National Economy

[whatnext]

Originally Posted by Build.It

Our equivalent to the 1929 stock market crash is the housing collapse. Everyone invested in real estate throughout the 2010s and early 2020s, and now people are losing their shirts.

The decline in prices has been nothing close to a “collapse” at this point. It certainly is nowhere near close enough in our biggest cities to bring housing g back to affordability.

[kwoldtimer]

A 10 -15% decline over two years is more a reset than a collapse, even if the next couple of years see the same trend continue.

[Build.It]

Kitchener is down by over 20% since the peak.

It's also not over yet - we are just beginning the renewal cliff with the 1.5% COVID mortgages coming up for renewal in 2025 and 2026.

Bare in mind the only loss that matters for people is their equity. Even if the price of the house only went down by 20%, if they only had 20% equity to begin with, it might as well be a 100% crash for that individual.

[kwoldtimer]

Originally Posted by Build.It

Kitchener is down by over 20% since the peak.

It's also not over yet - we are just beginning the renewal cliff with the 1.5% COVID mortgages coming up for renewal in 2025 and 2026.

Bare in mind the only loss that matters for people is their equity. Even if the price of the house only went down by 20%, if they only had 20% equity to begin with, it might as well be a 100% crash for that individual.

As long as you can still pay the mortgage, the equity in a house that's not on the market seems moot (unless you can't refinance). But one will bear it in mind.

[whatnext]

Originally Posted by Build.It

Kitchener is down by over 20% since the peak.

It's also not over yet - we are just beginning the renewal cliff with the 1.5% COVID mortgages coming up for renewal in 2025 and 2026.

Bare in mind the only loss that matters for people is their equity. Even if the price of the house only went down by 20%, if they only had 20% equity to begin with, it might as well be a 100% crash for that individual.

Shouldn’t these buyers have to been run through the stress test? Don’t tell me they lied in their mortgage application or that banks did a nudge, nudge, wink, wink. If so both the mortgagee and the institution deserve to get burned.

[acottawa]

Originally Posted by whatnext

Shouldn’t these buyers have to been run through the stress test? Don’t tell me they lied in their mortgage application or that banks did a nudge, nudge, wink, wink. If so both the mortgagee and the institution deserve to get burned.

I believe the stress test is a 5 year fixed mortgage, so based on a 1.5% rate during the COVID mortgages.

[YOWetal]

Originally Posted by acottawa

I believe the stress test is a 5 year fixed mortgage, so based on a 1.5% rate during the COVID mortgages.

The stress test set a floor rate. 5.25% was a common rate through a lot of this period so most should be tested to be able to afford to renew at that rate. Of course this doesn't consider some took on a lot more debt after getting this first mortgage.

[acottawa]

Originally Posted by YOWetal

The stress test set a floor rate. 5.25% was a common rate through a lot of this period so most should be tested to be able to afford to renew at that rate. Of course this doesn't consider some took on a lot more debt after getting this first mortgage.

I don’t think that was the stress test in place at the time.

https://globalnews.ca/news/4097215/c...ess-test-2018/

[YOWetal]

Originally Posted by acottawa

I don’t think that was the stress test in place at the time.

https://globalnews.ca/news/4097215/c...ess-test-2018/

The Liberals brought started it in 2016 though was tightened up as you say in 2021.

[casper]

Originally Posted by whatnext

Shouldn’t these buyers have to been run through the stress test? Don’t tell me they lied in their mortgage application or that banks did a nudge, nudge, wink, wink. If so both the mortgagee and the institution deserve to get burned.

I think the stress test is only applied when you first get a mortgage. I don't think it is redone for renewals.

Interest rates are coming down but not to the 1.5% rate.

The realtors in Toronto and Vancouver are raising the alarms about market collapse. That sounds like a bigger issue with condos that were purchased as investment properties. I think the government should be worried about individuals who own their home being able to renew. The investors (even is small investors) on the other hand chose to take on that risk and now need to live with the outcome.

Originally Posted by YOWetal

The Liberals brought started it in 2016 though was tightened up as you say in 2021.

There is also a mix of rules. The stress test applied to federally regulated banks. Credit unions that operate under provincial banking rules had a different set of regulations. Suspect most provinces eventually established similar stress tests over time.

[whatnext]

Originally Posted by casper

I think the stress test is only applied when you first get a mortgage. I don't think it is redone for renewals.

Interest rates are coming down but not to the 1.5% rate.

The realtors in Toronto and Vancouver are raising the alarms about market collapse. That sounds like a bigger issue with condos that were purchased as investment properties. I think the government should be worried about individuals who own their home being able to renew. The investors (even is small investors) on the other hand chose to take on that risk and now need to live with the outcome.



