Housing Bubble II: The Quest To Build Enough Homes Where People Actually Need Them

[theman23]

Originally Posted by Nite

Fine don't trust my eyes trust you own and tell me what can you conclude from the charts i posted, or bring some other type of evidence to refute my conclusion that interest rates are the strongest determinate of house prices than population growth is

Interest rates have gone up 375%, while housing prices have corrected by what - 20%? In early 2023 when interest rates were paused, housing prices went up again. There's clearly more at play here than just interest rates.

You have a great ability to spam threads with graphs that you don't really understand, but try to apply some critical thinking. Your graphs would look a lot different if you compared actual price and population numbers than just looking at YoY figures.

[Xelebes]

Originally Posted by Nite

Fine don't trust my eyes trust you own and tell me what can you conclude from the charts i posted, or bring some other type of evidence to refute my conclusion that interest rates are the strongest determinate of house prices than population growth is

Please take some time to review and learn what causality is before lecturing us with whatever graphs you are posting.

[whatnext]

Originally Posted by WarrenC12

Making stuff up? It's StatCan, they are reputable. The differences are regional too, Ontario lost 48k jobs while most other provinces gained.

LOL, have you ever participated in one of their employment surveys? Typical inflexible government gobbledygook. But sure we can believe just 100 new jobs were created.

[MonkeyRonin]

Originally Posted by Nite

Fine don't trust my eyes trust you own and tell me what can you conclude from the charts i posted, or bring some other type of evidence to refute my conclusion that interest rates are the strongest determinate of house prices than population growth is

The rise & fall of interest rates has historically been a pretty good indicator of how a market will function relative to its base value: in a market that is functioning normally, rising interest rates will lead to lower relative home values, and vice versa. The base itself though, is a function of supply & demand more than anything else - and that's what determines how "affordable" (or not) a place is. The +/- in value due to interest rates is all relative to what the market will support. An expensive market (high demand relative to supply) that goes down 10% is still expensive; or a cheap market (high supply relative to demand) that goes up 10% is still cheap.

So while the rise in interest rates should in theory lead to a reduction in home values, it won't in and of itself create affordable conditions. If home values don't decline significantly, the additional interest required on mortgage payments will more than make up for lower values for prospective buyers. This is what is happening right now.

The other thing is, because there's such an extreme mismatch between population growth and housing availability, we also don't have a market that is functioning normally. Normally there's a bit more elasticity, but right now we're dealing with ~0% vacancies. Prices aren't falling nearly as much as they should because we have a very simple supply & demand mismatch:

2023 population growth: ~1.6 million people, or at least ~650,000 new households.
2023 housing completions: ~250,000 units.

All of those people want a place to live, and there simply isn't enough housing. Therefore, rents & home prices will continue to be pushed to what the highest bidder is willing to pay to not be homeless. This is compounded on top of what was already a housing shortage, with many people also sitting on the sidelines of the market and/or living in inadequate housing. In other words, it doesn't matter how high interest rates go - housing affordability will not be returning any time soon in these conditions.

[lio45]

Originally Posted by theman23

Interest rates have gone up 375%, while housing prices have corrected by what - 20%? In early 2023 when interest rates were paused, housing prices went up again. There's clearly more at play here than just interest rates.

You have a great ability to spam threads with graphs that you don't really understand, but try to apply some critical thinking. Your graphs would look a lot different if you compared actual price and population numbers than just looking at YoY figures.

Exactly. The strongest correlation is between the imbalance of supply and demand, and housing affordability (product of nominal prices and interest rates).

Predictably, the more demand there is relative to supply, the more unaffordable housing is. Not rocket science, except for Nite it may well be (it seems beyond his comprehension).

[WarrenC12]

Originally Posted by whatnext

LOL, have you ever participated in one of their employment surveys? Typical inflexible government gobbledygook. But sure we can believe just 100 new jobs were created.

The specific number is a rounding error. Are you saying you don't believe StatCan? Who do you believe?

[Loco101]

Originally Posted by whatnext

Did the woke take over r/Toronto they way they did r/Vancouver?

Definitely not. The City of Vancouver didn't have an amalgamation like Toronto did. So Toronto has a lot of more suburban type population in former cities such as Etobicoke, North York and Scarborough. Those areas don't like woke politics at all unlike what you'd find downtown.

