Canada's 'housing bubble' deemed close to bursting

[1overcosc]

Originally Posted by suburbanite

Definitely couldn't do something as small and rural as Ompha, but I do love the small Southeastern Ontario towns. I feel like I could spend a month a year in a place like Westport when I'm retired.

Edit: Lol, apparently this goes for $900k in Westport, 45 minutes north of Kingston. Not even on the water.

Ompah is dirt cheap. Buddy got a 2 bedroom bungalow on a sizeable lot (half-acre I think?) "in town" (as much as you can be "in town" over there ) for less than $300k and that was only a few months ago. I visited him last weekend, house is nice enough. Old, but nice.

[rofina]

Originally Posted by 1overcosc

Ompah is dirt cheap. Buddy got a 2 bedroom bungalow on a sizeable lot (half-acre I think?) "in town" (as much as you can be "in town" over there ) for less than $300k and that was only a few months ago. I visited him last weekend, house is nice enough. Old, but nice.

I will just say that this goes to show how skewed our Canadian perceptions are.

Ompah is a rural town that 99.99% of Canadians could not find without Google Maps (myself included). Where 99.99% of Canadians would have no interest in visiting or living. Might be hard to believe, but no diss on Ompah, Canada is filled with towns like this.

To think that $300k for a house in a town like this is dirt cheap is part of the perception problem facing us as a nation.

Land shouldn't cost more then a few thousand here, plus construction costs on a 2 bed bungalow call it $100,000. How this is worth more than $150,000 is mind blowing.

[Innsertnamehere]

300k at 20% down is like $900 a month at current mortgage rates. You could qualify for that off of about $45k in income. Not terrible, but that's about half of median household income in Ontario.

For Ompah? Maybe a bit pricey, but that's affordable from two minimum wage workers. You literally won't really find properties cheaper than that basically as that's basically the floor of productivity in this country.

A 2 bed, 800sf bungalow would be about $150,000 minimum to build new right now. Plus you are looking at probably 30-40k in servicing costs assuming it's urbanized with municipal services. And a couple grand for land? You really devalue the productivity of land haha.

To me that's inflated a bit but not a ton. I couldn't see it going for less than $200k, unless the place is completely falling apart. $300k is basically the floor for detached housing, again, unless it's falling apart.. And it makes financial sense as to why it is.

There are ways to make much cheaper housing though than detached. Specifically if you shrink land needs. An 800sf townhouse with bare bones finishes could probably be done and sold for $200k if you played the cards right, assuming land costs were near zero and you are in a low cost municipality. Your servicing costs are a lot lower, there are construction cost savings from doing multiple units at once / sharing walls, and your base land cost is lower. Something like a stacked townhouse or walkup is even cheaper than that for 800sf.

[lio45]

Originally Posted by Innsertnamehere

And a couple grand for land? You really devalue the productivity of land haha.

Land in the Ompah area should be worth $500/acre tops, so a half-acre lot is worth at most $250, not “a couple grand”, that’d be highway robbery.

[lio45]

BTW, construction costs don’t matter. If no one wants to live in Ompah then that house is worth $0.

There are houses in the worst areas of Detroit or Chicago that are selling for tiny fractions of what they’d cost to build. And that’s normal. Supply/demand.

[SpongeG]

If you want cheap places look into northern Alberta, I saw a listing in Hines Creek for $20,000 for a house. There's not really anything there but people do live there.

You could get a place in Berwyn for under $50,000 easily too.

All small farming towns with dwindling populations.

[Gresto]

Originally Posted by 1overcosc

Ompah is dirt cheap. Buddy got a 2 bedroom bungalow on a sizeable lot (half-acre I think?) "in town" (as much as you can be "in town" over there ) for less than $300k and that was only a few months ago. I visited him last weekend, house is nice enough. Old, but nice.

I have to agree with the others. Unless your buddy has waterfront on beautiful Palmerston Lake or bought a luxurious, well-maintained log house, 300 Grand doesn't strike me as cheap at all. There's almost literally nothing, nothing doing in Ompah (even less than Plevna), and based on what I have descried driving through over the years, most residents are too cash-strapped and/or elderly to maintain their properties. Some of the properties are quite ramshackle, while a few are tidy and well-kept. It's a sad state of affairs that exposes the urban-rural divide: penurious locals surrounded by well-to-do, leisure-seeking summer interlopers from the city. Lots of American cottage-owners in the area, too.

[DirectionNorth]

Originally Posted by Innsertnamehere

300k at 20% down is like $900 a month at current mortgage rates. You could qualify for that off of about $45k in income. Not terrible, but that's about half of median household income in Ontario.