There is also a mix of rules. The stress test applied to federally regulated banks. Credit unions that operate under provincial banking rules had a different set of regulations. Suspect most provinces eventually established similar stress tests over time.

Well, investors getting burned and having to sell will be just what the doctor ordered to help restore affordability. Nothing better than a panicked seller whose principal residence might be foreclosed if they don’t cut a deal and sell. And realistically, what % of the population got their first home and mortgage at rock bottom COVID rates?

[casper]

Originally Posted by whatnext

Well, investors getting burned and having to sell will be just what the doctor ordered to help restore affordability. Nothing better than a panicked seller whose principal residence might be foreclosed if they don’t cut a deal and sell. And realistically, what % of the population got their first home and mortgage at rock bottom COVID rates?

Agreed.

The feds changed a number of rules to make renewals more flexible. Even those who purchased during COVID, may not be happy paying more interest but they will likely have options that keep them in their properties.

The investors, especially the ones that purchased pre-built or airb&b type properties are running into trouble. They were searching for get-rich-quick schemes and getting burnt doing that sometimes should be expected.

[zahav]

Originally Posted by Build.It

2 people I know personally recently became homeless and are currently living in tents. They made stupid choices in life, but were still able to keep a roof over their head in the past. They are working class I'd say.

I remain convinced that this decade of Canadian history be will viewed as our generation's version of the Great Depression when the history books get written.

Most people during the GD kept their jobs and their homes and didn't really feel it. However homelessness skyrocketed and unemployment was mich higher than normal.

Today is a bit different ... we simply don't have enough working age adults for unemployment rates to skyrocket like that IIMO, but homelessness, and the general decline in standard of living for most Canadians, resembles the GD.

Most friends and family members I know that don't work for themself are stressed about money at the moment. It's very different from the 2008 recession where people were worried about their job security but could otherwise still afford everything.

Today people aren't worried about their job, but they are worried about being able to pay all the bills, and in many cases are ending up living in tents despite being employed.

Strange times. They say every generation lives through something like this once. I have no idea when it will peak but it is interesting to live through.

I thinkone of the lessons we're getting out of this is that all of the government recession indicators are wrong. If their indicators haven't flashed red the last year or so it obviously means that they are using the wrong methods. A simple eye test and talking to everyday Canadians tells a very different story than what the government's official data is saying.

In a few years things could be different, but your wording underestimates the suffering of the GD for millions of people, saying "Most people during the GD kept their jobs and their homes and didn't really feel it" is not accurate. A huge chunk of the population lost their livelihoods, land, and caused a massive migration to places like California. The main difference is the population was far more rural, and a lot of the pain affected the rural midwest and south, but people in the north were suffering too, there is so much research on the living conditions and how they deteriorated hugely (people were eating things like water pie because ingredients were so expensive or hard to come by). There's definitely parallels to today but in a more modern world of course, buts similar stresses. But I would definitely not claim that most people kept their jobs and homes, what we are seeing currently is nowhere near as bad as the depression. I am hopeful it won't go down that road either, the global economy and government involvement is so different now than then, if it was something that was going to put literally millions and millions of Canadians into destitution, there would be policy changes to absorb some of the shock (again, hopefully...). But as it is right now, there's no way we're worse than the 30s.

But yes, I have to stop myself frequently from waxing nostalgic for the 2010-2019 lifestyle we had, so many things we took for granted. It hurts to realize how many ways things got worse. But things are cyclical, people always fear downturns and every time people think there's no way out, but it will improve. Just hope not too many people get hurt in the process

[ssiguy]

Originally Posted by Build.It

Our equivalent to the 1929 stock market crash is the housing collapse. Everyone invested in real estate throughout the 2010s and early 2020s, and now people are losing their shirts.

I agree the analogy is there but there are a couple of major differences:

1} People would betting their money, fortunes, and futures on stocks which is not a necessity of life quite unlike housing. When people play with stocks, they are playing with their own money but when they are playing with real estate they effect everyone else's future.

2} When the 1929 crash hit, politicians tried to sooth the fears but both in Canada and the US, they let the situation play out for better or for worse. In the free wheeling 20s where money seemed to drop from the skies, politicians and economists knew it couldn't go on forever and there would be a day of reckoning.

This is quite unlike Canada's current housing crisis because instead of letting the market correct itself, Trudeau decided that the best thing for him politically was to just artificially pump more potential buyers into the market a la mass immigration. He couldn't care less about the devastating impacts, economic and social, as long as it didn't happen under his watch.

