Housing Bubble II: The Quest To Build Enough Homes Where People Actually Need Them

[theman23]

Vancouver realtor gets it right on the recent Liberal rental/housing announcements.

TLDW version: Reporting you rent to the credit bureau is a Liberal policy response to the backlog at lanlord tenant boards. Its their way of reassuring landlord investors by making it easier for them to deal with troublesome tenants while duping renters into thinking it may help them buy a house one day (it wont). Essentially another support for housing prices.
Fast forward to 9 minutes 45 second for the relevant portion.

• Video Link
https://youtu.be/6RB53pyLbbI?feature=shared&t=585

[ssiguy]

^^^^ Don't know how to say it better.

Our housing crisis is not due unforeseen events or even normal market forces, quite the contrary, it has been methodically manufactured by Ottawa to keep our real estate Ponzi Scheme economy growing less we actually have to grow it by productivity gains which is just too much work for Trudeau which assumes he even knows what it means.

Trudeau is responsible for this but so are all his Cabinet and Liberal backbenchers who are far more concerned about their gold-plated pension qualifications than they are about getting rid of this man before he causes Canada anymore harm. The fact that we have thousands living on the streets and millions lining up at our Foodbanks is viewed by these Patricians as nothing more than "collateral damage" in their quest for a comfy retirement. It's contemptable.

[MonkeyRonin]

This article is for those forumers who somehow think affordability is improving, or will be any time soon:

Buying A House In Canada Has Never Been Harder, Years To Correct: RBC

April 2, 2024

Canadian housing affordability has never been worse, according to RBC. A median household would need to spend 63.5% of its income to carry the mortgage on a “typical” home in Q4 2023. That’s a 1.7 point increase from the previous quarter, and the largest share ever. For context, the peak of the 1990s bubble was 57% of income—almost affordable in contrast.

Every market tracked saw affordability erode, warns the bank. The markets with the worst levels were Vancouver (106.3% of income), Toronto (84.8%), and Victoria (80.2%). These cities are notoriously expensive, but their long-term averages now resemble levels “affordable” cities are currently at.

The bank made special note of those historically affordable markets, now at their respective worst affordability levels ever. A median buyer needs to spend roughly half their income in Ottawa (49.9%), Montreal (53.3%), and Halifax (45.3%).

The bank attributes the erosion of affordability to mortgage payments. The maximum budget shrunk 22% since Q1 2022, but home prices only fell 1.8% over the same period, according to the bank. The average payment for a buyer would be roughly $3,990—more than double the average payment existing homeowners pay.

Monetary policy changes should reduce prices but they take about 18 to 24 months for the impact to be seen. As the impact of the first rate hikes are starting to take hold, the conversation around cutting rates has already begun. Consequently, the narrative of prices rising once again never died—it was only pushed to the backburner.

Full article: https://betterdwelling.com/buying-a-...o-correct-rbc/

[lio45]

Originally Posted by MonkeyRonin

This article is for those forumers who somehow think affordability is improving, or will be any time soon

We both know Nite isn't going to read it ...

[Coldrsx]

[whatnext]

Oh that Chrystia! Obviously not a student of history and the Harper/Flaherty mortgage term extension controversy.

Canada will relax the rules on mortgages to allow first-time buyers to take out 30-year loans when they purchase newly built homes.
The change to regulations on insured mortgages come into effect on Aug. 1, Finance Minister Chrystia Freeland said. It’s a move that’s primarily aimed at winning over younger voters who’ve been shut out of the housing market, or squeezed by soaring prices and high interest rates...

https://www.bloomberg.com/news/artic...&sref=x4rjnz06



Even a cursory Google search bring this up:

Finance Minister Jim Flaherty has outlined new rules aimed at reining in a hot housing market and ensuring Canadians aren't taking on more debt than they can afford.

Flaherty laid out a series of changes to the rules that govern the Canada Mortgage and Housing Corporation, the Crown corporation that effectively oversees the housing market by insuring the vast majority of Canadian mortgages.

The most important new change is that the maximum amortization period has been reduced to 25 years, down from 30. The longer a mortgage is spread out, the lower the monthly mortgage payments are — but the more the borrower ends up paying overall over time....

...At 25 years, the maximum amortization period for CMHC-backed loans is now back to where it had historically been before the Harper government began raising the period after taking office in 2006.

Interim Liberal Leader Bob Rae made that very point in question period on Thursday, asking Prime Minister Stephen Harper if raising CMHC's limit to 40 years in the first place was a mistake....

https://www.cbc.ca/news/business/ott...ears-1.1171007

[Xelebes]

Line must go up.

[thewave46]

Originally Posted by Xelebes

Line must go up.

In addition to 30 year mortgages on new homes, the measures include the ability to borrow $60,000 from one’s RRSP (up for $35,000) and extensions to 35-year amortization for those who are struggling to pay their mortgage.

