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

[YOWetal]

Originally Posted by casper

I would disagree.

The intake of "students" over the last two years is a red-herring. A short-term spike. While it likely added to the problem, it clearly has not cause an increase in housing costing. Housing prices have been for the most part stable for the last two years.

The "students" are not the cause of the crisis. If they were, the fact those numbers have now been reduced would have "solve the problem". No additional action would be required. Clearly that is not the case.

.

We have had high levels of sustained immigration and students for some time. Yes more recently it has exploded.

Arguably in 2021 with rock bottom rates we weren't really in a crisis. As rates soared prices should have fallen but they didn't because of the surge of students. Fake students mostly. Conversely we could thank the government for avoiding panic selling by landlords. Of course this is all speculative but certainly rents are higher than they would be without these students. Other prices are less clear as we would have had labour shortages causing a spike in wages which would hurt those of us not competing with fake students and of course helped those at the entry level.

[Changing City]

Originally Posted by YOWetal

We have had high levels of sustained immigration and students for some time. Yes more recently it has exploded.

Arguably in 2021 with rock bottom rates we weren't really in a crisis. As rates soared prices should have fallen but they didn't because of the surge of students. Fake students mostly. Conversely we could thank the government for avoiding panic selling by landlords. Of course this is all speculative but certainly rents are higher than they would be without these students. Other prices are less clear as we would have had labour shortages causing a spike in wages which would hurt those of us not competing with fake students and of course helped those at the entry level.

There's a reasonable correlation between interest rates and Canadian house prices over the past four years.. Prime rate was dropped from 3.95% to 2.45% in March 2020 when the CREA composite home price was $539,100. They stayed at 2.45% until the end of February 2022. That month's home price was $834,500 - as high as the composite price reached.

Rates have been raised 10 times since March 2022, and went as high as 7.2%. They dropped back to 6.95% this month. The composite home price dropped to $707,200 in March 2023, climbed again to $752,000 in August, and since then has fallen every month to $714,300.

[Innsertnamehere]

I mean fixed rates are what matter as most homeowners use a fixed rate mortgage.

In that sense fixed rates are already down basically a full percentage point from the peak a year and a half ago, and continuing to drop.

[Changing City]

Originally Posted by Innsertnamehere

I mean fixed rates are what matter as most homeowners use a fixed rate mortgage.

In that sense fixed rates are already down basically a full percentage point from the peak a year and a half ago, and continuing to drop.

4 January 2023
1-year fixed 6.34%
3-year fixed 6.14%
5-year fixed 6.49%
prime 6.45%

5 June 2024
1-year fixed 7.84%
3-year fixed 6.99%
5-year fixed 6.84%
prime 7.20%

[WOWA, Canadian mortgage rate history]
(These are posted rates, and there are always better rates on offer to clients, but that's generally true most of the time unless banks are getting worried)

[Innsertnamehere]

Originally Posted by Changing City

4 January 2023
1-year fixed 6.34%
3-year fixed 6.14%
5-year fixed 6.49%
prime 6.45%

5 June 2024
1-year fixed 7.84%
3-year fixed 6.99%
5-year fixed 6.84%
prime 7.20%

[WOWA, Canadian mortgage rate history]
(These are posted rates, and there are always better rates on offer to clients, but that's generally true most of the time unless banks are getting worried)

lowest advertised fixed rate has dropped from about 5.5% in October 2023 to 4.64% today, and continues to drop:

https://www.ratehub.ca/5-year-fixed-...e-rate-history

Posted rates are a bunch of crock and as you said basically nobody (or at least anyone with half a brain) does not take a mortgage at that rate. Buyers plan on the discounted rate they are given, not the general posted rate.

[Changing City]

Originally Posted by Innsertnamehere

lowest advertised fixed rate has dropped from about 5.5% in October 2023 to 4.64% today, and continues to drop:

https://www.ratehub.ca/5-year-fixed-...e-rate-history

Posted rates are a bunch of crock and as you said basically nobody (or at least anyone with half a brain) does not take a mortgage at that rate. Buyers plan on the discounted rate they are given, not the general posted rate.

In your previous comment you said 18 months, so that's what I quoted. Now you're saying 8 months. In January 2023 the rate on your source was 4.39%, and now it's 4.64%, so it's a little higher than 18 months ago.

So the real cost of a mortgage has fallen in the past 8 months from about 5.5% in October 2023 to 4.64% today, and the composite home price has also fallen from $739,900 in October 2023 to $714,300 today.

It appears that sustained low interest rates led to a huge hike in prices, and 10 hikes in rates over a relatively short period saw them fall back. Despite mortgage rates falling a little in the past 8 months, it hasn't been enough for prices to rise (yet).

[Innsertnamehere]

Yes, apologies - rates peaked more recently than I remembered off hand.

