Canada's 'housing bubble' deemed close to bursting

[ssiguy]

Canada needs higher interest rates to encourage people to save, slow inflation, bring the real estate prices down to some form of normality, and get the country off it's real estate led unproductive economic growth.

The BoC rate should be raised to at least 5% and should never be allowed to drop below 3%.

[samne]

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

The problem is where is moving somewhere cheaper?

[Nashe]

Originally Posted by samne

The problem is where is moving somewhere cheaper?

I'm not 100% sure I understand your wording, but if I do: literally anywhere that real estate is quite a bit cheaper and you're OK with the lifestyle change (if there is one).

Remote work can be part of it, but it doesn't have to if you free up enough liquidity to live mortgage free. You could literally do the same or a different job for less money and be farther ahead each month.

[MolsonExport]

You could move to Elliott Lake! Pay no attention to the collapsing shopping mall roof.

https://en.wikipedia.org/wiki/Algo_Centre_Mall#2012_roof_collapse

[niwell]

Originally Posted by MolsonExport

You could move to Elliott Lake! Pay no attention to the collapsing shopping mall roof.

https://en.wikipedia.org/wiki/Algo_Centre_Mall#2012_roof_collapse

They have a new, smaller mall now! That brings me back to when I had to cover the trial for work (building code related). Just a clusterfuck from literally every involved party.

Also one of the few places in Ontario where you're required to have radon mitigation in basements...

[MolsonExport]

my wife spent time working/living in EL back in the day. She does not have the fondest memories.

[whatnext]

B-b-but it's a supply issue:

Statistics Canada
@StatCan_eng
8h
In 2021, growth in the number of private dwellings (+6.4%) again outpaced that of the population living in these dwellings (+5.4%). For more data from the #2021Census: http://ow.ly/Jnrp50J7oLt.

https://twitter.com/StatCan_eng/status/1525128824572231680

[samne]

Originally Posted by Vorkuta

I'm not 100% sure I understand your wording, but if I do: literally anywhere that real estate is quite a bit cheaper and you're OK with the lifestyle change (if there is one).

Remote work can be part of it, but it doesn't have to if you free up enough liquidity to live mortgage free. You could literally do the same or a differenth job for less money and be farther ahead each month.

I suppose that my point is finding a reasonable place to live your life that’s worth the trade off for a cheaper home.

For the most part, the desirability of living in a location whether it be a part of the city or the country is reflected in the price. People want to live there for a reason.

[WarrenC12]

Originally Posted by whatnext

B-b-but it's a supply issue:

Statistics Canada
@StatCan_eng
8h
In 2021, growth in the number of private dwellings (+6.4%) again outpaced that of the population living in these dwellings (+5.4%). For more data from the #2021Census: http://ow.ly/Jnrp50J7oLt.

https://twitter.com/StatCan_eng/status/1525128824572231680

Why don't you post the graphic?



Notice any trends? Any correlation with home prices?

[swimmer_spe]

Originally Posted by ssiguy

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.

The problem is not the structure, it is the land which the structure sits on. That includes the cost and the zoning.

Originally Posted by samne

The problem is where is moving somewhere cheaper?

Tale of 2 homes.
Live in the Sudbury area. My waterfront house is worth about $400k. Bought it for a little less than that a few years ago.
Friend of mine lives in Burlington. Bought their house 20 years ago at under $200k. House near them just sold for about $1 million. They could sell theirs and buy 2 of mine.

It all depends on why you live where you do.

Originally Posted by whatnext

B-b-but it's a supply issue:

Statistics Canada
@StatCan_eng
8h
In 2021, growth in the number of private dwellings (+6.4%) again outpaced that of the population living in these dwellings (+5.4%). For more data from the #2021Census: http://ow.ly/Jnrp50J7oLt.

https://twitter.com/StatCan_eng/status/1525128824572231680

Those percentages are not the whole story. If anything, they are meaningless unless shown over several years or decades...

Line this \/ \/ \/

Originally Posted by WarrenC12

Why don't you post the graphic?



Notice any trends? Any correlation with home prices?

There is a lot to gather from it. One thing to gather from it is the fact that the construction has not kept pace with the numbers of people wanting a home.

[kwoldtimer]

Bubble seems to be officially hissing ...

[casper]

Originally Posted by kwoldtimer

Bubble seems to be officially hissing ...

Nonsense. Realtors keep telling me this pause is providing an excellent opportunity to get into the market.

More realistically over the past year it has increased to quickly. We need a pause to let inflation catchup.

[Innsertnamehere]

Originally Posted by whatnext

B-b-but it's a supply issue:

Statistics Canada
@StatCan_eng
8h
In 2021, growth in the number of private dwellings (+6.4%) again outpaced that of the population living in these dwellings (+5.4%). For more data from the #2021Census: http://ow.ly/Jnrp50J7oLt.

https://twitter.com/StatCan_eng/status/1525128824572231680

it's almost like average household size has continued to shrink over many decades and shows no sign of abating..

Just because the number of dwellings is growing faster than the number of people doesn't mean there isn't a shortage. It could be that people are having smaller household sizes.

[thewave46]

Originally Posted by Innsertnamehere

it's almost like average household size has continued to shrink over many decades and shows no sign of abating..