Now that he has single handedly managed to send our rental and real estate prices into the stratosphere along with being one of the most heavily indebted consumers on the planet, Canada is in a horrid situation. If we cut immigration even just back to traditional levels, the effect on the housing market and Canadians financial situation is going to be far more impactful.

[acottawa]

Originally Posted by zahav

In a few years things could be different, but your wording underestimates the suffering of the GD for millions of people, saying "Most people during the GD kept their jobs and their homes and didn't really feel it" is not accurate. A huge chunk of the population lost their livelihoods, land, and caused a massive migration to places like California. The main difference is the population was far more rural, and a lot of the pain affected the rural midwest and south, but people in the north were suffering too, there is so much research on the living conditions and how they deteriorated hugely (people were eating things like water pie because ingredients were so expensive or hard to come by). There's definitely parallels to today but in a more modern world of course, buts similar stresses. But I would definitely not claim that most people kept their jobs and homes, what we are seeing currently is nowhere near as bad as the depression. I am hopeful it won't go down that road either, the global economy and government involvement is so different now than then, if it was something that was going to put literally millions and millions of Canadians into destitution, there would be policy changes to absorb some of the shock (again, hopefully...). But as it is right now, there's no way we're worse than the 30s.

But yes, I have to stop myself frequently from waxing nostalgic for the 2010-2019 lifestyle we had, so many things we took for granted. It hurts to realize how many ways things got worse. But things are cyclical, people always fear downturns and every time people think there's no way out, but it will improve. Just hope not too many people get hurt in the process

I think the migration was more heavily linked to the dust bowl than economic factors.

Real wages rose throughout the Depression and unemployment was about 20% so for the 80% the direct impact would have been minimal.

[Build.It]

The average person in the late 1920s was far poorer than the average citizen in the late 2010s. What matters is the perceived decline in standard of living for the ordinary person, especially the bottom 50%.

The percentage decline from peak to trough is comparable, but the low point this time around won't be nearly as bad as the GD, since the starting point was a lot higher.

A modern tent with a gas stove and access to free public washrooms (and internet) and cheap fast food is a lot better than having to find materials to build your own shack, shitting outside and having to basically hunt your own food.

But for thebperson in the tent the percentage decline in their standard of living is going to feel the same as the homeless person during the GD. There is an estimated 235,000 homeless people in Canada, not including hidden homelessness. That's roughly 1% of the population and growing. Not sure how that % compares with the GD, but it's certainly the worst it's ever been in our life time, hence my original assertion that this period will be viewed as our generation's version of the Great Depression.

[casper]

Originally Posted by Build.It

But for thebperson in the tent the percentage decline in their standard of living is going to feel the same as the homeless person during the GD. There is an estimated 235,000 homeless people in Canada, not including hidden homelessness. That's roughly 1% of the population and growing. Not sure how that % compares with the GD, but it's certainly the worst it's ever been in our life time, hence my original assertion that this period will be viewed as our generation's version of the Great Depression.

Around 3-3.5% of housing in Canada is social housing. The OECD average is 7%. That is the safety net for those that can't find housing through the private sector. The obvious solution is to build more social housing. That should address that 1%.

That is a very different problem that those who should be able to afford a mortgage or at-market rentals.

[jonny24]

Originally Posted by casper

Around 3-3.5% of housing in Canada is social housing. The OECD average is 7%. That is the safety net for those that can't find housing through the private sector. The obvious solution is to build more social housing. That should address that 1%.

That is a very different problem that those who should be able to afford a mortgage or at-market rentals.

Maybe, but that means increasing the amount of social housing by 33%. That's hard to accomplish on any kind of short timelines.

[YOWetal]

Originally Posted by casper

Around 3-3.5% of housing in Canada is social housing. The OECD average is 7%. That is the safety net for those that can't find housing through the private sector. The obvious solution is to build more social housing. That should address that 1%.

That is a very different problem that those who should be able to afford a mortgage or at-market rentals.

You are talking about a massive amount of money. Most of those above us have much higher tax rates. Are you willing to pay 15% GST to pay for social housing? All this does is put housing out of reach further for middle class young people and give those not working or working with large familes access to cheaper substandard housing.

[acottawa]

Originally Posted by casper

Around 3-3.5% of housing in Canada is social housing. The OECD average is 7%. That is the safety net for those that can't find housing through the private sector. The obvious solution is to build more social housing. That should address that 1%.

That is a very different problem that those who should be able to afford a mortgage or at-market rentals.

The constraints on social housing construction are the same as private sector construction: land shortages, labour shortages, logistics challenges, NIMBYs.