Canada's 'housing bubble' deemed close to bursting

[1ajs]

hotels in canada are expensive and have gotten more so cause of insurance companies jacking up the premiums 2x5X overnight last yr as well hell theres huge swaths of canada u cant get insurance at all even for ur house or contents u just get hung up on

[swimmer_spe]

Originally Posted by yaletown_fella

Which brings me to an important question.
If the Bank of Canada was truly committed on maintaining an average of 2% inflation, shouldn't its goal for the next 4 quarters be 6% deflation, to even out the 8% inflation of the past year?

In this case I am taking the manipulated (artificially lowered by hedonics and owners equivalent rent etc) CPI inflation numbers seriously.

That could be expected. Whether or not it can be done just with interest rate rises, time will tell.

[Coldrsx]

Another 75 basis points.

[WarrenC12]

Originally Posted by Coldrsx

Another 75 basis points.

And "more to come" according to the BoC. I think we're heading into overshoot territory, but I guess time will tell.

[someone123]

The pre-covid rate was 1.75%. This will bring the rate to 3.25%. The inflation target is 2% and recently it has been up around 7-8% year over year.

[MolsonExport]

Deflating housing prices, inflating debt burden.

What a lovely state of affairs. Goddamn, why did they let things get so badly out of hand in the first fucking place?

[WarrenC12]

Originally Posted by someone123

The pre-covid rate was 1.75%. This will bring the rate to 3.25%. The inflation target is 2% and recently it has been up around 7-8% year over year.

Inflation appears to have peaked in the last month or two. These interest rate hikes take time to work through the economy. Hopefully this inflation and rate hikes are a relative blip (1 year) rather than a prolonged period.

[ssiguy]

Originally Posted by MolsonExport

Deflating housing prices, inflating debt burden.

What a lovely state of affairs. Goddamn, why did they let things get so badly out of hand in the first fucking place?

They let things get so bad because everybody loved it and inflation was still kept in check.

People wanted cheap money and the BoC was more than happy to oblige. This is why our personal debt levels are at a record high and housing prices soared to absurd levels. Gov'ts also didn't complain because it lowered their debt servicing costs. Now, it's time to pay the piper and surprise, surprise, we can't afford to.

The interest rates should NEVER drop below 2.5 to 3% so we don't get this kind of mania and the hangover that always accompanies it. Such a move makes both people and governments more reflective when they spend money they don't have, strengthens the dollar so our exporters can't rely on a cheap currency to compete but rather have to invest in their businesses and workers, we get away from our highly unproductive housing based economy, and encourages people to actually --- wait for it---- SAVE for a rainy day and still get some interest as opposed to being just as well off stuffing it under the mattress.

[WarrenC12]

Originally Posted by ssiguy

They let things get so bad because everybody loved it and inflation was still kept in check.

Basically everything was fine until COVID messed up supply chains and led to all of the money printing.

The rest of your comment is hindsight. Our economy would be in the shitter for years if we insisted on keeping rates significantly higher than the US.

[whatnext]

Originally Posted by WarrenC12

Inflation appears to have peaked in the last month or two. These interest rate hikes take time to work through the economy. Hopefully this inflation and rate hikes are a relative blip (1 year) rather than a prolonged period.

It doesn't matter if it has peaked. It can go down to 6% but will still be way over the target rate.

Retailers are just getting merch for Xmas now and you can bet their cost on it has gone way up over last year. Supply shortages are still a thing. I was watching a review of the new BMW 440i and it had manual seats rather than power ones because they couldn't get the proper microchip!

[WarrenC12]

Originally Posted by whatnext

It doesn't matter if it has peaked. It can go down to 6% but will still be way over the target rate.

Retailers are just getting merch for Xmas now and you can bet their cost on it has gone way up over last year. Supply shortages are still a thing. I was watching a review of the new BMW 440i and it had manual seats rather than power ones because they couldn't get the proper microchip!

Supply shortages have been improving for months.

They'll get the ultimate improvement soon when debt payments catch up with people and demand drops off a cliff.

[swimmer_spe]

Originally Posted by WarrenC12

Inflation appears to have peaked in the last month or two. These interest rate hikes take time to work through the economy. Hopefully this inflation and rate hikes are a relative blip (1 year) rather than a prolonged period.

The thing is, some things have gotten out of hand, housing for example. So, I feel that until wages can match the skyrocketing costs of home ownership, the interest rates should stay high. This may give developers a chance to catch up to the demand as well as stop building McMansions.

Originally Posted by ssiguy

They let things get so bad because everybody loved it and inflation was still kept in check.

People wanted cheap money and the BoC was more than happy to oblige. This is why our personal debt levels are at a record high and housing prices soared to absurd levels. Gov'ts also didn't complain because it lowered their debt servicing costs. Now, it's time to pay the piper and surprise, surprise, we can't afford to.

The interest rates should NEVER drop below 2.5 to 3% so we don't get this kind of mania and the hangover that always accompanies it. Such a move makes both people and governments more reflective when they spend money they don't have, strengthens the dollar so our exporters can't rely on a cheap currency to compete but rather have to invest in their businesses and workers, we get away from our highly unproductive housing based economy, and encourages people to actually --- wait for it---- SAVE for a rainy day and still get some interest as opposed to being just as well off stuffing it under the mattress.

That would be all well and good if wages were more closer to the percentages they were in the 50s-60s, where you could buy a house for $40k and it be a nice one, and one income could pay for it and give the family a good life. Those were also the times of high taxes for everyone, especially the rich. It was also a time of high union membership. Those days are long gone. However, if we want those days back, it is time to bring in a living wage and get rid of a minimum wage.

