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

[MonkeyRonin]

Why saving for a downpayment is next to impossible in Canada's major markets

Robert McLister: When someone earning six-figures can't save fast enough, you know there's a problem

Author of the article:
Robert McLister
Published May 10, 2024 • Last updated 4 days ago • 4 minute read

If you’re a first-time buyer, diligently saving for a new home means you’ll probably end up paying a lot more for that home.

It’s like the universe’s most depressing game of Monopoly: you pass “Go,” collect your $200, and home prices rise four times that.

Fresh data from the Canada Mortgage and Housing Corp. (CMHC) suggest it takes an average of 4.2 years to save for a down payment. That doesn’t sound so bad, given all the doomsday headlines about down payments taking decades to accumulate.

In high-demand regions like Toronto and Vancouver, accumulating a minimum down payment on an average home takes individuals well over a decade, even if they make $100,000 a year and save 10 per cent of their gross income, tax-free, at a conservative rate of return.

And who can afford to save 10 per cent of their income amidst sky-high rents, wallet-shrinking inflation, unexpected expenses and the taxman’s shakedown?

But let’s play along with the 4.2-year down payment fairy tale, for conversation’s sake. What happens to prices over 4.2-year spans?

Using data from the Canadian Real Estate Association (CREA) going back to 1981, Canada’s average 12-month home value gain is 5.75 per cent.

So if we take CREA’s average Canadian home price of $698,530 and increase it 5.75 per cent a year, that’s a $185,000 surge in prices in just 4.2 years.

There’s no way an average Canadian can save enough to offset that, let alone a first-time buyer yearning for an “average” home. You’d need a couple, each raking in way beyond $100,000 a year, to save that much that fast.

...

Imagine you’re a single buyer earning 100 grand and eyeing the average condo in Toronto, which is $766,917, according to the Toronto Regional Real Estate Board. If you’re not in the 30 per cent of buyers receiving a family gift for your down payment and have no other options or help, it would take over seven years to save up today’s minimum down payment for that condo based on historical appreciation rates.

“Today’s” the keyword.

The problem is, just five years into your diligent savings, that formerly $766,917 condo would shoot well over the government’s $999,999.99 maximum value limit for default insurance. At that point, you’d need to put 20 per cent down instead of 7.5 per cent or less.

But there’s no way you could ever save a 20 per cent down payment on a $100,000 wage while earning a three per cent return, even if using a tax-sheltered savings account. You’d need to put even more money aside or take significantly more risk with your investments.

https://financialpost.com/real-estat...-major-markets



Maybe we need to start thinking of more creative solutions to the housing crisis, like this Michigan woman who was found living in the sign of a big box grocery store. Think of how many people we could fit in underused spaces like these.

Woman found living in Michigan grocery store sign, complete with computer and Keurig, for months

The woman had flooring, a computer, a desk, a printer and a Keurig in the rooftop Family Fare sign, police say.

May 10, 2024, 1:44 PM PDT
By Mirna Alsharif

A woman was found living in the rooftop sign of a Family Fare grocery store in Michigan and had been there for about a year, police said.

Police in Midland were notified about the woman living in the small space that hosts the supermarket’s sign on April 23 after contractors working on the roof found her there.

The woman had flooring, a computer, a desk, a printer, a Keurig and a pantry of food in the space, which was 10 to 15 feet long, five feet wide and approximately 8 feet tall at its highest point, according to the Midland Police Department.

https://www.nbcnews.com/news/us-news...uri-rcna151750

[whatnext]

LOL yes I saw that story earlier this week. Gotta admire her chutzpah and creativity!

Sad that we’ve come to this point though.

[CanSpice]

Originally Posted by whatnext

Sad that we’ve come to this point though.

We haven't, unless somehow I missed that Michigan is now part of Canada.

[MonkeyRonin]

Originally Posted by CanSpice

We haven't, unless somehow I missed that Michigan is now part of Canada.

Yeah, we're even worse.

Michigan average house price: US$245,683
Michigan median monthly rent: US$1,397
Michigan median household income: US$92,835

Canada average house price: CAD$719,400
Canada median monthly rent: CAD$2,188
Canada median household income: CAD$98,390

[theman23]

Originally Posted by MonkeyRonin

Yeah, we're even worse.

Michigan average house price: US$245,683
Michigan median monthly rent: US$1,397
Michigan median household income: US$92,835

Canada average house price: CAD$719,400
Canada median monthly rent: CAD$2,188
Canada median household income: CAD$98,390

Yeah, those are pretty stark differences. A lot Michigian is also very nice, offering a superior quality of life than what's available across the border in Canada for young people. If we ever had Schengen-like labour movement between Canada and the USA the effects would be pretty devastating for our country. It's very likely the vast majority of young people would decamp, leaving behind a society of senior citizens and increasingly aging cohort of millennals trapped in their debt pits.

[whatnext]

Originally Posted by theman23

Yeah, those are pretty stark differences. A lot Michigian is also very nice, offering a superior quality of life than what's available across the border in Canada for young people. If we ever had Schengen-like labour movement between Canada and the USA the effects would be pretty devastating for our country. It's very likely the vast majority of young people would decamp, leaving behind a society of senior citizens and increasingly aging cohort of millennals trapped in their debt pits.