Where's Ompah?

Originally Posted by Innsertnamehere

For Ompah? Maybe a bit pricey, but that's affordable from two minimum wage workers. You literally won't really find properties cheaper than that basically as that's basically the floor of productivity in this country.

I follow the development threads for many American cities (as the Portland thread will tell you, really stirred a nest of bees there). In the Salt Lake City threads, everybody agreed that a median house price of $500,000 was soooo high, and that they were in a housing crisis. I immediately thought that was really cheap. Can you see a problem?

A 2 bed, 800sf bungalow would be about $150,000 minimum to build new right now. Plus you are looking at probably 30-40k in servicing costs assuming it's urbanized with municipal services. And a couple grand for land? You really devalue the productivity of land haha.[/QUOTE]

Originally Posted by Innsertnamehere

To me that's inflated a bit but not a ton. I couldn't see it going for less than $200k, unless the place is completely falling apart. $300k is basically the floor for detached housing, again, unless it's falling apart.. And it makes financial sense as to why it is.

In a town nobody's heard of? Why would a house need to be $300,000 (and regarded as cheap) in a town with no economic activity, no proximity to anything, no anything? Unless it has gorgeous views or something.

[lio45]

I guess the one way to assign any value to Ompah real estate, as there’s nothing there, is as a commutable location for Ottawa. ~3 hours a day round-trip, 5x per week, assigning a value of $20/hour at least to one’s time, plus some vehicle-related expenses, we’re at at least $400/week in “cost” to live there for an Ottawan, so ~$20k a year. Since Ottawa real estate can be financed at ~3% (or maybe even less), an Ompah property starts to make financial sense whenever one pays at least $670k less than the Ottawa equivalent. (That’s if you value your time at only $20/h. If it’s more, the gap grows.)

[jonny24]

I think there is a bit of a clear gap between those who "got in" before things were too expensive, I don't think that gap in anywhere so clear as "born in late 80s" or anything so blanket-approach, when applied to the whole country. To me the biggest determiners of being able to get in are:

1: Location. Young people / lower earners may have been priced out in Vancouver 15 years ago and Toronto 10 years ago, but other cities are still affordable (if getting less so). I find the discussion tends to get skewed towards the more unaffordable places since, well, they're unaffordable, and lots of people live there. But I still see statements along the line of "all 20-somethings have missed the boat" and I just don't see that in my world yet.

2. Single vs couple. Being able to afford ~twice as much, plus the stability of only going down to one income rather than zero (unlikely that both lose a job at the same time). It may drive towards a larger purchase, or require other compromises, but double the buying power is hard to beat any other way.

3. Family setup. The egregious example is gifting hundreds of thousands of dollars to buy, but there are MANY ways in which the parents' situation, and how much they extended that to the kids, can have a huge impact. Whether it's paying or helping with school, letting kids live at home during/post school, providing a car so a kid can take a better job further away. Things that don't even have direct value, like mindset towards money/property and education towards money/property. This one is huge, but still, all the help in the world still doesn't mean guaranteed success.

4. Income. More money is more money. This can be tied to career choices, career progression, effects of student debt, different stages of life (still figuring things out vs on a clear path), demand for your field, willingness to move vs stay close to home or family.


A look at me and my three siblings illustrates some of this. We all had the same upbringing, and the same help available to us, but different ages and life choices have us in very different situations. Two of us have "got in", I'm not sure how likely it is for the other two any time soon.

1. Me, 28, estimator. College 3 years, lived at home 3 years. I had school debt, but paid it off in 6 months. Saved but not aggressively, and spent a lot too (new car). Moved in with girlfriend, who had no school or car debt (parents), both of us had immediately gotten jobs in our fields out of school (construction mgmt. and HR). Apartment for a year and a half, then in 2018 bought a house in Hamilton for $350k. This was well below what we were approved for and is very comfortable for us to afford.

2. Brother 1, 26. Cabinetmaker apprenticeship 3 years, working most of that time and collecting EI during the in-school portions. No debt generated, in fact saved a bunch, lived at home the whole time. Doesn't spend on anything, bought a used truck for cash. Left to Sudbury for GF's school, moved in with me when that didn't work out, fully employed in both cities. Bought a house by himself in 2020 in Brantford for $350k. This was the absolute max he could spend, and required a higher down payment than I did, and his budget is very tight without Brother 2 moving in.

3. Brother 2, 23. College 2 years, moved back home for 1 year. Social work, but didn't go into that field, and works at an auto parts factory. Moved in with Brother 1 when he bought the Brantford house. Not sure on debt/spending with him, but he doesn't do much besides gaming, paid cash for a decent used sedan. Assume he's saving decently for his non-minimum-but-not-stellar wage.