Originally Posted by WarrenC12

Basically everything was fine until COVID messed up supply chains and led to all of the money printing.

The rest of your comment is hindsight. Our economy would be in the shitter for years if we insisted on keeping rates significantly higher than the US.

A lot of people do not want to see that higher interest rates have some down sides.

Originally Posted by WarrenC12

Supply shortages have been improving for months.

They'll get the ultimate improvement soon when debt payments catch up with people and demand drops off a cliff.

That will mean the end of covid pricing. Used anything was double or more for everything. Interest rates won't change that unless it is variable.

[Innsertnamehere]

Originally Posted by WarrenC12

Inflation appears to have peaked in the last month or two. These interest rate hikes take time to work through the economy. Hopefully this inflation and rate hikes are a relative blip (1 year) rather than a prolonged period.

Things will probably drop in 2024 or 2025 a bit, but don't expect it to go back to 2021 rates or even 2019 rates.

Maybe it peaks at 4%, but I'd be surprised to see it drop below 2.5% any time soon. And that's coming from someone who's got a big mortgage at a very low rate and is likely going to be burned big time in 2025 when it comes up for renewal.

[thewave46]

Originally Posted by MolsonExport

Deflating housing prices, inflating debt burden.

What a lovely state of affairs. Goddamn, why did they let things get so badly out of hand in the first fucking place?

There is some debate as to the accuracy of CPI measures prior to COVID and if they accurately reflected what was actually happening on the ground in Western economies. That may have led to lower interest rates for longer than were actually merited under the circumstances.

The cheap stuff from overseas was so cheap it dragged down CPI, hiding inflation elsewhere. Meanwhile, life just kept inflating away like normal in the West.

Then COVID buggered the whole works.

It was easy getting in. Getting out is always the harder part.

[whatnext]

Originally Posted by thewave46

There is some debate as to the accuracy of CPI measures prior to COVID and if they accurately reflected what was actually happening on the ground in Western economies. That may have led to lower interest rates for longer than were actually merited under the circumstances.

The cheap stuff from overseas was so cheap it dragged down CPI, hiding inflation elsewhere. Meanwhile, life just kept inflating away like normal in the West.

Then COVID buggered the whole works.

It was easy getting in. Getting out is always the harder part.

And if China continues with the draconian lockdowns to pursue Covid Zero it is hard to imagine supply chains not being continually impaired.

[WarrenC12]

Originally Posted by Innsertnamehere

Things will probably drop in 2024 or 2025 a bit, but don't expect it to go back to 2021 rates or even 2019 rates.

Maybe it peaks at 4%, but I'd be surprised to see it drop below 2.5% any time soon. And that's coming from someone who's got a big mortgage at a very low rate and is likely going to be burned big time in 2025 when it comes up for renewal.

The BoC has sliced the rates every time there has been the hint of a recession. I don't expect the next time to be any different provided inflation is under control.

People have short memories.

[yaletown_fella]

Originally Posted by MolsonExport

Deflating housing prices, inflating debt burden.

What a lovely state of affairs. Goddamn, why did they let things get so badly out of hand in the first fucking place?

Decision makers who bought into keynesian economics and the idea that deflation is the worst thing that could happen to society (they still believe this , unfortunately) . The delusional pursuit of limitless growth ,cheap credit, and stupid dreams at the expense of stability and upward mobility.

[yaletown_fella]

Originally Posted by ssiguy

They let things get so bad because everybody loved it and inflation was still kept in check.

People wanted cheap money and the BoC was more than happy to oblige. This is why our personal debt levels are at a record high and housing prices soared to absurd levels. Gov'ts also didn't complain because it lowered their debt servicing costs. Now, it's time to pay the piper and surprise, surprise, we can't afford to.

The interest rates should NEVER drop below 2.5 to 3% so we don't get this kind of mania and the hangover that always accompanies it. Such a move makes both people and governments more reflective when they spend money they don't have, strengthens the dollar so our exporters can't rely on a cheap currency to compete but rather have to invest in their businesses and workers, we get away from our highly unproductive housing based economy, and encourages people to actually --- wait for it---- SAVE for a rainy day and still get some interest as opposed to being just as well off stuffing it under the mattress.

I'm in complete agreement here. Couldnt say it better myself.

[swimmer_spe]

Originally Posted by Innsertnamehere

Things will probably drop in 2024 or 2025 a bit, but don't expect it to go back to 2021 rates or even 2019 rates.

Maybe it peaks at 4%, but I'd be surprised to see it drop below 2.5% any time soon. And that's coming from someone who's got a big mortgage at a very low rate and is likely going to be burned big time in 2025 when it comes up for renewal.

Are you talking mortgage rates? It is a sad state of affairs where a bump of 1% in interest rates cause people to worry about their mortgage. It also speaks to the need to lower the borrowing amount you can do.

Originally Posted by whatnext

And if China continues with the draconian lockdowns to pursue Covid Zero it is hard to imagine supply chains not being continually impaired.

Even more reason to repatriate or move manufacturing from China.

[travis3000]

Im locked in at 1.8% on my house until April 2026. I don't expect to see those rates again anytime soon. But my hope is that the current 5 year fixed rate of 5.4% drops down to around 3.5% or so by the time my renewal is ready. I was paying 3.79% in 2018 and managed that just fine. So I know I can do it.

Now 5% or higher would be painful. Would have to start eliminating some luxuries and start some strict budgeting.