in frustration).
Alternately, as boomers die and many of their homes go into REITs instead of younger generations as they reverse-mortgage to fund extremely expensive senescence more and more housing moves out of the voting public and populists get more and more power by catering to this disenfranchised group.
The question then is whether those populists do it with good policy or with scapegoats and hate.
Well good news for us, we’re importing millions of new people who will mostly comprise of renters!
Even though I had to pay though the nose to buy a house years ago, I hope for a crash so that people are not screwed forever more.
What I find really odd is the commercial market in smaller towns, its cheap as shit.
Crashes only hurt regular people. People who have money/capital can wait it out and then buy even more housing to make the bubble bigger next cycle.
source: lived through 2008 and that fucking sucked
Yeah well high prices only hurt regular people, too!! It’s almost like we’re getting fucking squeezed by our economic masters, eh?
Same and I don’t think a housing crash would hurt just the poor like say a 2008 style crash (it would still hurt the poor because everything does). I also don’t think there is any other option other then a crash, things are too out of hand bubble wise. It would be cool if someone in power could get crazy serious about the issue but there is no will and it is likely to late.
I don't think a housing crash would hurt just the poor like say a 2008 style crashHow about you expand on your ideas a bit, because I could say I don’t believe in a lot of things without explaining why and that wouldn’t make me right.
No politicians want to tackle the issue because we’re the ones who guarantee risky mortgages through the CMHC.
I mean partly due to real estate now the largest contributor to the gdp (https://www.statista.com/statistics/594293/gross-domestic-product-of-canada-by-industry-monthly/ ) and partly due to the abundance of non home real estate supply, Canada is in a situation of not so much being in a bubble but being the bubble. In a 2008 type crash you have a large group of people with enough capital that could by out the foreclosed houses, the upper middle class (but not all of them https://www.cbc.ca/radio/day6/episode-407-the-waffle-house-index-trump-book-quiz-the-big-trip-photographing-spain-s-ghost-towns-and-more-1.4821840/photographing-spain-s-ghost-towns-10-years-after-the-financial-crisis-1.4821871 ).
But I think Canada’s next crash will not be part of a world wide event and will be a value crash more then a mortgage crash at a time when that upper middle class is narrowing. When a value crash happens the people who would buy the majority would see their own equity take a hit, limiting how much appetite most would have for buying more. the ultra rich put their money in real estate for investment or laundering, they would be effected but not as much long term (nice to be rich).
Then you have the companies, most are leveraged to the teeth and are not even concerned with the rental income in a lot of cases (they still get all the rent they can, they just see it as a side effect). In the case of a value crash they would be underwater and go overnight, this does not mean other larger entities would not jump in to buy them for pennies on the dollar, but it would remove a lot of the intensive that exists right now. This might mean rents go up when these companies get desperate but the renting class can not bare much more and would likely result in another crisis.
In short term this next crash (unless something really drastic or shady is done) will be incredibly bad for everybody, but in the medium term the poor have little to no capital to lose compared to everyone else and should see prices collapse and due to that being Canada’s largest business now would have to cater to the new market. In the long term many here in power would be back trying to pump up the housing bubble and most ultra rich would be hesitant to invest in a market that has shown it is a bubble (think Japan, Grease, Ireland, China, etc.).
Thanks, good thought process 👍
2008 was not a regular speculative housing crash. It was a result of an incredibly fraudulent system propagated by the banks.
Because there’s zero opportunity in small towns. Another major issue with Canada right now
I am doing well in small towns mostly due to the impression that there is no opportunity. Starting a small business in a major city is nigh impossible without a lot of money, but small towns don’t. The issue I see most often is people opening places in small towns without any business plan or market research, leading to failure. I think some of that will change when more business realizes that they can save money by going to a smaller town.
My dad ran a business in a small town his whole life and said it’s not a good idea anymore. Been a struggle for him for the last like 20 uears. Always told me to never be a business owner so I’ll follow that advice
My parents said the same thing, my biggest regret in life was listening to them.
