Canada's 'housing bubble' deemed close to bursting

[WarrenC12]

Originally Posted by whatnext

What are these "mortgages" you speak of?

If inflation is at 7%, and you can borrow money at 3% or less, you'd be financially foolish to pay it off.

[thewave46]

Originally Posted by casper

North Bay is a weird place to commute from to Toronto.

Oh, I don't mean as a commute. That would be bonkers.

More like - I need to make a trip to the city every few weeks and don't want to use an airplane.

[thewave46]

Originally Posted by casper

I would surprised if they even go up another 0.5%. The existing increase they have done has had the intended consequence. The world economy is going into recession.

I am curious if inflation will drop much, though. The labour market is tight due to demographic pressure, food and oil prices are high due to external pressures (Russia is no longer a major supplier of oil), which has knock-on effects in the economy.

COVID-related shortages down the pipeline due to China's 'Zero COVID' strategy will add cost to goods too.

The Bank of Canada is walking a tightrope.

[someone123]

Originally Posted by WarrenC12

If inflation is at 7%, and you can borrow money at 3% or less, you'd be financially foolish to pay it off.

We are probably in a stagflation period though where incomes for a lot of people are not keeping up. If your income grows at 2%, your mortgage is 4%, and inflation is 7%, you will have less capacity to pay off your mortgage in 5 years, not more. Your interest rate exceeds income growth and on top of that a lot of other stuff will take up more and more of your budget.

I wonder how long people will keep up the claims that living standards are improving for broad demographics in Canada. I think living standards have gone down a lot in the past couple years and there doesn't seem to be a quick recovery on the horizon.

[WarrenC12]

Originally Posted by someone123

We are probably in a stagflation period though where incomes for a lot of people are not keeping up. If your income grows at 2%, your mortgage is 4%, and inflation is 7%, you will have less capacity to pay off your mortgage in 5 years, not more. Your interest rate exceeds income growth and on top of that a lot of other stuff will take up more and more of your budget.

Yeah but I'm referring to investments that pay somewhere north of 3%. If you have the risk tolerance, borrow and invest. It's how the rich get and stay rich.

[someone123]

Originally Posted by WarrenC12

Yeah but I'm referring to investments that pay somewhere north of 3%. If you have the risk tolerance, borrow and invest. It's how the rich get and stay rich.

We're in a period of economic malaise. Investment markets as a whole haven't been doing great lately either. I don't think there is a free lunch, though some people may do better than average. If we want a good standard of living there needs to be high productivity and you don't get that with a busted housing market, broken globalization with frozen supply chains and lockdowns, and invasions in strategically important parts of the world. We have not even seen the medium term impact of the Russia/Ukraine stuff and Chinese lockdowns yet. A bunch of Chinese-manufactured inputs will be missing from the global economy for months at minimum.

[casper]

Originally Posted by thewave46

Oh, I don't mean as a commute. That would be bonkers.

More like - I need to make a trip to the city every few weeks and don't want to use an airplane.

When I was living in Deep River, I would end up down in Toronto for a day or two every two or three weeks. As people shift to work from home, I think that type of pattern is going to be more common.

In the Upper Ottawa valley the choices were driving or flying back then. Pem-Air from Pem-Air from Pembroke to Toronto on a King Air was an experience that may tried to avoid for some reason.

I would have been much happier with the train as an option. North Bay to Ottawa connecting to Toronto would have been idea. Sad, such a train service has not existed for decades.

[casper]

Originally Posted by thewave46

I am curious if inflation will drop much, though. The labour market is tight due to demographic pressure, food and oil prices are high due to external pressures (Russia is no longer a major supplier of oil), which has knock-on effects in the economy.

COVID-related shortages down the pipeline due to China's 'Zero COVID' strategy will add cost to goods too.

The Bank of Canada is walking a tightrope.

Inflation is not going to drop. I think we are heading to a trade war with China. Ukraine is simply a distraction that has pushed that off by 6-12 months.

