Canada's 'housing bubble' deemed close to bursting

[DirectionNorth]

Originally Posted by swimmer_spe

The solution to the skyrocketing houses is more supply. We can look to the past and the present for the solution.

The present? IKEA and others that sell flat pack furniture. They ensure it meets all regulations and you, or someone you ask puts it together following a set of reasonably clear instructions.

The past? Craftsman. Many know that name from the brand of tools that Sears sold. However, they made kits for houses that had everything. They were about $35k in today's money.

So, now if we combined the 2, we would get a flat pack house. Now a days, you cannot just buy a lot and build on it. Some developer is going to sell you the lot, but you must pick one of their plans. Maybe it is time to get rid of that and simply have the opportunity to buy the lot and build a home that you want.

I know there are companies like Beaver Homes, but part of the problem is the lot.

The problem is land. You don't need to pay for furniture spots in your house. We can't (and shouldn't) keep sprawling out forever. Mid-density prefabricated housing could work, but then we run into zoning.

[swimmer_spe]

Originally Posted by DirectionNorth

The problem is land. You don't need to pay for furniture spots in your house. We can't (and shouldn't) keep sprawling out forever. Mid-density prefabricated housing could work, but then we run into zoning.

Fir the larger cities like Toronto and Vancouver, this idea wouldn't work, but when a small city is seeing the skyrocketing prices as well, this could work.

Zoning is easy, if the local politicians are forward thinking.

[SignalHillHiker]

There was a post on Reddit making the rounds yesterday about how Minneapolis got rid of SFD zoning entirely, has since seen density increase, and rents are dropping as there are many units available and landlords are competing. Bad news for some, I imagine, but presumably good news for the city as a whole. I, of course, don't know if it's true - it was just one of those "how is started vs how it's going" photo memes.

[someone123]

This is framed a little weirdly in the public discussion sometimes. SFD zoning simply gives land owners the option of developing into higher density and in practice it would not happen on every parcel of land. I think it's more accurate to say there is currently a ban on most even modestly dense infill in most cities, and maybe it would be better politically too.

In a similar vein, NIMBYs usually have complete control over their own land and they are calling for control over land owned by other people. And often it just depends on what they want personally; if they want to downsize they will sell to the highest bidder which may be a highrise developer, but if they want to stay there they will fight a neighbour who wants the same thing.

There is a question of construction quality and neighbourhood compatibility but height and density are just a tiny part of that. It's possible to build a great high density development surrounded by low density or (more commonly) awful low density. Implicit in a lot of public discussion is that less development is better but that's not true.

[WarrenC12]

Originally Posted by someone123

In a similar vein, NIMBYs usually have complete control over their own land and they are calling for control over land owned by other people. And often it just depends on what they want personally; if they want to downsize they will sell to the highest bidder which may be a highrise developer, but if they want to stay there they will fight a neighbour who wants the same thing.

There is a question of construction quality and neighbourhood compatibility but height and density are just a tiny part of that. It's possible to build a great high density development surrounded by low density or (more commonly) awful low density. Implicit in a lot of public discussion is that less development is better but that's not true.

This is well said, personal greed above all if we're being honest about it.

The other aspect about new development is the future residents who will be able to afford a piece of this density and add to the neighbourhood are just theoretical at the time the decisions are being made. It makes mobilization by the NIMBY elements a lot more feasible.

[swimmer_spe]

Originally Posted by someone123

This is framed a little weirdly in the public discussion sometimes. SFD zoning simply gives land owners the option of developing into higher density and in practice it would not happen on every parcel of land. I think it's more accurate to say there is currently a ban on most even modestly dense infill in most cities, and maybe it would be better politically too.

In a similar vein, NIMBYs usually have complete control over their own land and they are calling for control over land owned by other people. And often it just depends on what they want personally; if they want to downsize they will sell to the highest bidder which may be a highrise developer, but if they want to stay there they will fight a neighbour who wants the same thing.

There is a question of construction quality and neighbourhood compatibility but height and density are just a tiny part of that. It's possible to build a great high density development surrounded by low density or (more commonly) awful low density. Implicit in a lot of public discussion is that less development is better but that's not true.

Maybe the problem is that zoning is the problem. Go look at truly vibrant neighbourhoods. There is housing. There is commercial. There is light industrial. And it is all within walking distance. And it is desirable to locate there.

The idea of planned subdivisions filled with houses should go the way of the dodo bird.

[ssiguy]

Actually it's not the zoning that's the problem but the real estate and developers who want to maintain the current and very lucrative status quo.

Modern modular homes {not mobiles} conform to every construction and zoning laws that regularly constructed homes do but can built much faster and are usually of higher quality because they have the exact conformity in construction of a regular assembly line work and aren't left in the cold and rain during actual construction.