[thewave46]

Originally Posted by MonkeyRonin

The rise & fall of interest rates has historically been a pretty good indicator of how a market will function relative to its base value: in a market that is functioning normally, rising interest rates will lead to lower relative home values, and vice versa. The base itself though, is a function of supply & demand more than anything else - and that's what determines how "affordable" (or not) a place is. The +/- in value due to interest rates is all relative to what the market will support. An expensive market (high demand relative to supply) that goes down 10% is still expensive; or a cheap market (high supply relative to demand) that goes up 10% is still cheap.

So while the rise in interest rates should in theory lead to a reduction in home values, it won't in and of itself create affordable conditions. If home values don't decline significantly, the additional interest required on mortgage payments will more than make up for lower values for prospective buyers. This is what is happening right now.

The other thing is, because there's such an extreme mismatch between population growth and housing availability, we also don't have a market that is functioning normally. Normally there's a bit more elasticity, but right now we're dealing with ~0% vacancies. Prices aren't falling nearly as much as they should because we have a very simple supply & demand mismatch:

2023 population growth: ~1.6 million people, or at least ~650,000 new households.
2023 housing completions: ~250,000 units.

All of those people want a place to live, and there simply isn't enough housing. Therefore, rents & home prices will continue to be pushed to what the highest bidder is willing to pay to not be homeless. This is compounded on top of what was already a housing shortage, with many people also sitting on the sidelines of the market and/or living in inadequate housing. In other words, it doesn't matter how high interest rates go - housing affordability will not be returning any time soon in these conditions.

Bless you for an adult post.

[yaletown_fella]

Originally Posted by urbandreamer

^Exactly what I meant. Punjabi Canadians have become a powerful lobbyist group. There's a woman on X, Justice Queen who brags about her Ontario government department being almost all SA. I do wonder how she can spend her entire day on X while maintaining a FT government job. When Doug unveiled his latest Hwy 413 plans a few weeks ago, he was surrounded by Punjabi businessmen/lobbyists, Punjabi bureaucrats and Punjabi journalists.

It's smart from a political perspective for Doug to prioritize that project, because thats a powerful voting block

[yaletown_fella]

Originally Posted by Build.It

Canada is getting poorer too, and higher interest rates make houses even less affordable, and you guys seriously think prices are going to keep going up?

There has to be a major correction coming for suburban 905 condos, and I assume suburban condos in the lower mainland as well. They are frequently listed at 30-40% over value, and thats a conservative estimate.

There will be a correction for downtown condos in major cities, but to a lesser extent.

[yaletown_fella]

Originally Posted by suburbanite

So interest rates are the biggest determinant of prices, and Americans could previously lock in 2% rates. Chicago also has higher median incomes than Toronto. In theory we should be able to go back and see Chicagoans bidding up all the supply in Chicago and actually reaching real prices in excess of what Toronto saw during 2020-2022. All that matters is that they basically had the ability to lock in free money for the entirety of their 30 year mortgage right?

I'd love to see the graph for that. Or maybe, just maybe, Chicago actually has a relatively healthy balance of supply and demand and so people don't unnecessarily bid up assets and overindebt themselves when there isn't the level of competition to necessitate it.

Thats a great point. Coincidentally I was browsing and saw a 2 bed 2 bath condo in Chicago listed for around 400k , a little north of the core too, not a rough area. Large kitchen with full peninsula counter, double door fridge, gas stove, original hardwood. It wasnt a glorified dorm room, it was a beautiful 800 square foot unit in a historic building.

[Truenorth00]

Originally Posted by theman23

Early 2023. The last time fixed rage mortgages fell even slightly, prices begin to return to all time highs. There is no plan to curb demand and the government seems determined to do all it can to buoy the housing market with affordability solutions that amount to lip service. The sentiment still is that rates will go down eventually and that housing prices will always go up, so I’d imagine that there will be a flurry of activity this spring with people trying to get in with what they see is a temporary reduction in prices.

Mortgage rates are falling now though. And inventory is still sitting. There will be the occasional bull trap where prices blip up as specuvestors try to time the bottom, but broadly the trend is still lower. Ron Butler said on Herle Burly that TREB is showing sales at their lowest since they started keeping records in 1992.