4. Sister, 21. College 2 years, didn't want to go into that field, 1 year training course in something else. Still isn't sure what she wants, lives at home and works at Tim Hortons. Drives one of mom and dad's cars. I don't think she spends much either - they live in the country and there hasn't been much to do for the last little while for some reason.

Like I said, very different for different reasons. No cash gifted but the opportunity to live at home and save - parents don't charge rent but help with hobby farm chores is expected. By far the biggest differentiator has been the fact that I have a second person. If brother 2 and I were flipped in age, he likely could have bought "more/better house", but since he's budgeted quite tight, maybe would not have.

You could look at that example and think that the $350k affordability line had moved from Hamilton to Brantford, but it's not that clear-cut. Brother 1 🞵🞵🞵🞵🞵🞵🞵 hates living in the city, and also works in Cambridge. More money would have gone towards getting out of urbanity, not further in.

Other than more time to save a down payment, Brother 2 and Sister could be much closer to buying something, if their careers had kicked off immediately the way it did for the older 2. As it stands now, if they had a DP, I'm not sure either would have the cashflow on their own to make Brother 1's situation work for them. So career is the biggest differentiator between those two and Brother 1.

[Innsertnamehere]

Originally Posted by lio45

BTW, construction costs don’t matter. If no one wants to live in Ompah then that house is worth $0.

There are houses in the worst areas of Detroit or Chicago that are selling for tiny fractions of what they’d cost to build. And that’s normal. Supply/demand.

yea, because those cities have a vast oversupply of housing. So the most marginal product is very cheap. Most of those houses for a couple grand are uninhabitable anyway, Clearly Ompah, and Canada as a whole, does not.

Detroit isn't actually that cheap anymore either. You are generally looking at at least $150k USD ($185k CAD) in the worst neighborhood to get something habitable. anything less and it's a house with fire damage or that has been gutted, or an empty lot. Even empty lots in many neighbourhoods are going for $50k+.

Again, as I said, detached properties that are habitable generally have a "core" value of about 200k these days. You would only see prices lower in markets with severe oversupply of housing.

[Innsertnamehere]

Originally Posted by DirectionNorth

Where's Ompah?



I follow the development threads for many American cities (as the Portland thread will tell you, really stirred a nest of bees there). In the Salt Lake City threads, everybody agreed that a median house price of $500,000 was soooo high, and that they were in a housing crisis. I immediately thought that was really cheap. Can you see a problem?

A 2 bed, 800sf bungalow would be about $150,000 minimum to build new right now. Plus you are looking at probably 30-40k in servicing costs assuming it's urbanized with municipal services. And a couple grand for land? You really devalue the productivity of land haha.

Because that's the base cost to construct a dwelling basically, as I said.

Land costs given the location would basically be next to zero, but even in the middle of nowhere land has greater economic productivity than $250/acre. If it's serviced, urbanized, and generally habitable, that has value.

$250 an acre might buy you some arctic tundra as that evaluation places effectively basically 0 productivity on the land. Literally any kind of improvement like road access, any kind of permissive use, recreational potential, etc. adds value.

I get it, everyone thinks $300k is a lot, but the reality is with 1.3-2% financing right now and the cost of construction, that's basically as cheap as it gets for a detached dwelling. And that's fine, as the vast, vast majority of Canadian households can afford that.

I'm not debating if Canadian housing as a whole is overvalued, just saying that you aren't going to find cheaper than that other than in vastly oversupplied markets. And Canada is not oversupplied right now, especially Ontario.

And by the way, there are lots of cheaper housing options for detached in Ontario still too in better areas than Ompah.

This place sold for $165k in January and is generally habitable, for example. It's on a small plot of land and is fairly run down, but operational. Lots of sub-300k examples in the province too.

[thewave46]

Originally Posted by rousseau

Real estate as an investment? It's not for everybody. From what I've been told, you need the stomach for the inevitable bad tenants. It's certainly not for me.

I hear this post.

It's the 'cult' of RE as an investment that bugs me. How every conversation becomes 'Oh, houses are worth $X' once RE fever sets into a place.

I couldn't care less about what my house is worth, since I'm going to be living in it, probably for a good long time. What I do care about is how much it costs me and how that cost could seriously escalate if the principal I'm refinancing is large.

The mantra of RE viewed only as an investment is just another way of screwing over the next generation insidiously via debt.

[MolsonExport]

Originally Posted by DirectionNorth

Where's Ompah?

mostlyofftopic

[le calmar]

Originally Posted by rousseau

Never heard of it, so I had to take a look. It does indeed look very charming.