Modular homes can be built with multi-floors, basements, be built to any design or construction material, and can be small apts buildings. The reality is that you may pass a modular house every day and never even know it.

[swimmer_spe]

Originally Posted by ssiguy

Actually it's not the zoning that's the problem but the real estate and developers who want to maintain the current and very lucrative status quo.

Modern modular homes {not mobiles} conform to every construction and zoning laws that regularly constructed homes do but can built much faster and are usually of higher quality because they have the exact conformity in construction of a regular assembly line work and aren't left in the cold and rain during actual construction.

Modular homes can be built with multi-floors, basements, be built to any design or construction material, and can be small apts buildings. The reality is that you may pass a modular house every day and never even know it.

Show me a new subdivision with a good mix of housing commercial and industrial.
You are not wrong with the rest, but the zoning is part of the reason we are in this mess.

[MolsonExport]

Insanity

cbc

[Nashe]

If you owned a home and cashed out recently in a few of these places with intent to move somewhere cheaper, you basically won the lottery. All luck. And no mortgage.

I know a few 20/30 somethings that have benefitted from this. I'm insanely jealous, eyeing the 10 years I have left on my mortgage at age 50-ish

[MolsonExport]

Originally Posted by Vorkuta

If you owned a home and cashed out recently in a few of these places with intent to move somewhere cheaper, you basically won the lottery. All luck. And no mortgage.

I know a few 20/30 somethings that have benefitted from this. I'm insanely jealous, eyeing the 10 years I have left on my mortgage at age 50-ish

You and me both (except what looked like 14 years left is starting to look like 16 years given the rise in rates....variable rate here). I am 52.

[thewave46]

Originally Posted by Vorkuta

If you owned a home and cashed out recently in a few of these places with intent to move somewhere cheaper, you basically won the lottery. All luck. And no mortgage.

I know a few 20/30 somethings that have benefitted from this. I'm insanely jealous, eyeing the 10 years I have left on my mortgage at age 50-ish

Oh, but those people think they're financial geniuses.

"Hey, I bought a house in Mississauga 10 years ago and sold it in 2022 for mega bucks. I'm practically a Warren Buffet-level genius. Let's go invest in Bitcoin!"

The Toronto Life guy, but younger. Sure, I have seen a couple of people who got lucky, but I'm not sure the luck holds out forever. Those 20/30 somethings that cashed out still have to spend decades somewhere.

Something something rising tide lifts all boats. Let's see who's been swimming naked when the tide goes out.

[Nashe]

Originally Posted by MolsonExport

You and me both (except what looked like 14 years left is starting to look like 16 years given the rise in rates....variable rate here). I am 52.

LOL, that's pretty close to my experience. I've been tweaking my payments up to cover it and not extend my mortgage length, but it's not enjoyable re-budgeting every few months. My gut tells me we WON'T see 80's level interest rates as it doesn't even benefit the banks at that point, but we'll see how close to the brink they'll go. I mean... they're as painted into a corner as everyone else is, really.

Originally Posted by TheWave46

Something something rising tide lifts all boats. Let's see who's been swimming naked when the tide goes out.

It's kind of a one-time thing, as well, unless you are astute (and mobile) enough to leapfrog into the "next up and coming place" and that pans out... otherwise, it's a one-way trip and you're stuck in Doaktown, NB with a paid off ranch on 200 acres and a cool million in the bank and not much to spend it on...?

[SignalHillHiker]

This video was a great breakdown of the zoning issues we face. France's model would be ideal for St. John's. Pity we don't have it.

• Video Link

And one other...

• Video Link

[thewave46]

Originally Posted by Vorkuta

LOL, that's pretty close to my experience. I've been tweaking my payments up to cover it and not extend my mortgage length, but it's not enjoyable re-budgeting every few months. My gut tells me we WON'T see 80's level interest rates as it doesn't even benefit the banks at that point, but we'll see how close to the brink they'll go. I mean... they're as painted into a corner as everyone else is, really.

Rising interest rates will have a larger blunting effect on the economy than in the 1970s and early 1980s. A lot of very speculative money is floating about, just hunting for any return it can get. As interest rates rise, bonds provide a safe place to park money and get an actual return, so they'll draw excess cash out of the economy.

Leverage is higher on both a personal and governmental level today, so small interest rate increases draw out a more significant portion of consumer/government spending.