The big banks send their thanks to the Liberal Party of Canada for giving the overleveraged a bit more rope. Bleeding out people insidiously via longer terms and not preventing a necessary correction for people who shouldn’t have bought in the first place is the order of the day. If you think losing your house in your 30s sucks, wait until you lose the house in your 40s. Or 50s. Because these people will lose the house eventually, as a housing market that needs near zero Bank of Canada rates just to exist isn’t sustainable policy long term.

Bonus: by allowing people to raid their RRSPs even more, they can steal more from their future. Who needs money in their golden years when one can’t work? Work until you die to pay for your mortgage, peon.

This is perfect policy for a country whose citizens will gladly take on 84 and 96 month loans for depreciating assets like luxury vehicles and trucks.

If this is the Liberal Party of Canada’s great sustainable idea to fix the housing crisis long-term, they deserve to lose. The fact they try and dress it up as benefiting the young is all the more appalling. Pissing on the young and having the audacity to call it rain. Then one wonders why the young are looking at the Conservatives. Who would vote for the team actively pissing on their dream of homeownership?

[rdaner]

I appreciate whoever posted the graph on growth but it is highly problematic for a few reasons that I am sure have already been discussed here, least of which is the debate over how to measure NA metros when different parameters are used.

[casper]

Originally Posted by thewave46

In addition to 30 year mortgages on new homes, the measures include the ability to borrow $60,000 from one’s RRSP (up for $35,000) and extensions to 35-year amortization for those who are struggling to pay their mortgage.

That is a positive. If you are saving up for a down payment, you can now do it with more pre-tax money in a tax sheltered environment.

Lets be realistic here. No one in their 20s (that does not own and wants to own a home is saving for retirement), they are saving for their down payment. Why not do it in an RRSP.

Originally Posted by thewave46

The big banks send their thanks to the Liberal Party of Canada for giving the overleveraged a bit more rope. Bleeding out people insidiously via longer terms and not preventing a necessary correction for people who shouldn’t have bought in the first place is the order of the day. If you think losing your house in your 30s sucks, wait until you lose the house in your 40s. Or 50s. Because these people will lose the house eventually, as a housing market that needs near zero Bank of Canada rates just to exist isn’t sustainable policy long term.

Perhaps.

While I think housing in the major cities is over-priced. With population growth, shortage of housing, and inflation not clear housing pricing are coming down dramatically any time soon.

"These people" are going to just spend a lot of money on interest over their lives until they pay off their mortguage. However, would they have been off renting the same property? Probably not.

No government (of any stripe) is going to deliberately orchestrate a market crash especially in the middle of a housing shortage.

[theman23]

There are in between policy options between further juicing a bubble and orchestrating a crash.

[whatnext]

Originally Posted by casper

That is a positive. If you are saving up for a down payment, you can now do it with more pre-tax money in a tax sheltered environment.

Lets be realistic here. No one in their 20s (that does not own and wants to own a home is saving for retirement), they are saving for their down payment. Why not do it in an RRSP.




Perhaps.

While I think housing in the major cities is over-priced. With population growth, shortage of housing, and inflation not clear housing pricing are coming down dramatically any time soon.

"These people" are going to just spend a lot of money on interest over their lives until they pay off their mortguage. However, would they have been off renting the same property? Probably not.

No government (of any stripe) is going to deliberately orchestrate a market crash especially in the middle of a housing shortage.

Since the Liberals are going to get their asses kicked to the curb anyway they could best serve Canada by doing exactly that, crash the housing market. Wait a few months, call an election and let’s the Cons take most of the blame.

[theman23]

Toronto Star columnist David Olive calls on Feds to reduce immigration to address housing crisis:
https://www.thestar.com/business/opi...b43725508.html

For the next few years we must reduce our immigration intake, following the example of other immigration-friendly countries.

In doing so, we would finally address the demand side of the housing equation, after fixating with increased supply

[casper]

Originally Posted by whatnext

Since the Liberals are going to get their asses kicked to the curb anyway they could best serve Canada by doing exactly that, crash the housing market. Wait a few months, call an election and let’s the Cons take most of the blame.

While it does look they will "get their assess kicked to the curb" I don't think causing a crash is a positive. I know, sad but true (the kicked to the curb part).

We have a shortage of housing in the major cities. We have record low rental vacancy rates. Having banks foreclose on houses pushes people on the street when it is hard to find housing.

It would bring new construction by the private sector to a standstill.

If the Liberals were to "screw" with the incoming conservative government the best thing they could do is sign a bunch of deals on public transit, green industries, and social/co-op housing that the new government will not be able to get out of from. Lock in the capital spending of a liberal mandate for the first few years of the conservatives.

[shreddog]

Originally Posted by casper

...
If the Liberals were to "screw" with the incoming conservative government the best thing they could do is sign a bunch of deals on public transit, green industries, and social/co-op housing that the new government will not be able to get out of from. Lock in the capital spending of a liberal mandate for the first few years of the conservatives.