I am less worried about Russia oil. It will find a market. Europe will buy more from the middle east and less from Russia. India, China and Africa will buy more from Russia and less from the Middle East.

The BOC is going to have to get use to slightly higher target for inflation.

[ssiguy]

Inflation is going no where but up. Yes, the war in Ukraine has made the situation worse but the reality is that inflationary pressures were rising well before the invasion.

COVID has created a unique situation where wages actually went up for many while manufacturing plunged. This has led to more people wanting an ever shrinking supply. Backing this up by very low unemployment levels and companies desperate to find workers of all skill levels and hence having to significantly raise wages to entice them, you have an inflationary situation.

As inflation rises, workers will be demanding higher wages and they will get them due to a worker shortage. This is VERY different from the 1970s where unemployment was high and hence workers were in a limited situation of being able to demand higher wages to keep up with inflation. We have also seen provinces raise their minimum wage rates significantly and this will continue. It's not called an inflationary "cycle" for nothing.

The ONLY way to fight inflation that the BoC has at it's disposal is higher rates and they, eventually, will have no choice but to do it. It is far better to raise rates significantly now and try to nip inflation in the bud as opposed to waiting till it get's much higher and eventually the BoC will have to increase them dramatically {ie well over 10%} and cause the economy to plunge into a deep recession.

[kwoldtimer]

Originally Posted by casper

I would surprised if they even go up another 0.5%. The existing increase they have done has had the intended consequence. The world economy is going into recession.

I’ll be surprised if they don’t go up 0.5% (at least) in a couple of weeks, especially given the latest inflation numbers.

[swimmer_spe]

Originally Posted by thewave46

I am curious if inflation will drop much, though. The labour market is tight due to demographic pressure, food and oil prices are high due to external pressures (Russia is no longer a major supplier of oil), which has knock-on effects in the economy.

COVID-related shortages down the pipeline due to China's 'Zero COVID' strategy will add cost to goods too.

The Bank of Canada is walking a tightrope.

The 1970s/80s have returned.We will ride the waves of inflation and supply and demand for the next few years while things get sorted out. It will be a good sign that we will be entering a good time when manufacturers open shop back closer to markets.

Originally Posted by casper

When I was living in Deep River, I would end up down in Toronto for a day or two every two or three weeks. As people shift to work from home, I think that type of pattern is going to be more common.

In the Upper Ottawa valley the choices were driving or flying back then. Pem-Air from Pem-Air from Pembroke to Toronto on a King Air was an experience that may tried to avoid for some reason.

I would have been much happier with the train as an option. North Bay to Ottawa connecting to Toronto would have been idea. Sad, such a train service has not existed for decades.

Much of the ROW is still there, used as a snowmobile trail in the winter. It would be a good thing to put one back in. CP and CN learned what happens when you have only one route during the FN blockades.

[ssiguy]

In the 70s, the cause of stagnation was initially caused by the OPEC embargo which sent the price of gas thru the roof and hence so do everything else. This was backed by large wage gains in the late 60s/early 70s causing demand to rise for many products. This is the same situation we have today.

What caused the inflation rate to continue to rise after the oil price shock was that the Central Banks reacted far too slowly to repond to the initial inflation rates. This led to much higher inflation and hence the BoC to raise rates significantly higher than what would have been needed had they acted earlier. It takes a while for interest rates to be reflected in lower prices and yet the high interest rates had an immediate effect on consumer spending leading to layoffs while inflation was still raging............stagflation.

Unfortunately the BoC has not learnt this lesson by being ridiculously slow to react to rising inflation and nipping it in the bud which will result in much higher rates down the road as inflation rates continue to rise and becomes more entrenched.

Higher interest rates are inevitable and you either raise them now to 5% and live with a economic slowdown or you wait and then have to raise them to 10% resulting in a major recession.

[thurmas]

Several economic forecasters are already saying economic panic is more likely than just a recession now.