Having experienced several oil price rises in the past few decades has also blunted the effect they have on the economy writ large. Vehicles are far more efficient today, with electric vehicles an increasing proportion of the fleet. I'd be worried if I was one of the Big 3 automakers and heavily dependent on pickup truck sales. Crimping consumer spending and high oil prices will unduly hit expensive pickup truck sales (just like in 2008/09!) and now many of them have no cars to cover the smaller portion of the market.

Labour inflation could continue to be a concern. Without a cheap manufacturing country to export low-end jobs to (China is played out), the Baby Boomers leaving the workforce, the increased demand for labour-intensive social services, and no slack in the broader workforce, the cost of labour will likely continue to rise.

It's kind of a one-time thing, as well, unless you are astute (and mobile) enough to leapfrog into the "next up and coming place" and that pans out... otherwise, it's a one-way trip and you're stuck in Doaktown, NB with a paid off ranch on 200 acres and a cool million in the bank and not much to spend it on...?

I don't know if many 20/30-somethings headed to the boonies though. Maybe a few did. Older people? Sure, not being tied to an employer means one can move about. Employment is still located near metro areas, by and large. Maybe some 20/30-something relocated to cheaper metros, though.

Anyway, I would have locked in my mortgage as cheaply as I could during the past year or so. A (low) fixed rate for the next few years seems an astute bet.

[MolsonExport]

I'd be worried if I was one of the Big 3 automakers and heavily dependent on pickup truck sales. Crimping consumer spending and high oil prices will unduly hit expensive pickup truck sales (just like in 2008/09!) and now many of them have no cars to cover the smaller portion of the market.

This will be...the third time that the Big 3 were caught with their pants down. Firstly in the 70s, when they made giant inefficient saloons that were shitty on quality, while the Japanese made better quality, more efficient compact cars. They needed bailouts and import quotas/duties to survive. Then with the onset of the Great Recession. Again, massive bailouts from the Canadian/Ontario and American governments. And now with their laser-sharp focus on producing ever-more-ginormous (and extremely ugly) pickup trucks. I want to say "fuck the Big 3" (they are about as domestic as Toyota is, as far as Canada is concerned), but I don't want to see all their Canadian factories shutter.

[jigglysquishy]

We won't get to 80s interest levels, but they'll get high enough that the young people of 2045 will talk about it the same we talk about 80s interest rates now.

[travis3000]

Interest rates (5 year fixed) will top out around 5.0% to 5.5% by the time we get to next spring IMO (they are currently at 4% now for insured and 4.3% for uninsured). They will plateau here and likely fall again back to 3-4% when they realize we are in a recession from a slumping real estate market. They will never go higher, or we will be back in the 1930s depression era.

Housing prices are already falling from February highs across Greater Toronto Area. On average they have dropped 10-15% based on the most recent data. However when measured against YTD from 2021, they are still up 18-22%.

My guess is that prices will continue to trickle down throughout 2022 and early 2023, likely dropping 20-25% from the all time Feb 2022 highs. Which means a house that sold at $1,200,000 in February 2022 is now worth $1,050,000. And by the end of this journey will be down to $900,000. Sounds steep... but before COVID that house was only worth $700,000. So it's still up in the grand scheme of things. Sucks if you bought during the peak but thats the risk of real estate.

[ssiguy]

Originally Posted by swimmer_spe

Show me a new subdivision with a good mix of housing commercial and industrial.
You are not wrong with the rest, but the zoning is part of the reason we are in this mess.

I completely agree that zoning and city bureaucracy is one of our main problems in getting homes built. However this idea that we simply can't build them fast enough is a bit of bunk. modular homes are much cheaper to build and significantly faster.

[Innsertnamehere]

Originally Posted by travis3000

Interest rates (5 year fixed) will top out around 5.0% to 5.5% by the time we get to next spring IMO (they are currently at 4% now for insured and 4.3% for uninsured). They will plateau here and likely fall again back to 3-4% when they realize we are in a recession from a slumping real estate market. They will never go higher, or we will be back in the 1930s depression era.

Housing prices are already falling from February highs across Greater Toronto Area. On average they have dropped 10-15% based on the most recent data. However when measured against YTD from 2021, they are still up 18-22%.

My guess is that prices will continue to trickle down throughout 2022 and early 2023, likely dropping 20-25% from the all time Feb 2022 highs. Which means a house that sold at $1,200,000 in February 2022 is now worth $1,050,000. And by the end of this journey will be down to $900,000. Sounds steep... but before COVID that house was only worth $700,000. So it's still up in the grand scheme of things. Sucks if you bought during the peak but thats the risk of real estate.

I think this is largely correct in terms of my expectations. We can already see headwinds of a global recession incoming, and frankly it was basically a foregone conclusion once people pulled out of COVID and really looked around a bit at how 2 years of productivity basically got wiped off the map.