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

[giallo]

Originally Posted by SpongeG

housing costs seems to be a reason why people are leaving

• Video Link

The comments in this video are what you'd expect; lots and lots of people sharing their experiences in Canada from back in their home country. Most seem to like Canada, and Canadians, but just couldn't make it work due to the cost of living and poor job prospects.

The overall sentiment was "Better to have a home in a developing country than to be homeless in a developed one."

[niwell]

Interestingly enough I was at a cottage with a friend from undergrad who now works as a lawyer in Dallas. She bought her 1960s era bungalow in an older suburb abutting Dallas proper 7 years ago for a bit less than $300k. Mortgage costs are dirt cheap (less than $1k) but total carrying costs for the house are around $3,800 per month, with the excess split pretty evenly between property tax and insurance. Property taxes are about 5-6x what they would be for an equivalent house in Ontario, and insurance around 10x what we pay.

During this time housing costs in the area have almost tripled, with average sales prices around $750kUSD. Granted, you can go much further out for cheaper prices still, but increased housing costs has become a major topic in my friend's social circles. A new mortgage with those associated costs is starting to get up there. Her husband works in trades (plumbing) and has found that younger people in his company are increasingly priced out of the market, particularly as wages aren't keeping pace with increases in these industries. And of course health benefits aren't that great even for unionized tradespeople. Contrary to what we hear on SSP not everyone is a tech guy with the money hose hooked up. Median family income in the Dallas-Ft Worth area is roughly on-par with the GTA, though of course they don't have state income tax. They moved from California begrudgingly as costs had gotten out of control even for someone making a VERY good income as a patent lawyer.

Again (and again, and again) not trying to downplay the situation here but I don't think it's as simple as building a couple more freeways and opening up land. Both of which seem to be in the cards for the GTA anyways. Not to mention a place like Calgary that's facing significant year-over-year increases. There's more at play here and we just happen to be facing the perfect storm of something that's affecting everyone.

[Coldrsx]

2024 Quarterly Housing Reports
The second installment of our 2024 Market Housing and Rental Report is now available. This report highlights housing activity across the province and recaps what we saw in Q1 + Q2 2024, including housing starts, rental trends, housing types under construction, pricing, inventory and population growth.

KEY HIGHLIGHTS

-With 21,510 year-to-date starts, Alberta has set a record for the first six months and is on pace to set a record level of housing starts for the year.

-Year-to-date, housing starts in Alberta are up 54% compared to 2023 and remain well above the ten-year average.

-The Calgary and Edmonton regions continue to lead the province in population growth and housing activity and are well above their ten-year averages.

-Momentum is slowly building in mid-sized municipalities with Red Deer, Grande Prairie and Medicine Hat posting housing starts above their ten-year averages.

-Housing starts rebounded in Lethbridge and are up 265% from 2023 and near ten-year averages.

-Despite an increase in mid-sized cities, the majority of housing starts remain in the

-Calgary and Edmonton regions with a total of 91% of all housing starts year-to-date.

-Purpose-built rentals are increasing in mid-sized municipalities and continue to account for 33% of all housing starts province wide.

-Housing inventory saw a modest increase but still remains below ten-year averages.

-Home prices continue to remain elevated above ten-year averages and most regions saw an increase compared to last year.

-Alberta’s population continues to surge with an overall 4.4% increase in 2023 led by a 6% increase in Calgary, 4.2% increase in Edmonton and 3% increase in Red Deer and Lethbridge. Other regions continue to experience modest growth compared to the previous five years.

https://bildalberta.ca/housing-data/

[theman23]

Originally Posted by niwell

Interestingly enough I was at a cottage with a friend from undergrad who now works as a lawyer in Dallas. She bought her 1960s era bungalow in an older suburb abutting Dallas proper 7 years ago for a bit less than $300k. Mortgage costs are dirt cheap (less than $1k) but total carrying costs for the house are around $3,800 per month, with the excess split pretty evenly between property tax and insurance. Property taxes are about 5-6x what they would be for an equivalent house in Ontario, and insurance around 10x what we pay.

During this time housing costs in the area have almost tripled, with average sales prices around $750kUSD. Granted, you can go much further out for cheaper prices still, but increased housing costs has become a major topic in my friend's social circles. A new mortgage with those associated costs is starting to get up there. Her husband works in trades (plumbing) and has found that younger people in his company are increasingly priced out of the market, particularly as wages aren't keeping pace with increases in these industries. And of course health benefits aren't that great even for unionized tradespeople. Contrary to what we hear on SSP not everyone is a tech guy with the money hose hooked up. Median family income in the Dallas-Ft Worth area is roughly on-par with the GTA, though of course they don't have state income tax. They moved from California begrudgingly as costs had gotten out of control even for someone making a VERY good income as a patent lawyer.