[kwoldtimer]

Originally Posted by ssiguy

In the 70s, the cause of stagnation was initially caused by the OPEC embargo which sent the price of gas thru the roof and hence so do everything else. This was backed by large wage gains in the late 60s/early 70s causing demand to rise for many products. This is the same situation we have today.

What caused the inflation rate to continue to rise after the oil price shock was that the Central Banks reacted far too slowly to repond to the initial inflation rates. This led to much higher inflation and hence the BoC to raise rates significantly higher than what would have been needed had they acted earlier. It takes a while for interest rates to be reflected in lower prices and yet the high interest rates had an immediate effect on consumer spending leading to layoffs while inflation was still raging............stagflation.

Unfortunately the BoC has not learnt this lesson by being ridiculously slow to react to rising inflation and nipping it in the bud which will result in much higher rates down the road as inflation rates continue to rise and becomes more entrenched.

Higher interest rates are inevitable and you either raise them now to 5% and live with a economic slowdown or you wait and then have to raise them to 10% resulting in a major recession.

PSAC is seeking 13.5% over three years - negotiations with TB broke off today. Usually PSAC goes first and sets the precedent for the other, smaller federal employee unions.

[casper]

Originally Posted by kwoldtimer

PSAC is seeking 13.5% over three years - negotiations with TB broke off today. Usually PSAC goes first and sets the precedent for the other, smaller federal employee unions.

Honestly, 4.5% per year is not unreasonable given where inflation is heading.

The union should also appreciate the feds over those three years should and will be investing in technology to reduce head count or at a minimum keep head count the same while population is going to increase.

[Loco101]

Originally Posted by kwoldtimer

PSAC is seeking 13.5% over three years - negotiations with TB broke off today. Usually PSAC goes first and sets the precedent for the other, smaller federal employee unions.

I belong to PSAC.
It's an interesting time when my union is asking for salary increases that are below the inflation rate and my employer (government) is turning it down and offering much less. Our collective agreement expired last year so I have a feeling that the more this gets stalled, the higher the increase we will get as more inflation data comes in. My employer would have been wise to have just accepted what PSAC had asked for last year!

[Wigs]

Please let some air out of the bubble...







Once again, this is Welland, Ontario, usually considered the least desirable city in Niagara.

[Loco101]

Originally Posted by casper

Honestly, 4.5% per year is not unreasonable given where inflation is heading.

The union should also appreciate the feds over those three years should and will be investing in technology to reduce head count or at a minimum keep head count the same while population is going to increase.

There is still a fair amount of hiring going on. Not as much a a year or two ago though. From my experience in the federal public service, technology hasn't really reduced the size of the workforce in most departments and agencies. It has in some but a lot of human intervention is needed for much that has been computerized.

I have been surprised at how many of my co-workers have left my employer for the private sector this year. But there are some who don't like working alone from home and on a computer all day unlike before where we had more socialization and enjoyable meetings. I like working from home but have found that my employer has become very strict lately and micro-managing so many things.

[SignalHillHiker]

Originally Posted by Loco101

I like working from home but have found that my employer has become very strict lately and micro-managing so many things.

Oh God, that's the worst. Sending my sympathies - at least in the public service, your odds of having a new superior relatively quickly are good.

I'll never understand micro-managers - I've had only one such supervisor in my career (lucky, really) and after a few months I was afraid to send an email, constantly making mistakes, etc. Luckily I had enough experience that no one else assumed it was me.

[Nashe]

Originally Posted by SignalHillHiker

I'll never understand micro-managers - I've had only one such supervisor in my career (lucky, really) and after a few months I was afraid to send an email, constantly making mistakes, etc. Luckily I had enough experience that no one else assumed it was me.

Control-focus can be a personality trait, but it is often a result of pressures from above. "How can we be sure they're WORKING?!? We need hard METRICS!" Middle/lower management is like that... you get shot at from both sides.