Canada's 'housing bubble' deemed close to bursting

[casper]

Originally Posted by TorontoDrew

I hope this threads title finally makes sense. I'm feel8ng pressures from family in B.C to pack up and move there from Toronto. I really don't want to leave Toronto for tge Sunshine Coast. If only the name was the reality of the climate.

You could compromise and move to Saskatoon. Sunniest city in Canada.

[swimmer_spe]

Originally Posted by canucklehead2

Rural Canada renaissance could be great. With investment in housing stock. So much cheaper land so close to the city. Especially in old railroad suburbs. The best bones. Vegreville is 1H from downtown Edmonton on a direct to downtown CN line. But mostly abandoned. Prices are 1/3 the city. Reopen Vegreville subdivision to passenger service and boom! Town!

If we had provincial and federal desires to run on existing lines that would be a start. So, what time does the train leave Edmonton for Calgary?

Originally Posted by yaletown_fella

We are heading into another period of stagflation, when you account for how the formula to calculate the CPI has been manipulated. It's not the same CPI that was used in the 70s-80s.

Central banks will never be able to achieve real positive interest rates due to unprecedented levels of debt.

Interest rates that are 9-10% lower than the real double digit inflation % is still extremely dovish. All the hawks are extinct.

So, if the manipulation was gone from the CPI, what would the inflation be vs what it is now?

Originally Posted by goodgrowth

West Vancouver illustrates how local governments contribute to Canada’s housing woes

https://www.theglobeandmail.com/opinion/article-vancouver-canada-housing-crisis-policy/

I have always thought that there should be some sort of requirement that if you work for a certain locale, you should live in that same locale.So, in this example, if you work in West Van, you should also work in West Van. Same for politics. The MP or MPP from there should live there.

Originally Posted by Denscity

Ya in Fall everything on the West Coast is still green.

I have cut my grass in Victoria on Christmas Day. I love being back in Ontario where the seasons and weather makes sense.

[Al Ski]

Originally Posted by MolsonExport

I can't be happy about higher interest rates, even if I agree, in theory, that they were far too low for far too long. I am paying a variable rate, and while I bought my home awhile ago (2014, 8 years after purchasing my first home), I still have a substantial mortgage, and every half point rise adds years to paying off my mortgage, and thus extra years that I need to work beyond normal retirement age. Do I really want to have to work 3-5 extra years? Is that better than high inflation?

With all due respect, you're crying the privileged woes.

I have a couple of friends who bought way too much house based upon insanely low interest rates. I had a serious talk with one of them.. to no avail.

We knew this day of reckoning was coming, many chose to ignore it. It's as if 2008 never happened, so short is our memory.

Interest rate hikes affect the asset class, inflation DESTROYS the middle and working class.

While I'm sorry that you may have to pay a more realistic mortgage rate, for the other 80% of the population the situation is much more worrisome.

It's amazing to me that we've walked right back into this - after having experienced 2008!

Only this is an everything bubble burst that will make 2008 look like a mere rehearsal.

I'm sure you'll struggle through, somehow. Be strong!

[casper]

Originally Posted by Al Ski

With all due respect, you're crying the privileged woes.

I have a couple of friends who bought way too much house based upon insanely low interest rates. I had a serious talk with one of them.. to no avail.

We knew this day of reckoning was coming, many chose to ignore it. It's as if 2008 never happened, so short is our memory.

Interest rate hikes affect the asset class, inflation DESTROYS the middle and working class.

While I'm sorry that you may have to pay a more realistic mortgage rate, for the other 80% of the population the situation is much more worrisome.

It's amazing to me that we've walked right back into this - after having experienced 2008!

Only this is an everything bubble burst that will make 2008 look like a mere rehearsal.

I'm sure you'll struggle through, somehow. Be strong!

I am lucky, I have a small line of credit secured by my property. So this does not impact me all that much.

That said, I think the biggest problem we have is what you identified. Last thing anyone wants to see are people displaced from their home due to the Bank of Canada being overly aggressive. The bank needs to move far more slowly. If it does, we will have something that is a softer landing that 2008 and causes less disruption.