Again (and again, and again) not trying to downplay the situation here but I don't think it's as simple as building a couple more freeways and opening up land. Both of which seem to be in the cards for the GTA anyways. Not to mention a place like Calgary that's facing significant year-over-year increases. There's more at play here and we just happen to be facing the perfect storm of something that's affecting everyone.

Your friends situation seems…unique?
Average home prices in DFW have gone up significantly, but the average hasn’t doubled over 7 years. $368k to $459k. That’s actually less than the rate of inflation if you punch it into a calculator.
They’re also paying about 4x more for insurance than the average Texas homeowner. Have they forsaken lightbulbs and decided to light the home with kerosene lamps or something?

[Build.It]

Not saying Dallas is cheap, but those property tax and insurance multiples sound a tad exaggerated.

Also Texas incomes are higher than Ontario incomes (for the same job), and there is no state tax.

A notable difference is that most houses in Texas don't have basements, so construction costs are cheaper but you also have a bit less space.

And similar to what we are currently seeing in Alberta, when there is excess demand, Texas builders are free to fulfill that demand, unlike in Ontario where only compromised units are allowed.

[theman23]

Originally Posted by Build.It

Not saying Dallas is cheap, but those property tax and insurance multiples sound a tad exaggerated.

Also Texas incomes are higher than Ontario incomes (for the same job), and there is no state tax.

A notable difference is that most houses in Texas don't have basements, so construction costs are cheaper but you also have a bit less space.

And similar to what we are currently seeing in Alberta, when there is excess demand, Texas builders are free to fulfill that demand, unlike in Ontario where only compromised units are allowed.

The median home price in Dallas is $460k which if assessed correctly pays $10k in property tax a year ($2.30 per $100 assessed value).

The median home price in Toronto is $930k and would pay $6.5k a year if assessed correctly (70 cents per $100 assessed value)

Maybe they do a better job with housing assessments in Dallas, but I’m skeptical that amounts to a 5 to 6 times difference. What’s more likely, as often happens during causal conversations amongst friends, the numbers were exaggerated or made up to make a point. Either that or there’s something very unique about the specific property in question.

[1overcosc]

Higher property taxes and lower income taxes is also much better tax policy for economic growth. You discourage harmful economic activity (speculative real estate holdings) and encourage productive economic activity (employment). I bet that higher property taxes are a key part of why prices in Texas are relatively affordable. And for actual people buying houses to live in (as opposed to speculators), the lower income taxes cancel it out.

Plus it's more effective as a revenue generator as property taxes are harder to dodge and easier to administer (ie. Lower overhead) than income taxes are.

IMO, we need this tax shift in Ontario. Ideally, we'd abolish provincial income tax entirely and replace it with a mix of higher property tax and a higher sales tax.

[P'tit Renard]

Originally Posted by niwell

Interestingly enough I was at a cottage with a friend from undergrad who now works as a lawyer in Dallas. She bought her 1960s era bungalow in an older suburb abutting Dallas proper 7 years ago for a bit less than $300k. Mortgage costs are dirt cheap (less than $1k) but total carrying costs for the house are around $3,800 per month, with the excess split pretty evenly between property tax and insurance. Property taxes are about 5-6x what they would be for an equivalent house in Ontario, and insurance around 10x what we pay..

Dallas is one of the offices I work closest with, and I ran this casually by a few of my colleagues there (who where transferred there from the 905). They live around the University Park, Richardson, Plano areas, and they find your friend's stats a bit hard to believe.

According to my colleagues, their property tax is more like 2-3x compared to GTA, and insurance is only like 1-3x compared to GTA, albeit they have much bigger homes on average and materially large acreage than what they used to have in the 905.

So seconding theman23, I think your friend probably has greatly exaggerated the numbers to make a point.

[niwell]

I was incredulous as well but was assured those are in fact the costs. Average home insurance in major Texas cities is about $5500 annually. However apparently this coverage isn't great and naturally goes up if you want to expand it. In my friend's particular case their insurance is affected by the fact the area can easily flood during rainstorms, they have a pool/hot tub, solar panels, and beehives / backyard chickens which surprisingly add to things. She's tried to convince the bank to allow self-insurance but it hasn't gone over well.