Remote work is a thing now and small towns = smaller mortgage so you don’t need to shop for a job with the same salary as you would in the city…
I’m shopping for a house in a small town at the moment and I’m finding things as low as 200k and I just sold my one bedroom condo (that I could afford alone working part time) in the city for close to the same price…
Not everyone can work remote
Thanks for not reading the rest of what I wrote, small town = lower price, just get a local job for a lower salary and buy a house and you’re at the same level as a high paying job living in a rental property in the city
We did that a little over a decade ago. One thing to watch out for is that it could be a one way trip. We’re now retired. The lower wages mean that the retirement income is also lower. That would be fine, except that now we’re looking at what the future holds for health care and driving. We’re fine as long as we can stay here, but anything that forces us back to the city means absolute destitution.
That’s not an actual solution though. Not everyone is in a position to simply uproot like that, when you may need services that aren’t available in small towns, or you might be caring for someone who can’t move, or you might just be part of a tight-knit family or community and moving takes away more support than independence gives. Even if that’s irrelevant, not everyone can simply find a job in a small town because every job doesn’t exist in the same way everywhere. Think there’s a lot of demand for administrative assistants in Irvine, AB? And that’s not even counting the fact that while people can work remotely (assuming the destination has decent internet, which depending on how small & remote the town is is not a guarantee), there’s plenty of companies whose policies have removed it because they need to justify their investments in real estate and middle managers.
Even if we assume a genie appears and gives everyone who wants it the opportunity to find fulfilling jobs that they can work from small towns, exactly how long are those prices going to stay low as soon as people jump ship from the cities, or worse, once real estate investment companies are able to create income properties in these same places?
And that’s not counting the fact that it’s expensive to move, and especially moving a long way. Even if you just rent a U-haul and chuck all of your junk into it, the truck costs, fuel costs, there’s usually hookup fees for services, you may not be able to work during this time if you can work remote, or you may have to go without pay if you’re between jobs… It’s not an insignificant barrier to entry and that’s assuming you’re young and healthy and none of those are concerns. Moving away from major cities is potentially a workable solution for some people, but it doesn’t solve anything and it doesn’t help the people who most need help.
If you can’t afford to move then the fact that you can’t own a house is the least of your troubles.
Tons of jobs in remote locations, do you think the boomers people love to hate all worked their dream job?
There are exceptions, but let’s not pretend everyone that’s complaining is in a situation where they qualify as an exception.
Housing is expensive sure, but I’m shopping right now and I could buy a house tomorrow for 250k and I would be at a commuting distance of a city of over 200k. Heck, I had trouble selling my condo for 160k inside an urban area of over 1m!
Know what’s funny? I bought it because that’s what I could afford and it allows me to look for a single family house ten years later. Meanwhile my friends are complaining they can’t buy a single family house as their first property… That’s like wanting a job before you go to school!
There are a lot of jobs that only exist in big cities.
Sure, you make your choices and deal with the consequences, if your professional life is more important than owning a house then go ahead and live in an environment where you can’t expect to own one.
Reminder: People owning a house in the city is an historical anomaly and is unsustainable.
The downtown strip of the town I grew up in (about 2hrs from Toronto) is a ghost town. I doubt retailers want to risk starting a lease on a commercial property when in many situations, brick&mortar isn’t much of an asset.
That is the crazy part I am talking full on buying not renting. I run a few stores in more rural areas and my company just bought the building because the owner would not rent/lease to us but would sell it for less then you could buy a shed for.
I guess it is crazy you could buy a storefront in a small town for much less then a house in a small town (maybe a protip?).
While this is commonish sense, this news isn’t trustworthy without any evidence or numbers.
How much exposure is there, what order of magnitude of assets are at risk, what would a target for post-bubble prices be, how at risk is Canadian debt servicing, etc.