There's a certain population threshold from 100+ years ago determining whether a town in Eastern Ontario has a solid wall of commercial buildings in its core, and you notice this the farther you drive northeast of Toronto. Down here even tiny villages had/have unbroken commercial frontage of varying lengths right in the centre instead of detached shopfronts.

It's thunderingly obvious, but it's still fun to take note of how Eastern Ontario serves as an architecural transition zone between southern Ontario and Quebec.

It’s often a good indicator to determine how large/important a town was 100 years ago. A tiny place like Athens, which almost nobody has ever heard of, has a continuous wall of commercial buildings on its main street (small, but still) whereas much larger towns like Casselman don’t have one. One could argue they barely have a proper commercial main street, or that Casselman feels like Nicolet.

[Harrison]

Originally Posted by SpongeG

If you want cheap places look into northern Alberta, I saw a listing in Hines Creek for $20,000 for a house. There's not really anything there but people do live there.

You could get a place in Berwyn for under $50,000 easily too.

All small farming towns with dwindling populations.

Yup, rural Alberta, even the entire rural Prairies, for that matter, have bargain basement RE prices. Even Edmonton and Calgary offer excellent RE prices relative to their sizes and amenity offerings, which I feel most people in BC and Southern Ontario aren't terribly aware of. For instance, there are brand new SFDs in desirable central Edmonton neighbourhoods listed between $550,000 - $650,000 right now.

[someone123]

Originally Posted by Harrison

Yup, rural Alberta, even the entire rural Prairies, for that matter, have bargain basement RE prices. Even Edmonton and Calgary offer excellent RE prices relative to their sizes and amenity offerings, which I feel most people in BC and Southern Ontario aren't terribly aware of. For instance, there are brand new SFDs in desirable central Edmonton neighbourhoods listed between $550,000 - $650,000 right now.

It's pretty disruptive to move between regions in Canada. If you move from Vancouver to Edmonton, not that far apart in the national scheme of things, you're pretty much starting over and you will only be visiting people in your former town maybe a couple times a year.

This is separate from the question of whether or not the regions are comparable in terms of desirability which will depend somewhat on the person. I don't think it's generally true that somebody used to coastal BC will find northern Alberta to be similar.

To be humane to its own citizens Canada needs to offer a good standard of living within each of its regions. I don't think it's acceptable to say that if you are in the unlucky 1/2 of the country you are expected to move hundreds or thousands of km away if you want a middle class lifestyle. And I'm saying this as a person who has lived, by choice, on both coasts plus in Ontario. I am also inclined to believe that when it's all of a sudden hard for many people to live well in a given place there's usually something broken about how it's being managed by the government (though there are exceptions, like if there is a resource bonanza that suddenly ends).

[thebasketballgeek]

Isn’t this also a way to incentivize people to move to areas that sorely need population increases?

Moving is most certainly not an easy task but interprovincial migration patterns show that people are still leaving the prairies more then they are arriving here. Despite the fact that the prairies are the most affordable places in Canada.

For example I just looked at Osborne Village listings and you can live in a 1200 sq ft house for $250k and it’s a 10 minute walk to any amenity you could possibly ask for and across the river to downtown. There are many similar listings at similar prices throughout Winnipeg and Edmonton and are necessary to not only incentivize people from Toronto or Vancouver getting priced out of their houses, but to also have the ability of enjoying an urban lifestyle at a very affordable price.

[someone123]

Originally Posted by thebasketballgeek

Moving is most certainly not an easy task but interprovincial migration patterns show that people are still leaving the prairies more then they are arriving here. Despite the fact that the prairies are the most affordable places in Canada.

I don't think the net migration or prices really mean anything by themselves. You can't conclude directly from place A being cheaper than place B that A is "undervalued". Maybe people just like B more.

I would argue it is a problem when there are deep flaws in a given region, such as a large percentage of the inhabitants struggling to afford housing that allows them to comfortably raise even 1 child. My impression is the Prairies don't really have these issues, but I have no strong opinion on that.

[Harrison]

Originally Posted by someone123

I don't think the net migration or prices really mean anything by themselves. You can't conclude directly from place A being cheaper than place B that A is "undervalued". Maybe people just like B more.

I would argue it is a problem when there are deep flaws in a given region, such as a large percentage of the inhabitants struggling to afford housing that allows them to comfortably raise even 1 child. My impression is the Prairies don't really have these issues, but I have no strong opinion on that.

At least in Edmonton, people here can easily afford to raise a family in all areas of the city, but that alone doesn't seem to be enough of a draw from other provinces...yet.