Just because the number of dwellings is growing faster than the number of people doesn't mean there isn't a shortage. It could be that people are having smaller household sizes.

I am actually curious about how low a household size can go. I find it difficult to imagine it dropping below ~2.2-2.5 at a society-wide level. We're not far away from that point right now.

I expect it to decline a bit more as demographics change, but eventually to stabilize. Most of the decline in household size will be due to widowing effect of the Baby Boom over the next few decades. I can't imagine the economically active portion of society will have household sizes of <2, given that people are people. They tend to end up in relationships and have kids.

The big drops of the previous decades were due to divorce become more accepted, and the decline in number of children.

[thewave46]

Originally Posted by kwoldtimer

Bubble seems to be officially hissing ...

What I am curious about is if affordability improves.

We rode the wave of cheaper housing and falling interest rates. It was fun while it lasted. Now we've expensive housing and rising rates.

Even if one gets a deal right now as prices are declining, will rising interest rates gobble up any gains?

[kwoldtimer]

Originally Posted by thewave46

What I am curious about is if affordability improves.

We rode the wave of cheaper housing and falling interest rates. It was fun while it lasted. Now we've expensive housing and rising rates.

Even if one gets a deal right now as prices are declining, will rising interest rates gobble up any gains?

If buyers believe that the deal right now is more expensive than the deal in a couple of months, the decline in sales should grow and prices continue to go down.

[SignalHillHiker]

I fell in love with this house when I first looking in 2012 but I wasn’t ready to buy and it was too much. I still like the bones inside more than my own, but wow everything around mine is so much better. Also this house is only a couple blocks from me. It’s not a nice enough neighbourhood to be $279 lol (I paid more than $100K less than that).

https://www.realtor.ca/real-estate/24400735/12-gilbert-street-st-johns

[ssiguy]

A 1% rise in mortgage rates causes the payments to rise 10%. That is manageable in many parts of the country but in areas where buyers are living on a thread due to mortgage debt, 10% is a lot.

Even if one can afford the 10% extra, it's not that which is making them withdraw from the market but rather knowing that interest rates will continue to climb. They maybe able to pay the 10% extra but if interest rates rise even another paltry 2%, that means their payments at renewal go up another 20% on top of the 10%. Added to this is that most of our expensive housing markets {especially Vancouver} are built on nothing but speculation as they no longer bare any resemblance to the local economy or wages. People buy it because they expect the prices to rise combined with the fact that savings get you no interest at all.

Of course as interest rates rise, the above scenario does a complete 180. Higher interest rates mean people expect prices to decline all while rising interest rates make savings more appealing. "Buy before you are priced out" turns into "sell before you lose your shirt". Of course it takes years to have prices rise but a collapsing market can happen in just a couple months for one very simple reason...............buying requires you to have money and selling requires you to have none at all.

[kwoldtimer]

Originally Posted by SignalHillHiker

I fell in love with this house when I first looking in 2012 but I wasn’t ready to buy and it was too much. I still like the bones inside more than my own, but wow everything around mine is so much better. Also this house is only a couple blocks from me. It’s not a nice enough neighbourhood to be $279 lol (I paid more than $100K less than that).

https://www.realtor.ca/real-estate/24400735/12-gilbert-street-st-johns

The hydro stack and meter in the middle of the facade would disqualify it for me. The toilet off the kitchen is a bit too “quaint” for me.

[swimmer_spe]

Originally Posted by kwoldtimer

Bubble seems to be officially hissing ...

Where? I feel any hissing may just be in our hopeful minds that a dilapidated house in Toronto or Vancouver no longer is worth $1 million.

Originally Posted by thewave46

What I am curious about is if affordability improves.

We rode the wave of cheaper housing and falling interest rates. It was fun while it lasted. Now we've expensive housing and rising rates.

Even if one gets a deal right now as prices are declining, will rising interest rates gobble up any gains?

It all comes down to affordability. If the drop does not actually change the monthly rate you pay, then no deals are there. Mind you, if it is not an investment, but a place to live long term, then you are gaining a lot. I know of people who bought a house in the 70s for $15,000 and that house is now worth $500,000.

Originally Posted by ssiguy

A 1% rise in mortgage rates causes the payments to rise 10%. That is manageable in many parts of the country but in areas where buyers are living on a thread due to mortgage debt, 10% is a lot.

Even if one can afford the 10% extra, it's not that which is making them withdraw from the market but rather knowing that interest rates will continue to climb. They maybe able to pay the 10% extra but if interest rates rise even another paltry 2%, that means their payments at renewal go up another 20% on top of the 10%. Added to this is that most of our expensive housing markets {especially Vancouver} are built on nothing but speculation as they no longer bare any resemblance to the local economy or wages. People buy it because they expect the prices to rise combined with the fact that savings get you no interest at all.

Of course as interest rates rise, the above scenario does a complete 180. Higher interest rates mean people expect prices to decline all while rising interest rates make savings more appealing. "Buy before you are priced out" turns into "sell before you lose your shirt". Of course it takes years to have prices rise but a collapsing market can happen in just a couple months for one very simple reason...............buying requires you to have money and selling requires you to have none at all.

This might cause urban decay as people flock to places that are cheaper. Especially for those who can work from home, if there is no reason to live in the big cities, they can move to a place that is cheaper and may give them a better quality of life.