Actually that could be a big win for the CPC:

Namely that these deals are mainly loaded on out years (so minimal impact on 2026-27 budget cycle);
Would provide ample ammunition for the CPC to cut discretionary LPC social spending in lieu of infrastructure ("You want a subway for the masses in a few years or pharmacare for select few this year?"), and
Set the CPC for numerous photo ops when the capital structures come online in time for the next election ("The CPC delivered you a subway and the LPC only gave you skyrocketing home costs!")

Hopefully the LPC brass hear your advice!

[thewave46]

Originally Posted by casper

That is a positive. If you are saving up for a down payment, you can now do it with more pre-tax money in a tax sheltered environment.

Lets be realistic here. No one in their 20s (that does not own and wants to own a home is saving for retirement), they are saving for their down payment. Why not do it in an RRSP.

Many employers contribute to their employees’ RRSP as a benefit of employment. The idea of the RRSP is in the name - retirement. That’s what the tax shelter is for. By raiding their RRSP, it essentially allows a well off subset of people to continue driving up house prices in the short-term by giving them more leverage.

The problems being that the money must be recontributed in 15 years or they face penalties. If one is raiding every penny just to get into a house, what are the odds they can repay that $60k? There have been substantial doubts that people who borrowed the lower limit can recontribute before they hit the deadline.

Second, they lose the largest compounding effect of that money by raiding it early. Being poor in retirement is a future problem, though.

Third, the LPC invented the FHSA scam handout tax shelter for this very purpose. If one needs several different programs just to get people to scrape into the housing market, maybe we should rethink our housing strategy.

I oppose efforts to continually inflate the market in its current state. That is what these policies are.

Perhaps.

While I think housing in the major cities is over-priced. With population growth, shortage of housing, and inflation not clear housing pricing are coming down dramatically any time soon.

"These people" are going to just spend a lot of money on interest over their lives until they pay off their mortguage. However, would they have been off renting the same property? Probably not.

No government (of any stripe) is going to deliberately orchestrate a market crash especially in the middle of a housing shortage.

There is a subset of overleveraged homeowners who bought in the last few years. They should not have been able to afford their homes, save for a fluke where one could get extremely low rates on very large mortgages.

Once interest rates rose back to historically normal rates, they went underwater. The worst cases accrued interest on top of their principal if they had variable mortgages. By not ripping off the bandaid and admitting these people are broke, one essentially allows the bank to bleed these people out for interest without denting principal. It also decreases downward pressure on house prices by preventing these homes from being sold at a more affordable price - great for asset holders and money lenders (i.e. the banks)

In a more normal supply-demand situation (i.e. not 1 million+ new imported bodies per year), these people would have lost the house, but ended up in a cheaper rental to rebuild. Of course that option is gone, courtesy of the government’s immigration plan.

Any policy that serves to drive housing prices upwards is bad policy. Especially at this juncture. Policy to decrease prices is where all efforts should be aimed.

A controlled deflation of housing prices relative to income and decreasing indebtedness of Canadians is preferable to external economic shock essentially inflicting uncontrolled misery when it does arrive.

The LPC is continuing to mortgage young people’s future.

[lio45]

Well, I for one am glad to see that the Liberals agree with me that real estate is currently too cheap and that new measures are urgently needed to make prices rise.

They did not disappoint!

[lio45]

Originally Posted by thewave46

Second, they lose the largest compounding effect of that money by raiding it early. Being poor in retirement is a future problem, though.

One could reply that they're trading that compounding effect for an even better investment: at retirement time, they'll be part of the small club of the Landed Gentry in a Canada of ~100 million, approximately half of whom will likely be homeless and would sell their mother for housing of any kind.

In a more normal supply-demand situation (i.e. not 1 million+ new imported bodies per year), these people would have lost the house, but ended up in a cheaper rental to rebuild. Of course that option is gone, courtesy of the government’s immigration plan.

Only a total idiot would lose their house when all they have to do is pack South Asian Indentured Servants like sardines in the basement and be immediately in the black, cash-flow wise, even with ~10% interest rates.

[Innsertnamehere]

A most excellent thread:

https://twitter.com/MikePMoffatt/sta...95030523224217

The most critical item, IMO:



Really shows how huge a chunk of the increased housing costs in Ontario are through land costs. In 2004, land costs for a simple detached house were 11% of final sale price. Today, they are 32%.

And to blame for those land costs? Anti-sprawl legislation. That's it. If we could get land costs back down to 2004 levels, we could cut the cost of housing by over 20%. And that's without even touching DCs and regulatory charges, which if they also dropped back down to 2004 levels, we could probably get housing costs down even further.

It's completely possible to build housing affordably. We just need the regulatory system to support it.

We need to open up far, far more land for development. Both for low-rise housing and intensification through relaxing planning regulations. It has the potential to massively cut housing costs.

[lio45]

So, in a nutshell, we need to pave over the entire countryside because there are billions of suckers out there who don't live in Canada yet but would like to...?