Yes, I'm always surprised that a lot of forummers don't seem to get that.

Canada has basically become Ireland in the 1840s or Italy of 1900s. People will leave for better opportunity where they can afford to have a roof over their head.

[niwell]

Originally Posted by MonkeyRonin

Yeah, we're even worse.

Michigan average house price: US$245,683
Michigan median monthly rent: US$1,397
Michigan median household income: US$92,835

Canada average house price: CAD$719,400
Canada median monthly rent: CAD$2,188
Canada median household income: CAD$98,390

I think you accidentally looked up the average income for Michigan, not median. The median is $68,990. Adjusted to $CAD the above figures would be:

Michigan average house price: CAS$335,368
Michigan median monthly rent: CAD$1,907
Michigan median household income: CAD$94,178

To me this illustrates how much the cost of purchasing housing is out of control here moreso than other COL factors. Felt the same way visiting big cities in the US that have pretty expensive rent and day-to-day costs but more options for purchasing housing. Toronto’s not overly expensive *if* you own a place that was purchased a while back but can be a nightmare if you’re locked out of the housing market. Rent’s not exactly cheap but it’s totally out of sync with what one may expect based on housing costs.

[Wigs]

Since you guys decided to use Michigan:
If Michigan is so nice then why is the population essentially stagnant?

2000 9,938,444 6.9%
2010 9,883,640 −0.6%
2020 10,077,331 2.0%
+138,887 or ~6,945/yr. Very anemic growth for a State of 10 million.

Border States to Michigan

Ohio is doing better and has 3 large Metros
2000 11,353,140 4.7%
2010 11,536,504 1.6%
2020 11,799,448 2.3%
+446,308 or ~22,315/yr

Indiana is doing better
2000 6,080,485 9.7%
2010 6,483,802 6.6%
2020 6,785,528 4.7%
+705,043 or ~32,252/yr

Wisconsin, borders the UP of Michigan
2000 5,363,675 9.6%
2010 5,686,986 6.0%
2020 5,893,718 3.6%
+530,043 or ~26,502/yr

[lio45]

Originally Posted by Wigs

Since you guys decided to use Michigan:
If Michigan is so nice then why is the population essentially stagnant?

Because there are even nicer U.S. states?

Anyway, if "non-stagnant population" is the metric, then yeah, Syria, South Sudan, Canada, Niger, Burundi, are all nicer than California and Switzerland

[Innsertnamehere]

Important to remember the insane subsidies the US hands out for home ownership which Canadians don’t get. Also - they don’t restrict greenfield development.

Michigan is cheap, but super sprawly as well. It’s not exactly an urbanist’s utopia.

The lack of growth for the last 50 years means its infrastructure is great though. I’ve spent a decent amount of time in Michigan and it’s simply soooo much easier to get around there than in Ontario where you are battling to get basically anywhere.

[theman23]

Originally Posted by Wigs

Since you guys decided to use Michigan:
If Michigan is so nice then why is the population essentially stagnant?

2000 9,938,444 6.9%
2010 9,883,640 −0.6%
2020 10,077,331 2.0%
+138,887 or ~6,945/yr. Very anemic growth for a State of 10 million.

Border States to Michigan

Ohio is doing better and has 3 large Metros
2000 11,353,140 4.7%
2010 11,536,504 1.6%
2020 11,799,448 2.3%
+446,308 or ~22,315/yr

Indiana is doing better
2000 6,080,485 9.7%
2010 6,483,802 6.6%
2020 6,785,528 4.7%
+705,043 or ~32,252/yr

Wisconsin, borders the UP of Michigan
2000 5,363,675 9.6%
2010 5,686,986 6.0%
2020 5,893,718 3.6%
+530,043 or ~26,502/yr

Michigan is a border state. I imagine it would be a prime spot for Canadians who are seeking a better quality of life but still wanting to be within driving distance of their aging parents if the border was to ever go down. But the point isn’t specific to Michigan, all of the northern states would be good options for Canadians.

Both of Lios points are also good ones: mainly that Americans are spoiled for choice, but also that population growth in itself doesn’t tell you anything about the quality of life in a place. Canada, Syria, and Niger are perfect counter examples to that.

[Wigs]

Ontario is an example of too much growth too quickly. Currently 110,000/quarter

2001 11,410,046 +6.1%
2006 12,160,282 +6.6%
2011 12,851,821 +5.7%
2016 13,448,494 +4.6%
2021 14,223,942 +5.8%

1Q2024 16,000,000+
+4.6 million or equivalent to Alberta's population in ~2023, or the State of Louisiana, the 25th largest US state.

[theman23]

Originally Posted by Wigs

Ontario is an example of too much growth too quickly. Currently 110,000/quarter

2001 11,410,046 +6.1%
2006 12,160,282 +6.6%
2011 12,851,821 +5.7%
2016 13,448,494 +4.6%
2021 14,223,942 +5.8%

1Q2024 16,000,000+
+4.6 million or equivalent to Alberta's population in ~2023, or the State of Louisiana, the 25th largest US state.