[yaletown_fella]

The Bank of Canada will not be agressive because they base everything around placating the stock market, over-leveraged households, and their delusional goal of maintaining "full employment" . If unemployment goes up by 2 or 3%, the clowns will just slash the key interest rate by a full percentage of more. Stop consuming media hype and just look at the history of Canada's asinine post 2008 monetary policy. They have no intention of changing their ways.

I hate to say it but the only reason central banks are raising rates is to give themselves room to slash rates later to re-inflate the bubble. The have no intention of bringing rates up to normalcy or anywhere even remotely close to the rate of inflation. Interest rates below 3% are still highly inflationary and stimulative.

A lot of people argue that the 2008 QE and rate cuts didnt cause significant inflation, but in reality the public was robbed from enjoying what could have been healthy deflation.

[casper]

Originally Posted by yaletown_fella

The Bank of Canada will not be agressive because they base everything around placating the stock market, over-leveraged households, and their delusional goal of maintaining "full employment" . If unemployment goes up by 2 or 3%, the clowns will just slash the key interest rate by a full percentage of more. Stop consuming media hype and just look at the history of Canada's asinine post 2008 monetary policy. They have no intention of changing their ways.

I hate to say it but the only reason central banks are raising rates is to give themselves room to slash rates later to re-inflate the bubble. The have no intention of bringing rates up to normalcy or anywhere even remotely close to the rate of inflation. Interest rates below 3% are still highly inflationary and stimulative.

A lot of people argue that the 2008 QE and rate cuts didnt cause significant inflation, but in reality the public was robbed from enjoying what could have been healthy deflation.

I do hope your assessment is correct.

Last thing we need is to do anything that causes unemployment or people to start missing their mortgage payments.

Coupled with increased immigration we should be able to sustained a higher level of economic growth.

[ssiguy]

If the BoC decides to reverse course then they risk plunging the currency as other countries continue to raise theirs. This will lead to even higher inflation as the price of imports soars.

Inflation MUST be nipped in the bud or it simply builds upon itself thru expectations. If people think that inflation will rise then they will demand significantly higher wages to compensate. Businesses will also proactively raise their prices as they expect their suppliers to increase theirs and knowing their workforce will as well. It's not called an "inflationary cycle" for nothing. Once it starts it's very hard to stop. It become the classic snowball down a mountain scenario. The BoC must act decisively to bring inflation under control. It should not be concerned with the effect on housing prices. The BoC has 2 mandates....to keep inflation under control and to maintain the integrity of the currency. Yes, they are always mindful of how impacts the conomy but that is secondary.

Many say that this inflationary cycle is just temporary as some of it is caused by the Ukraine war and hence when it's over then things will begin to return to normal. That is absolute bunk and the BoC knows it. Consumers and businesses don't give a damn about why they are paying ever increasing prices but just the fact that they are and will act accordingly. Economics is many ways is nothing more mass-psychology about business. A degree in Economic you get a Social Sciences degree and not one in Business.

This mass-psychology very much plays itself out in the housing market. Prices soar because of people expect them to continue to do so the "get in now before you never get in" takes hold. Conversely if people expect prices to plunge then this expectation can quickly flip on a dime as people expect prices to plunge and then the new mantra becomes "sell now or you will never sell". Of course it can take many years for prices to rise significantly while prices can plunge overnight for one very simple reason........................increasing prices means consumers have to have more money while plunging prices requires they have none at all.

[whatnext]

Originally Posted by casper

I do hope your assessment is correct.

Last thing we need is to do anything that causes unemployment or people to start missing their mortgage payments.

Coupled with increased immigration we should be able to sustained a higher level of economic growth.

Why? We’ve had high immigration pre-Covid without particularly strong growth and with it came the continual poor productivity performance.

This idea that Canadians must be saved at any cost from downturns in the housing market is quite frankly bizarre. It is also incredibly discriminatory to renters. Do you feel the same way about losses in stocks? Bitcoin?