My point more so is that we have seen relatively substantial declines in fixed rates already from the peak. Generally affordability in the housing market has improved substantially in the last few months because fixed rates have dropped so much, though it's at a very elevated rate still.

[Truenorth00]

The condo market is tanking in Toronto and no one can find anywhere to live. Here’s one major reason why

“One- or one-plus bedroom condos serve neither of these societal segments,” contributor John Lorinc writes. “It’s as if the apparel industry had suddenly stopped manufacturing M, L and XL-sized clothing.”

https://www.thestar.com/opinion/cont...6301f2a03.html

[suburbanite]

Originally Posted by Innsertnamehere

Yes, apologies - rates peaked more recently than I remembered off hand.

My point more so is that we have seen relatively substantial declines in fixed rates already from the peak. Generally affordability in the housing market has improved substantially in the last few months because fixed rates have dropped so much, though it's at a very elevated rate still.

Is there anything more indicative of our unhealthy relationship with real estate than the fact that 4% interest rates are "very elevated"? Did anybody in canada ever have a 4% mortgage rate before 2009? If housing is only attainable (still debatable) at historically low rates due to an environment of long-term monetary stimulus, something is clearly wrong.

[YOWetal]

Originally Posted by Innsertnamehere

Yes, apologies - rates peaked more recently than I remembered off hand.

My point more so is that we have seen relatively substantial declines in fixed rates already from the peak. Generally affordability in the housing market has improved substantially in the last few months because fixed rates have dropped so much, though it's at a very elevated rate still.

Fixed rates have not dropped "so much". At peak best 5 year fixed was 4.89%. now it's 4.59%. Though people weren't taking 5 year fixed at the time so the difference is probably less than that.

[Changing City]

Originally Posted by suburbanite

Is there anything more indicative of our unhealthy relationship with real estate than the fact that 4% interest rates are "very elevated"? Did anybody in canada ever have a 4% mortgage rate before 2009? If housing is only attainable (still debatable) at historically low rates due to an environment of long-term monetary stimulus, something is clearly wrong.

I read that with some amusement, remembering the 15.5% rate I was paying in the early 1980s, and again in the early 1990s. Two of the homes I bought sold for less than I paid for them, and another was worth less thanks to >20% inflation. Thinking 5% interest rates are high is a great example of recency bias.

[Truenorth00]

Originally Posted by Changing City

I read that with some amusement, remembering the 15.5% rate I was paying in the early 1980s, and again in the early 1990s. Two of the homes I bought sold for less than I paid for them, and another was worth less thanks to >20% inflation. Thinking 5% interest rates are high is a great example of recency bias.

What was your principal then?

[whatnext]

Originally Posted by suburbanite

Is there anything more indicative of our unhealthy relationship with real estate than the fact that 4% interest rates are "very elevated"? Did anybody in canada ever have a 4% mortgage rate before 2009? If housing is only attainable (still debatable) at historically low rates due to an environment of long-term monetary stimulus, something is clearly wrong.

Yup, that's what happens when you have gov'ts with various bad policies let housing prices race ahead of ordinary incomes.

[Changing City]

Originally Posted by Truenorth00

What was your principal then?

More than I could afford to repay. I co-owned one house with a co-worker. It had 3 bedrooms, but we turned one living room into a bedroom, and leased two bedrooms to two art students. Somehow we all managed to share a bathroom. Once the co-owner was getting married and moved out, the house was sold, and we split the very limited proceeds, as it hadn't increased in value much. (None at all, accounting for inflation). It helped with establishing a credit record, getting a subsequent mortgage, and not having to pay rent. But it didn't increase my net worth.

[whatnext]

Originally Posted by Truenorth00

https://www.thestar.com/opinion/cont...6301f2a03.html

In Vancouver even purveyors of “regular” units are running into trouble. At first it was largely China-connected developers but now it’s spreading into the Valley.

Vancouver to the Fraser Valley, court-ordered sales of developments are popping up everywhere
"There are signs of trouble elsewhere," said Adam Lawrence, who specializes in investment and development land sales at Goodman Commercial Inc.

https://vancouversun.com/business/re...are-everywhere

[Changing City]

Originally Posted by whatnext

In Vancouver even purveyors of “regular” units are running into trouble. At first it was largely China-connected developers but now it’s spreading into the Valley.

Vancouver to the Fraser Valley, court-ordered sales of developments are popping up everywhere
"There are signs of trouble elsewhere," said Adam Lawrence, who specializes in investment and development land sales at Goodman Commercial Inc.

https://vancouversun.com/business/re...are-everywhere

Many of the current suburban foreclosures in the Lower Mainland are linked to one over-extended Burnaby business, QRD (Quarry Rock Developments), who had several projects fold. It appears that the company is run by the past president of the Canadian Institute of Quantity Surveyors - British Columbia (CIQS-BC).