At the end of the day the monthly payment that families can afford stays the same. The rate only determines what net present value those payments add up to, which determines what they can bid.

Most likely I think we'll see specuvestors who often took variable mortgages or gambled on assignments get washed out of the market. But deep pocketed investors who can outbid families are probably enjoying the market right now. Families are screwed either way.

[Truenorth00]

Originally Posted by urbandreamer

It's not being talked about because the MSM is clearly biased in supporting the wealthy narrative. Look at Reddit Toronto, a shell of its former self, so many topics are no longer allowed. It's almost like it's 1984.

Were you trying to lecture them about how Indians are the new Italians or about how you're an outsider as a descendant of the Family Compact? But surprised they aren't interested in that....

But housing and real estate in the GTA has an entire subreddit. Hardly a taboo topic. They are probably sick of it on r/Toronto and want real estate discussion moved to Toronto Real Estate subreddit.

https://www.reddit.com/r/TorontoRealEstate/s/mZyB0eALRp

[urbandreamer]

The real estate subreddit is heavily moderated. No doom and gloom allowed. I have never posted on Reddit or any SM aside from Twitter.

I personally have no problem with South Asians or any group of immigrants. My frustration is directed at government policy that brought in record numbers of people when real estate has been at record highs, and particularly at TFW replacing low income workers jobs. What if the white collar jobs were threatened by masses of workers willing to work for less. Eg: planners, architects, lawyers, nurses.

[chowhou]

Originally Posted by urbandreamer

The real estate subreddit is heavily moderated. No doom and gloom allowed. I have never posted on Reddit or any SM aside from Twitter.

I personally have no problem with South Asians or any group of immigrants. My frustration is directed at government policy that brought in record numbers of people when real estate has been at record highs, and particularly at TFW replacing low income workers jobs. What if the white collar jobs were threatened by masses of workers willing to work for less. Eg: planners, architects, lawyers, nurses.

Not sure if you know this, but immigrants (not TFW, immigrants) are by and large white collar workers.

Also, it's pretty well established that low skill immigration suppresses low skill jobs, but creates higher skill higher earning jobs as the economy expands and managerial roles and auxilliary businesses open.

There's basically no good argument against immigration that is the fault of immigration itself. It's the other systems that have to keep up.

[casper]

Originally Posted by chowhou

Not sure if you know this, but immigrants (not TFW, immigrants) are by and large white collar workers.

Also, it's pretty well established that low skill immigration suppresses low skill jobs, but creates higher skill higher earning jobs as the economy expands and managerial roles and auxilliary businesses open.

There's basically no good argument against immigration that is the fault of immigration itself. It's the other systems that have to keep up.

Exactly.

The student visa program needs to be fixed to remove diploma mills but the rest of it is a positive. We then need to fix the problem of how to get the housing industry to scale up.

[suburbanite]

No one is arguing against the principal of immigration. The problem is we have ample evidence that the other systems alluded to are in fact not keeping up, and no material improvements have been made to keep them on pace with the growth that is being mandated. If the negative externalities are outweighing the positive, then it's not really a good justification for current policy to say "well if we were doing everything else right this wouldn't be a problem".

[urbandreamer]

Even Elon Musk is ranting about this problem on X. Let's look at India: imagine every year 50 million Chinese or African TFW moved there replacing all the lower caste jobs.

[casper]

Originally Posted by suburbanite

No one is arguing against the principal of immigration. The problem is we have ample evidence that the other systems alluded to are in fact not keeping up, and no material improvements have been made to keep them on pace with the growth that is being mandated. If the negative externalities are outweighing the positive, then it's not really a good justification for current policy to say "well if we were doing everything else right this wouldn't be a problem".

That goes to addressing the supply side. We should be able to scale.

[suburbanite]

Originally Posted by casper

That goes to addressing the supply side. We should be able to scale.

Talking in hypotheticals is great. The reality is that even under the most ideal circumstances supply side cannot scale as quickly as the demand can escalate. We are operating under far from ideal circumstances and so continuing to push forward counterproductive policy based on what should be achievable is the whole problem.