Property tax in their municipality is 2.52% and their house is assessed at around $600k. Which works out to $15,000. The area has increased significantly more than the metro average as it's become desirable for professionals and relatively centrally located. However a quick look at Zillow shows that this is the case for lots of neighborhoods, exacerbated by "bad" areas that people do not want to buy in. The average CVA in the City of Toronto for a detached home is $749k which equals $5,679 in combined property taxes. Should have been clear I was comparing to what I pay for our detached house in Eastern Ontario, which is just under $3k in property taxes and about $1,500 in insurance.

Is this an outlier? Absolutely! But if the topic is people who are moving to the US then we are in the realm of outliers. Nobody is moving from Toronto to Texas to work in construction (which, FWIW does not pay more than here for reasons that may be obvious) and live in a shitty townhouse. It's always an annoying conversation as pointing out hidden costs of these areas somehow puts you in the camp that things are hunky-dory here. Which they absolutely are NOT.

[Changing City]

Originally Posted by theman23

The median home price in Dallas is $460k which if assessed correctly pays $10k in property tax a year ($2.30 per $100 assessed value).

The median home price in Toronto is $930k and would pay $6.5k a year if assessed correctly (70 cents per $100 assessed value)

Maybe they do a better job with housing assessments in Dallas, but I’m skeptical that amounts to a 5 to 6 times difference. What’s more likely, as often happens during causal conversations amongst friends, the numbers were exaggerated or made up to make a point. Either that or there’s something very unique about the specific property in question.

So the Dallas median home pays $13,800 $CA in tax, and GTA $6,500, so more than double, but not five times.

Perhaps the Dallas homeowners are comparing what they used to pay in Canada (which could have been based on an older valuation, and before the recent higher tax increases) with what they pay now on a recent Texas assessment.

(And there's an explanation already provided!)

[niwell]

Originally Posted by 1overcosc

Higher property taxes and lower income taxes is also much better tax policy for economic growth. You discourage harmful economic activity (speculative real estate holdings) and encourage productive economic activity (employment). I bet that higher property taxes are a key part of why prices in Texas are relatively affordable. And for actual people buying houses to live in (as opposed to speculators), the lower income taxes cancel it out.

I agree. High property taxes are not a bad thing at all. It would absolutely discourage speculative investment in property.

[P'tit Renard]

Originally Posted by niwell

Should have been clear I was comparing to what I pay for our detached house in Eastern Ontario, which is just under $3k in property taxes and about $1,500 in insurance.

Yea, home insurance for the average detached home in Toronto and GTA is definitely nowhere near $1,500. It's more like in the ballpark of $3-6K and it's shooting up rapidly. The recent floods will continue to pressure on insurers to increase rates.

On the flip side, auto insurance in Dallas is a lot cheaper than the GTA. They pay much closer to Quebec rates.

[theman23]

Originally Posted by Changing City

So the Dallas median home pays $13,800 $CA in tax, and GTA $6,500, so more than double, but not five times.

Perhaps the Dallas homeowners are comparing what they used to pay in Canada (which could have been based on an older valuation, and before the recent higher tax increases) with what they pay now on a recent Texas assessment.

(And there's an explanation already provided!)

There isn't any need to convert. Niwell mentioned that DFW median family incomes are similar to Toronto area incomes... which is only true if you don't convert currencies. Once you convert, the incomes also obviously go up an equivalent amount.

And remember that $900k gets you a condo in Toronto. The average SFH costs $1.5 million in Toronto vs 516k in Dallas. That's a virtually identical tax bill before conversion.

Originally Posted by niwell

I was incredulous as well but was assured those are in fact the costs. Average home insurance in major Texas cities is about $5500 annually. However apparently this coverage isn't great and naturally goes up if you want to expand it. In my friend's particular case their insurance is affected by the fact the area can easily flood during rainstorms, they have a pool/hot tub, solar panels, and beehives / backyard chickens which surprisingly add to things. She's tried to convince the bank to allow self-insurance but it hasn't gone over well.

Property tax in their municipality is 2.52% and their house is assessed at around $600k. Which works out to $15,000. The area has increased significantly more than the metro average as it's become desirable for professionals and relatively centrally located. However a quick look at Zillow shows that this is the case for lots of neighborhoods, exacerbated by "bad" areas that people do not want to buy in. The average CVA in the City of Toronto for a detached home is $749k which equals $5,679 in combined property taxes. Should have been clear I was comparing to what I pay for our detached house in Eastern Ontario, which is just under $3k in property taxes and about $1,500 in insurance.

Is this an outlier? Absolutely! But if the topic is people who are moving to the US then we are in the realm of outliers. Nobody is moving from Toronto to Texas to work in construction (which, FWIW does not pay more than here for reasons that may be obvious) and live in a shitty townhouse. It's always an annoying conversation as pointing out hidden costs of these areas somehow puts you in the camp that things are hunky-dory here. Which they absolutely are NOT.