[Denscity]

Originally Posted by swimmer_spe

If we had provincial and federal desires to run on existing lines that would be a start. So, what time does the train leave Edmonton for Calgary?



So, if the manipulation was gone from the CPI, what would the inflation be vs what it is now?



I have always thought that there should be some sort of requirement that if you work for a certain locale, you should live in that same locale.So, in this example, if you work in West Van, you should also work in West Van. Same for politics. The MP or MPP from there should live there.



I have cut my grass in Victoria on Christmas Day. I love being back in Ontario where the seasons and weather makes sense.

That's exotic to be able to cut your grass on Christmas Day! That's what they do down south where we go on holidays!

[casper]

Originally Posted by whatnext

Why? We’ve had high immigration pre-Covid without particularly strong growth and with it came the continual poor productivity performance.

This idea that Canadians must be saved at any cost from downturns in the housing market is quite frankly bizarre. It is also incredibly discriminatory to renters. Do you feel the same way about losses in stocks? Bitcoin?

Bitcoin is on par with a daily trip to the casino. You know your getting into some speculative and you will get burnt.

People who invest directly in stocks are mature investors. Those that are not are usually participating through some type of investment sold by a professional that should be clear on the risks involved.

I would draw the line with individuals who are buy homes to live in. Investing in property is not their full time job. It is something they are doing to secure shelter for them and their families. Society is not well served by placing working families in trouble due to wild economic swings in property values.

As far are minimizing the downturn in the economic cycle and ensuring continued economic growth that is what government should be doing at this point in the economic cycle.

[MolsonExport]

Social Science or not, but a degree in Economics is more rigorous and I would say, more difficult than a standard BComm. It is extremely quant-heavy, and way more than any option in a BComm degree, including Finance.

[ssiguy]

While real estate is a loose reflection of the economic state of the country, it is really more psychological than anything else. It is based on "expectations", both good and bad. Yes, there may be unussual/unforseen events {ie interest/mortgage hikes} that can trigger a decline in housing but only mass social attitudes can cause a complete collapse.

We see this in the stock market. The 3 biggest crashes since 1900, {1907, 1929, 1987} all have one thing in common..... they occurred in October. Now, especially due to the Oct 29/29 crash people "expect" the market to decline and it always does. It's called the "October Effect" and has become a self-fulfilling prophecy. It makes absolutely no sense as "Black Tuesday" happened over 90 years ago but that doesn't matter. Economics {like real estate} is based upon emotions and expectations, not rationality.

Canadians are now expecting a MAJOR correction in the housing market and because they expect it, it will happen. When it comes to economics, we truly get what we ask for.

[thebasketballgeek]

^ that’s a good point because a significant amount of value for these houses during our unprecedented bubble was purely based on speculation. Lowering the speculation with rising interest rates, increasing supply, and the new attitude toward the housing market all lead me to believe that housing prices will go down across the country.

After nearly 11 years of this thread existing this is the first time I have truly thought the bubble is going to burst.

[WarrenC12]

Originally Posted by MolsonExport

Social Science or not, but a degree in Economics is more rigorous and I would say, more difficult than a standard BComm. It is extremely quant-heavy, and way more than any option in a BComm degree, including Finance.

I had a room mate in University who was in Honours Economics on a full ride. I like Economics, but some of the math he was doing was insane.

[swimmer_spe]

Originally Posted by ssiguy

While real estate is a loose reflection of the economic state of the country, it is really more psychological than anything else. It is based on "expectations", both good and bad. Yes, there may be unussual/unforseen events {ie interest/mortgage hikes} that can trigger a decline in housing but only mass social attitudes can cause a complete collapse.

We see this in the stock market. The 3 biggest crashes since 1900, {1907, 1929, 1987} all have one thing in common..... they occurred in October. Now, especially due to the Oct 29/29 crash people "expect" the market to decline and it always does. It's called the "October Effect" and has become a self-fulfilling prophecy. It makes absolutely no sense as "Black Tuesday" happened over 90 years ago but that doesn't matter. Economics {like real estate} is based upon emotions and expectations, not rationality.

