Canada's 'housing bubble' deemed close to bursting

[p_xavier]

Originally Posted by SignalHillHiker

Buddy took a picture of the line to view an apartment available on his block. More arriving all the time. It’s still possible to get into the housing market here if you’re fortunate enough to have a down payment, but if you’re trying to rent and want to be anywhere even remotely close to the core, good luck.

Were you just on Nick Lewis latest video?!

[SignalHillHiker]

OMG Xavier... I haven't even watched yet. I did submit (love him!). So I'm literally going to watch now lol

EDIT: Dead. Love his suggestions. I need to save up lol

[p_xavier]

Originally Posted by SignalHillHiker

OMG Xavier... I haven't even watched yet. I did submit (love him!). So I'm literally going to watch now lol

He will make you proud!

[SignalHillHiker]

Originally Posted by p_xavier

He will make you proud!

He's so good tho. I love the rug idea. And now I have to save up for wallpaper. Ugh. lol

[p_xavier]

Originally Posted by SignalHillHiker

He's so good tho. I love the rug idea. And now I have to save up for wallpaper. Ugh. lol

Yeah, but we don't have unlimited budgets either. I might sent him pics of my place too, finishing renos this weekend.

[SignalHillHiker]

Ooh if you do and even if you don’t want to share broadly please DM me link. I’d never publicly indicate it is yours but I’m DYING to know lol

*****

Might as well post it. IT'S ME! lol

• Video Link

[p_xavier]

Will DM you eventually, have some strong security requirements. Still fun to see that!

[Coldrsx]

Ottawa, ON, August 15, 2022 – Statistics released today by the Canadian Real Estate Association (CREA) show national home sales slowed further in July 2022.

HIGHLIGHTS
National home sales fell by 5.3% on a month-over-month basis in July.

Actual (not seasonally adjusted) monthly activity came in 29.3% below July 2021.

The number of newly listed properties dropped by 5.3% month-over-month.

The MLS® Home Price Index (HPI) edged down 1.7% month-over-month but was still up 10.9% year-over-year.

The actual (not seasonally adjusted) national average sale price posted a 5% year-over-year decline in July.




https://stats.crea.ca/en-CA/

[casper]

Originally Posted by Coldrsx

Ottawa, ON, August 15, 2022 – Statistics released today by the Canadian Real Estate Association (CREA) show national home sales slowed further in July 2022.

HIGHLIGHTS
National home sales fell by 5.3% on a month-over-month basis in July.

Actual (not seasonally adjusted) monthly activity came in 29.3% below July 2021.

The number of newly listed properties dropped by 5.3% month-over-month.

The MLS® Home Price Index (HPI) edged down 1.7% month-over-month but was still up 10.9% year-over-year.

The actual (not seasonally adjusted) national average sale price posted a 5% year-over-year decline in July.

That is a fairly step decline over the past three months.

Hopefully we are at the point where the Bank of Canada can become less aggressive and move to baby step increases. Perhaps even pause a bit and see what the impact is of the slowdown in the US.

[whatnext]

Originally Posted by GenWhy?

Even though it's a great idea and would have the same impact as the 60s and 70s, I just don't see tax breaks to rental construction on a large scale during the economic times we currently have going over well for the electorate. Which is sad.

I meant to come back to this. I don't think the public at large would be opposed to tax breaks on MURBs now as housing affordability is widely seen as a problem. It is not as if tax money is actually being paid out as opposed to foregone. Plus, many Canadians now hold REIT stock so many would benefit.

[ssiguy]

Originally Posted by casper

That is a fairly step decline over the past three months.

Hopefully we are at the point where the Bank of Canada can become less aggressive and move to baby step increases. Perhaps even pause a bit and see what the impact is of the slowdown in the US.

No, hopefully the BoC will become MORE aggressive.

Inflation isn't called a "cycle" for nothing. You either go full throttle and bring it down or you don't and watch it skyrocket and then interest rates will REALLY soar.

There is no such thing as transitory inflation except when our politicians are trying to defer the problem. In the early 70s they thought that the oil shock of the OPEC embargo was transitory and didn't raise interest rates enough expecting it would go away after the embargo ended. Well by the end of the 70s, when the embargo had ended, inflation soared and interest rates had to climb to 20% to finally get it under control.

If it causes a housing decline then so be it but it's either a major decline now or a complete crash later. For those who are worried, I have no empathy for people who bought at the top of the market for a quick flip or to rent it out. They took their chances and are paying the price for their lack of vision.

This is a housing correction Canada NEEDS to bring housing prices down to reflect local incomes so they once again be viewed as places to live and not stocks to flip. It will also help reset our economic growth model back onto productivity gains as opposed to highly unproductive real estate flipping.

[thurmas]

Originally Posted by ssiguy

No, hopefully the BoC will become MORE aggressive.

Inflation isn't called a "cycle" for nothing. You either go full throttle and bring it down or you don't and watch it skyrocket and then interest rates will REALLY soar.

There is no such thing as transitory inflation except when our politicians are trying to defer the problem. In the early 70s they thought that the oil shock of the OPEC embargo was transitory and didn't raise interest rates enough expecting it would go away after the embargo ended. Well by the end of the 70s, when the embargo had ended, inflation soared and interest rates had to climb to 20% to finally get it under control.

If it causes a housing decline then so be it but it's either a major decline now or a complete crash later. For those who are worried, I have no empathy for people who bought at the top of the market for a quick flip or to rent it out. They took their chances and are paying the price for their lack of vision.