As far as I can see the risk is 2023 to 2026 sees fixed rate renewals happen from covid rates to current or elevated rates. Variable rates make up about 1/3 of mortgage debt and defaults/sales would already be priced in.
Let’s run the numbers for Ontario.
Avg mortgage last year (in June, the easiest number to pull from CREA website) was $829k, at 2.5%, which is $3713/mo or $44,555 annually. They do 5 years and renew at 6%, leaves $701k on 20 years for $4997/mo, 34% increase and $60k/year to service. The Bank can extend you by 5 years and reduce the payment to $4489/mo reducing the cost to $54k.
So the question is, can families who already bought homes find $10k annually to make up that shortfall? That will command supply of homes. This should be worse for 2021 and 2020 purchases, but they have a lower total mortgage.
The affordability calculators all suck because they’re based on the down payment, so we’ll do it ourselves. According to stat can, average after tax family income in 2021 was $99,100 (Table 11-10-0190-01, can’t link on mobile), with 32% of income on housing we’re looking at $2650/mo which is a $415k mortgage at 6%. At 50% they can do $4129 for a $650k. That’s feasible but not recommended. The CMHC calculator goes to 70% (seems farfetched to me)
So, 50% of couple-families can roughly afford $650k at current rates on after tax income, and the average family has about $10k additional exposure, that can probably lead to a 25% drop in prices. That’s if median families are buying and have the down payment ready.
This is all napkin math though and not using the full distribution of prices. If I were doing this professionally I’d have simulated pricing structures and rate increase schedules. But to me I don’t think this bubble is going to see houses drop to the 300s like they used to be.
Increasing supply to decrease prices is the best option, that should be a priority for all levels of government. It would also deflate the balloon but not catastrophically.
But to me I don’t think this bubble is going to see houses drop to the 300s like they used to be.
Is this a conclusion based on just direct impact, or did you consider the risk of people trying to bail out of a perceived-collapsing market in fear of an ever more challenging monthly payment?
I’d agree if you said it’d be difficult to even guess at the exact effects if people started panic-selling houses to unload on income properties to limit their risk - my own family was caught in that in the early '80s Calgary market and we’ve never recovered - but is there a nod to the potential for that slippage in your conclusions?
I did not, no.
I’m just a guy with a spreadsheet and some extra break time I banked.
At 50% they can do $4129 for a $650k
That’s a MASSIVE stretch for a typical family of 4 on your average income scenario, Once you factor in all the utils, maintenance… the $400 to $500/month property taxes, a $650/month car payment (an average family has a car payment)… and the incredibly high cost of food… they will be well over stretched at a 50%.
I think $4k a month can cover that, but it’s not comfortable. 3k on groceries seems quite high to me.
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Join my pump and dump to stop financial crime
Lmfao.
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That’s true. My assumption was the bubble doesn’t pop unless people default, and what would cause that.
Flippers, investors, speculators, and banks aren’t really factored in here.
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What is bnnbloomberg, anyway? I see them in my feed sometimes and they have highly-produced news, but they don’t seem to have a lot of it, which makes me feel like it is carefully targeted (ie propaganda)
They’ve been around forever and it’s for financial wonks so their intended audience in this case is people involved in everything financial as it pertains to houses from C level to keener analysts.
It’s legit.
Bloomberg a legit news source. Two things though:
- This BNN Bloomberg, which is Business News Network after getting acquired by Bloomberg. It’s still a pretty factual news source (sometimes even more so than Bloomberg itself)
- This isn’t news. It’s a person (Phillip Colmar, partner at Global Strategist at MRB Partners) saying what they think. It’s more like an opinion piece, improvised on live television, and most of those are indeed garbage even in otherwise respectable outlets.
I’m sure a large commercial financial news outlet is factual most of the time. And I’m sure a lot of the time that they aren’t (even if through omission), it’s serving their owners.