I would imagine that if you installed a pool, a chicken farm, and a bee farm in a comparable Toronto property, the insurance rates would also shoot through the roof. Well actually, since the comparable priced property in Toronto would probably be a condo you would most likely be uninsurable and fighting in court with your condo corp. And honestly, $5500 a year for the average joe is not that bad for insuring a SFH. I pay $300 a month for the cheapest and most basic coverage I could find in Ottawa but got plenty of quotes in that ballpark. It is an older property, but a lot of Torontonians in their $1.5 million entry level homes are paying way more.

You can still get a SFH in DFW for <$400k, even if its in a "bad area" and doesn't have a chicken farm. Everything in the GTA costs >$1 million (probably 1.3 now), including the bad areas.

If she had bought a more typical property, her carrying costs would only be around $1500 more than her mortgage. That would likely be more than offset by how much she's saving on her mortgage and income tax.

[whatnext]

Originally Posted by 1overcosc

Higher property taxes and lower income taxes is also much better tax policy for economic growth. You discourage harmful economic activity (speculative real estate holdings) and encourage productive economic activity (employment). I bet that higher property taxes are a key part of why prices in Texas are relatively affordable. And for actual people buying houses to live in (as opposed to speculators), the lower income taxes cancel it out.

Plus it's more effective as a revenue generator as property taxes are harder to dodge and easier to administer (ie. Lower overhead) than income taxes are.

IMO, we need this tax shift in Ontario. Ideally, we'd abolish provincial income tax entirely and replace it with a mix of higher property tax and a higher sales tax.

Speaking of speculative real estate holdings:

Just over 80% of new condo investors in Toronto are losing money on their rentals
RACHELLE YOUNGLAI
REAL ESTATE REPORTER
PUBLISHED 5 HOURS AGO
FOR SUBSCRIBERS

Over 80 per cent of new condo investors in the Toronto region are finding the rental income from their units is not covering the increasing mortgage and other costs of owning the property, according to a new report issued on Thursday.

The losses are dissuading investors from buying new condo units, also known as preconstruction condos because they have not been constructed yet, the report said, contributing to the lowest sales in 27 years in the first half of this year.

The preconstruction condo market is “clearly in recessionary territory with conditions deteriorating to levels not seen in decades,” said the report authored by condo research firm Urbanation Inc. president Shaun Hildebrand and Canadian Imperial Bank of Commerce deputy chief economist Benjamin Tal.

The report found that average monthly ownership costs in the Toronto and Hamilton region have climbed to $3,250 due to the higher cost of new condos, borrowing and other expenses....

https://www.theglobeandmail.com/busi...sing-money-on/

[someone123]

Originally Posted by whatnext

Speaking of speculative real estate holdings

I don't think it's possible to have a healthy economy where a big percent of the population is engaged in rent-seeking by passively borrowing against their real estate and buying more. The gambling aspect of this is also clear now in that it obviously had risks relating to interest rates and rent and taxation levels. It's not a productive endeavor, it's just a financial scheme that works with a screwed up market and tax system.

The thing that really sucks is these investor condos are mediocre to poor housing. People want 2-3 BR units, not shoeboxes. Even if a lot of these investors lose their shirts the housing situation may not improve much and quality units will remain scarce because investment was misallocated for so long.

Canada has made some major policy errors for many years. Real estate for us is like Germany's genius plan to stop using nuclear power and rely on Russian gas. I think these compounding policy errors are how countries fall down the ladder.

[giallo]

Originally Posted by someone123

I don't think it's possible to have a healthy economy where a big percent of the population is engaged in rent-seeking by passively borrowing against their real estate and buying more. The gambling aspect of this is also clear now in that it obviously had risks relating to interest rates and rent and taxation levels. It's not a productive endeavor, it's just a financial scheme that works with a screwed up market and tax system.

The thing that really sucks is these investor condos are mediocre to poor housing. People want 2-3 BR units, not shoeboxes. Even if a lot of these investors lose their shirts the housing situation may not improve much and quality units will remain scarce because investment was misallocated for so long.

Canada has made some major policy errors for many years. Real estate for us is like Germany's genius plan to stop using nuclear power and rely on Russian gas.

It's true. These are not desirable places to call a permanent home. They're purely investment vehicles in a market run amok. No one wants to buy a 1 bedroom 500sqft shoebox to live in for $650,000. It's a cold product. These things will only become desirable as a first time apartment in Vancouver or Toronto at $200,000/$250,000.