This is a housing correction Canada NEEDS to bring housing prices down to reflect local incomes so they once again be viewed as places to live and not stocks to flip. It will also help reset our economic growth model back onto productivity gains as opposed to highly unproductive real estate flipping.

Agreed

[goodgrowth]

Originally Posted by ssiguy

This is a housing correction Canada NEEDS to bring housing prices down to reflect local incomes so they once again be viewed as places to live and not stocks to flip. It will also help reset our economic growth model back onto productivity gains as opposed to highly unproductive real estate flipping.

I'd be willing to bet actual affordability in places like BC and Ontario will not change much.

First of all rising interest rates are going to offset some of the drop in price. Would a new mortgage payment be much less with the added interest?

Second there is still significant housing scarcity issues in BC and Ontario combined with an aggressive immigration rate. This is going to continue to drive demand.

How are the rental markets? Prices coming down? Units available?

This obsession with interest rates as a cause and cure of all housing issues is too narrow a view.

[lio45]

Originally Posted by goodgrowth

I'd be willing to bet actual affordability in places like BC and Ontario will not change much.

As stated already, I'd go even further than that, I'm betting on affordability decreasing in places like TO and Van. (And Montreal too.)

[casper]

Originally Posted by lio45

As stated already, I'd go even further than that, I'm betting on affordability decreasing in places like TO and Van. (And Montreal too.)

If it takes over a year to bring a new multi-family rental or condo development to market you need to provide stability in the market so a developer is confident he is building something that is profitable at the end of the project.

That just does not happen if there are wild swings in the market.

We are going to have to solve affordability by flooding the market with new supply. Just now we are going in the wrong direction.

[lio45]

Interest rate increases will inevitably result in lower prices, and that will reduce the amount of new supply (which was already low-ish in the first place).

As you say, just the possibility of higher rates in the future is enough to have an impact on new builds.

[yaletown_fella]

The BOC is still extremely dovish right now. They are just pretending to be hawks because they lost some credibility after easing during covid, which turned out to be a complete disaster.

Inflation is still 8% on average over the past year (according to a CPI index that uses a lot of 'hedonic quality adjustment' and owners equivalent rent instead of real rents, so it's honestly significantly higher) Looking at one month and seeing no increase in inflation is meaningless. The goal should be to reverse it, not to merely stop it from increasing.

That means you have an erosion of at least 6% of your savings, year over year. And even if you're in a 4% GIC , thats still a 2% erosion year over year of purchasing power. This means most Canadians will be destitute in retirement, if they dont own a home.

By the time a 30 year old retires they will have lost at least 60% of their savings
Interest rates should be above the rate of inflation. But the BOC is not truly independent and will just cater to enable higher government debt loads and cower to the real estate lobby . The current rate is still extremely loose accommodative policy.

The minimum goal should be to extinguish inflation and provide real positive returns on instruments like GICS and lower the median national average home price to a MINIMUM of below 550k , which was the pre pandemic price.

[yaletown_fella]

Originally Posted by goodgrowth

I'd be willing to bet actual affordability in places like BC and Ontario will not change much.

First of all rising interest rates are going to offset some of the drop in price. Would a new mortgage payment be much less with the added interest?

Second there is still significant housing scarcity issues in BC and Ontario combined with an aggressive immigration rate. This is going to continue to drive demand.

How are the rental markets? Prices coming down? Units available?

This obsession with interest rates as a cause and cure of all housing issues is too narrow a view.

High rates are not directly correlated with rising rents. In fact, the availability of cheap credit due to bad BOC covid policy would only served to stimulate high demand/competition/bidding for rentals and keep rents artificially high , when they should have actually been deflating due to Canada's shrinking/aging demographics.

The reason for high rents in most big cities is that nowhere near enough purpose built rental in the first place. This is because cities like Toronto, have chosen to subsidize existing single family homes at the expense of rentals, new builds, and secondary units.


The problem really ramped up in the mid 2000s when society embraced the delusional mantra of "single family homeownership as a great investment for everyone" and the governments stubborn devotion to the TE for primary residence (which is in itself , stimulative) , etc.

[OldDartmouthMark]

Originally Posted by yaletown_fella

This means most Canadians will be destitute in retirement, if they dont own a home.

You mean if they sell their home when they retire and use the money to pay rent for an apartment?

I understand the concept of home ownership being an asset, but it's an asset they have to live in, spend money to maintain, and pay taxes and insurance on. That's why every time I read about homeowners being "rich" because they own a home and the values have shot up, it doesn't make sense to me as you still have to pay for a place to live.

So if I paid $200,000 for my house and it's now worth $400,000, on paper I have just gained $200,000 of net worth. However, I still have to live here (and want to live here), so I have no more disposable income, and am affected by inflation just like everybody else. The only difference is that I am lucky and privileged enough to own a home.

Sorry, off topic a little, but it's just that I keep reading this idea of wealth through home ownership, but on the ground it doesn't mean you are flush with money, just that you have a place to live that you could cash out on if you want/need to downgrade your living situation at some point.

One issue I see is seniors that spend their life savings to stay in their home, eventually sell their home and move to a senior's facility, only to have the house money eaten up by care expenses. I've seen it happen.

It's still better than living on the street, though.

[suburbanite]

Looking at your home from the perspective of a place to live and not an investment, I would almost always rather be going into the market with lower asset prices and higher interest rates/relative holding costs than vice versa.