[whatnext]

Originally Posted by Changing City

Many of the current suburban foreclosures in the Lower Mainland are linked to one over-extended Burnaby business, QRD (Quarry Rock Developments), who had several projects fold. It appears that the company is run by the past president of the Canadian Institute of Quantity Surveyors - British Columbia (CIQS-BC).

That may be but the overall market is struggling as well. That’s going to make it hard to convince developers to build when we apparently need a lot of housing. As I’ve said government policies have backed us into a place where the housing people need apparently can’t be built at a price they can afford.

Rate Cut Not Enough To Spark Fraser Valley Market Activity In June

​Inventory in the Fraser Valley has continued to build up for the sixth straight month while home sales remain soft.

Those who were hoping the Bank of Canada's rate cut on June 5 would spark activity in the real estate market will have to continue waiting, as home sales in the Fraser Valley went the other direction in June, according to statistics published by the Fraser Valley Real Estate Board (FVREB) on Wednesday.

In June, the Fraser Valley recorded a grand total of 1,317 home sales, which represents a decrease of 13% from May 2024 and a decrease of over 30% from both this time last year and the 10-year average for June.….

https://storeys.com/fraser-valley-re...ate-june-2024/

[Coldrsx]

[Changing City]

Originally Posted by whatnext

That may be but the overall market is struggling as well. That’s going to make it hard to convince developers to build when we apparently need a lot of housing. As I’ve said government policies have backed us into a place where the housing people need apparently can’t be built at a price they can afford.

Rate Cut Not Enough To Spark Fraser Valley Market Activity In June

​Inventory in the Fraser Valley has continued to build up for the sixth straight month while home sales remain soft.

Those who were hoping the Bank of Canada's rate cut on June 5 would spark activity in the real estate market will have to continue waiting, as home sales in the Fraser Valley went the other direction in June, according to statistics published by the Fraser Valley Real Estate Board (FVREB) on Wednesday.

In June, the Fraser Valley recorded a grand total of 1,317 home sales, which represents a decrease of 13% from May 2024 and a decrease of over 30% from both this time last year and the 10-year average for June.….

https://storeys.com/fraser-valley-re...ate-june-2024/

In expensive markets (Toronto, Vancouver, Fraser Valley etc) affordability is very limited. What you're seeing is sales numbers below 10 year average (in the Fraser Valley and in the new Vancouver monthly data), and the number of homes on the market rising. Yet prices are still only falling slightly (they're up 0.5% year-on-year in Vancouver, so a slight drop, allowing for inflation).

It'll take many more years of steady price drops (or lower interest rates) for prices to fall to more affordable levels. Blaming 'the government' is easy, but the government didn't buy all the homes at ever-increasing prices, that it turns out aren't as good an investment as the buyers thought, or they can't really afford now interest rates are higher (but by no means high in historical sense). People - almost all Canadian people - borrowed more than they should because of a series of myths, or lies they told themselves. 'Interest rates can't go up', 'prices never go down', 'they'll never close down AirBnB'.

Institutions haven't helped - Candian Banks, and 'alternative lenders' have loaned far more than they would have years ago, and you can argue the government should have regulated them more tightly (but it's supposed to be a free country where people can make their own decisions). The Bank of Canada could have kept interest rates a little higher, (but their main job is to avoid out of control inflation, while avoiding recessions). And obviously recent immigration levels (especially of overseas students) have helped keep prices up in some markets by creating more demand.

People's buying decisions having created the problem, they are also the solution. That's what you're seeing now. They're not buying, and sellers are reluctantly lowering their prices (or walking away, leaving the lenders to clear up the mess with a foreclosure sale). "transaction-level data do show that well-priced properties are still selling quickly, suggesting astute buyers are able to spot value and act when opportunities arise.” [REBGV June report] Home prices can rise like a rocket, but they usually take a lot longer to come back down again, (and if they come down as fast as they went up, there's a serious economic impact).

Developers who only build to sell will slow, or stop building, and those who bought land on credit will fail. Bigger builders, or more nimble ones, will switch to rentals, because the demand for homes still exists. (Westbank just applied to build 3 rental towers with nearly 1,000 units in the Downtown Eastside, for example).

There's no easy, or instant fix, and there will be casualties, just as there have been every time the market gets overextended.

[SpongeG]

I've been reading a few things about renters and home owners recenty and have only found out sometimes the owner is not that in control. Example, I was reading about these people bought a house intended for themselves to be their home and live in but the house has renters in it and the renters refuse to move out and the new owners have to jump through all these hoops and all this paper work that the renters are apparently ignoring and the old owners aren't doing much to help, this was somewhere in Ontario. And another example in BC is a renter is living in a suite inside a house that the owner sold and they also require paper work to be done but the renter is doing whatever they can not to move out.

I always assumed if a house with a rental suite in it has renters and the house is sold that the renters would have to move out but apparently they can stay? and some of them seem to be very adamant that they will not move out regardless of the home ownership change. Seems a little weird to me.