Canadians are now expecting a MAJOR correction in the housing market and because they expect it, it will happen. When it comes to economics, we truly get what we ask for.

So, this October could be interesting?

Good to know

[whatnext]

This CBC Editorial nails the problem with Canada's real estate economy:

...Western economies used to produce products and later on, services. Those products and services created enduring value, jobs and above all, innovation. But we in Canada have not engaged in such projects of late. Instead, we have experienced a lost decade — a decade where a significant amount of available capital and innovation has turned to constructing glass buildings in the sky.

Indeed, our present Canadian economy produces living quarters filled with indebted residents paying near New York City prices for Mississauga real estate. In the process, we have created small living space after small living space with no real, intrinsic value beyond the fact that the price of those same spaces continues to increase with every passing year.

We have, in short, collectively spent a decade creating nothing of enduring value beyond monetary multiplication.

What. A. Waste. There is something substantively wrong with an economy whose primary purpose is to house the people who are employed by the housing industry. To be clear, that is not just a fancy turn of phrase — Canadian housing is presently consuming 37 per cent of investment capital in this country. Such an economy will not and cannot lead the world into the 21st century...

https://www.cbc.ca/news/opinion/opinion-...morris-1.6492967?__vfz=medium%3Dsharebar

[esquire]

But I thought it was our collective ambition to grow beyond being hewers of wood and drawers of water?

Look, we have people coming from abroad with duffel bags full of money to little cubes in the sky!

[WarrenC12]

Originally Posted by esquire

But I thought it was our collective ambition to grow beyond being hewers of wood and drawers of water?

Look, we have people coming from abroad with duffel bags full of money to little cubes in the sky!

If our economy was 🞵🞵🞵🞵 we wouldn't have nosebleed level rent, nobody could afford them.

[swimmer_spe]

Originally Posted by whatnext

This CBC Editorial nails the problem with Canada's real estate economy:

...Western economies used to produce products and later on, services. Those products and services created enduring value, jobs and above all, innovation. But we in Canada have not engaged in such projects of late. Instead, we have experienced a lost decade — a decade where a significant amount of available capital and innovation has turned to constructing glass buildings in the sky.

Indeed, our present Canadian economy produces living quarters filled with indebted residents paying near New York City prices for Mississauga real estate. In the process, we have created small living space after small living space with no real, intrinsic value beyond the fact that the price of those same spaces continues to increase with every passing year.

We have, in short, collectively spent a decade creating nothing of enduring value beyond monetary multiplication.

What. A. Waste. There is something substantively wrong with an economy whose primary purpose is to house the people who are employed by the housing industry. To be clear, that is not just a fancy turn of phrase — Canadian housing is presently consuming 37 per cent of investment capital in this country. Such an economy will not and cannot lead the world into the 21st century...

https://www.cbc.ca/news/opinion/opinion-...morris-1.6492967?__vfz=medium%3Dsharebar

"Where did all the good paying jobs go?"

To all the places with lower tariffs and low wages. Free trade and other trade deals are the reasons we are in the mess we are in. I feel we should rip up every trade deal and put tariffs on things based on the costs of manufacturing them in Canada. Canadians would be pissed at spending $10k on the new tv, and would not buy it. The manufacturer might build a facility here and get them built and priced better.

But no politician has the balls to do it.

[Me&You]

Originally Posted by swimmer_spe

"Where did all the good paying jobs go?"

To all the places with lower tariffs and low wages. Free trade and other trade deals are the reasons we are in the mess we are in. I feel we should rip up every trade deal and put tariffs on things based on the costs of manufacturing them in Canada. Canadians would be pissed at spending $10k on the new tv, and would not buy it. The manufacturer might build a facility here and get them built and priced better.

But no politician has the balls to do it.

I doubt the Canadian market is large enough to encourage manufacturers to set up shop, mostly to supply the domestic market. Instead, Canadians would be left with $10k TVs...