That's 13% population growth over a period of 3 years. For Ontario to revert to normal population growth numbers by the time the next census rolls around, it would need to lose 1 million people by 2026. That's about the size of the city of Ottawa.

[905er]

Originally Posted by whatnext

Yes, I'm always surprised that a lot of forummers don't seem to get that.

Canada has basically become Ireland in the 1840s or Italy of 1900s. People will leave for better opportunity where they can afford to have a roof over their head.

I think you misspelled India

[manny_santos]

Originally Posted by MonkeyRonin

https://financialpost.com/real-estat...-major-markets

I've completely given up on home ownership, there's no point saving for it.

If I ever own a home it won't be in Canada.

[YOWetal]

Originally Posted by whatnext

Yes, I'm always surprised that a lot of forummers don't seem to get that.

Canada has basically become Ireland in the 1840s or Italy of 1900s. People will leave for better opportunity where they can afford to have a roof over their head.

Those are weird comparisons. There was full employment and people flooding in to buy real estate in those examples. Singapore has similar or on the entry level lower salaries and probably 2X+ real estate prices and we don't see a mass exodus there? Is dictatorship and social housing the answer?

[Truenorth00]

Originally Posted by YOWetal

Those are weird comparisons. There was full employment and people flooding in to buy real estate in those examples. Singapore has similar or on the entry level lower salaries and probably 2X+ real estate prices and we don't see a mass exodus there? Is dictatorship and social housing the answer?

Singapore is famous for their public housing program. Without it, they definitely would have people leaving.

• Video Link

I agree there won't be mass exodus. What will happen is that the talented and most productive will leave. And quality of life will simply get progressively worse for everybody else, without the tax base to support social services. This is what happens in a lot of the developing world with brain drain.

[whatnext]

Originally Posted by Truenorth00

Singapore is famous for their public housing program. Without it, they definitely would have people leaving...

Yes and so Vienna has a famous public housing program too. However in Canada all jurisdictions seem to think just offering developers sweet loan deals is going to get the job done.

It won't.

[Changing City]

Originally Posted by whatnext

Yes and so Vienna has a famous public housing program too. However in Canada all jurisdictions seem to think just offering developers sweet loan deals is going to get the job done.

It won't.

Sure Vienna has a fabulous public housing program. Maybe if a Canadian city had a Social Democratic politician running their city in 1922 who introduced a rent tax on the top 20 percent of affluent renters we'd have a similarly fabulous program, but we went in a different direction and so have a majority of the population owning their own home, or wanting to do so.

[whatnext]

Originally Posted by Changing City

Sure Vienna has a fabulous public housing program. Maybe if a Canadian city had a Social Democratic politician running their city in 1922 who introduced a rent tax on the top 20 percent of affluent renters we'd have a similarly fabulous program, but we went in a different direction and so have a majority of the population owning their own home, or wanting to do so.

It's not too late to change that. Instead of blowing billions on free dental care the Feds could actually put a roof over people's heads.

And as you should know, Vienna is still building social housing. I wonder how Ian Gillespie would feel about having to provide 2/3 social housing in his next starchitect building?

...In 2019, Vienna introduced a new zoning rule that means that in developments with more than 5,000 sq metres of living space, two-thirds must be subsidised housing. “For cities, the question is always whether they have a good bargaining position with land owners,” even Vienna-sceptic Simons concedes. “And Vienna has a good bargaining position.” The city’s land procurement fund coordinates closely with the department that hands out planning permissions, and can strike deals accordingly.

Whether Vienna will reach its target of building 5,500 new Gemeindebau apartments by 2025 remains to be seen, and whether that will be enough if the city is expected to return to its 1910 population levels by 2038 is another question entirely. But it is taking tangible steps. After an 11-year freeze on new social housing developments, the city resumed building new Gemeindebau blocks in 2015, and has earmarked €557m for new developments in 2024. One of the most recent to be completed, by the local architecture firm WUP, lies about 7km east of the city centre in Seestadt Aspern, a new urban centre growing on the site of a former airfield.

Margarete Stoklassa, 73, and her husband moved into one of the 74 apartments from an estate in the city centre last April because they needed barrier-free access, and seem more than pleased. At 50 sq metres their new home is not huge, but a circular floorplan and several sliding walls mean that “I sometimes end up playing hide-and-seek with my husband,” says Stoklassa. “I am very happy; everything I need is here.” The couple pay €520 in rent a month.

The facades of the new-era Gemeindebau are painted in chalky reds, blues and greens that reference the mighty fortresses of the Red Vienna period, although with prices of building materials peaking during the construction phase, there is plenty of bare concrete and galvanised steel. “The rise in the cost of raw materials forced us to concentrate on what social housing is really about,” says the architect Bernhard Weinberger. Having prevailed for more than a century, Vienna’s ideals of communal living have shown they can stand the test of time. “This building should still be standing in 200 years,” he says...

https://www.theguardian.com/lifeands...t-livable-city