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

[Changing City]

Originally Posted by whatnext

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.

The basic dental treatments covered by state care in Austria include check-ups, cleaning, and fillings.

They do both in Austria - it's not either/or.

And the dental system just created in Canada is costing $4.4bn a year. The 2023/2024 Housing Action Plan spending is three times that.

[Truenorth00]

^ Vienna isn't Austria. There's nothing stopping any Canadian city emulating Vienna. They don't need to wait for the federal government to do that.

[Changing City]

Originally Posted by Truenorth00

^ Vienna isn't Austria. There's nothing stopping any Canadian city emulating Vienna. They don't need to wait for the federal government to do that.

A number of Greater Vancouver municipalities, and Toronto have non-market Housing Agencies (and probably other Candian cities too). Vienna started over 100 years ago, so has a bit of a head start when they built 64,000 new units in 400 housing blocks between 1923 and 1934. They now own 60% of the City's housing stock - it would be difficult to emulate that aspect of their success.

[Build.It]

It appears that we have reached the peak in this year's spring market, and this year's peak is lower than the peak's in 2021, 2022 and 2023.

[P'tit Renard]

Interesting Quebec is proposing a 3 year moratorium on renovictions:

Un moratoire de trois ans sur les évictions
https://www.lapresse.ca/actualites/p...-evictions.php

[Coldrsx]

[Nite]

Originally Posted by Build.It

It appears that we have reached the peak in this year's spring market, and this year's peak is lower than the peak's in 2021, 2022 and 2023.

effectly zero price growth for he last 3 years.
when you factor in Inflation over the last 3 year a 700,000 today is the same value of 600,000 in Jan 2021 as well, so no price growth for the last 3.5 years

[SignalHillHiker]

If anyone wants just Mary and Louise between us, the house just two from me is for sale. And cheap!

[casper]

Originally Posted by Nite

effectly zero price growth for he last 3 years.
when you factor in Inflation over the last 3 year a 700,000 today is the same value of 600,000 in Jan 2021 as well, so no price growth for the last 3.5 years

That would be the best possible outcome. Ensuring there is no market crash. Stability while at the same time making housing more affordable over time.

Perhaps that is sounds management of the economy by the current government. More likely explanation is it is just good luck.

But looking at that graph it does look like 2020 (pandemic) was an outlier. (Had it not been for that year, it would have been stable with negative growth over the past decade. We will need to see stats Canada data at the next census but it looks like there was a significant shift of what people wanted on the housing front and that impacted prices.

[Nite]

Originally Posted by casper

That would be the best possible outcome. Ensuring there is no market crash. Stability while at the same time making housing more affordable over time.

Perhaps that is sounds management of the economy by the current government. More likely explanation is it is just good luck.

But looking at that graph it does look like 2020 (pandemic) was an outlier. (Had it not been for that year, it would have been stable with negative growth over the past decade. We will need to see stats Canada data at the next census but it looks like there was a significant shift of what people wanted on the housing front and that impacted prices.

It's the interest rates falling to 0% because of the pandemic which caused prices in 2020/2021 to rise so quickly despite almost no population growth and interest rates rising to 5% which has caused prices to fall since them despite rapid population growth.

Population growth went in the opposite direction in both cases which illustration my point that it's a very minor factor in determining house prices compared to interest rate.
No matter how many people Canada lets in, if interest rates are high house prices will fall, and if interest rates are low house prices will climb.

[whatnext]

Originally Posted by Nite

It's the interest rates falling to 0% because of the pandemic which caused prices in 2020/2021 to rise so quickly despite almost no population growth and interest rates rising to 5% which has caused prices to fall since them despite rapid population growth.

Population growth went in the opposite direction in both cases which illustration my point that it's a very minor factor in determining house prices compared to interest rate.
No matter how many people Canada lets in, if interest rates are high house prices will fall, and if interest rates are low house prices will climb.

LOL. Back to Econ 101 for you.

[casper]

Originally Posted by Nite

It's the interest rates falling to 0% because of the pandemic which caused prices in 2020/2021 to rise so quickly despite almost no population growth and interest rates rising to 5% which has caused prices to fall since them despite rapid population growth.

Population growth went in the opposite direction in both cases which illustration my point that it's a very minor factor in determining house prices compared to interest rate.
No matter how many people Canada lets in, if interest rates are high house prices will fall, and if interest rates are low house prices will climb.

That does make sense. The students (aka part-time uberEats drivers) are not going to be in a position to have a down payment for a home. They don't factor into the supply-demand equation. It will be several years before they build up the experience in Canada to be able to get a better paying job where they have a chance of starting to look at home ownership.

They are going to impact the rental market, not the home buyer market.

[lio45]

Originally Posted by casper

That does make sense. The students (aka part-time uberEats drivers) are not going to be in a position to have a down payment for a home. They don't factor into the supply-demand equation.

Only the homeless “don’t factor into the supply-demand equation”. Most FNSs want a roof over their head, therefore they bid up rents, which raises real estate values.

Nite’s post is Flat Earther/Supply-Demand Denier bullshit, as usual from him. Did not “make sense”

[Nite]

Originally Posted by lio45

Only the homeless “don’t factor into the supply-demand equation”. Most FNSs want a roof over their head, therefore they bid up rents, which raises real estate values.

Nite’s post is Flat Earther/Supply-Demand Denier bullshit, as usual from him. Did not “make sense”

It's good to see you are finally agreeing that high or low immigration doesn't do much to the homes prices in Canada, and that interest rates play a much bigger factor, which i have always been saying.

Again the largest population increase in Canada history over the last 2 years, has corresponded to a fall of 15% in the value of house prices in Canada.

[theman23]

It’s also translated into sky rocketing rental prices and mortgage costs for a first time buyer.

[lio45]

Originally Posted by theman23

It’s also translated into sky rocketing rental prices and mortgage costs for a first time buyer.

Exactly. Skyhigh immigration directly causes skyhigh rents and skyhigh monthly mortgage prices (i.e. more demand than supply -> people will stretch their financial resources to the max, in desperate efforts to avoid becoming homeless. That’s why housing affordability is at record lows right now: our intake of FNSs is at a record high.)

Basic supply and demand, in other words.

[thewave46]

It would be curious about how 5% Bank of Canada rates would affect housing prices in a low immigration scenario.

The correction would be much larger - a quick input of the average price (~$700k) into an amortization calculator with a 25 year amortization at 5.6% closed 5-year mortgage gives a monthly payment of $4,123, presuming a 5% downpayment. That’s $49,400/year.

Upper middle class, dual income without kids territory. That’s the average, and just the mortgage cost. Not expensive metros. Not other housing costs.

However, six to eight bedrooms at $1000-$1200/mo? That could be a business. $6,000-$9,600/mo. could easily carry that cost. Just need someone who will pay that to live like that.

Anyway, if the average asking rent is $2200/mo (1bdrm = $1920, 2 bed = $2300/mo. Per CTV) yeah, buy the $700k financed house and rent it out, because $2k a month thins out the tenants quickly if they want luxuries like single occupancy. They’ll come to the place that only asks $1200/mo. for a room if they’re desperate.

It only works if you have the desperate people though. Otherwise, the business doesn’t work.

[casper]

Originally Posted by thewave46

It would be curious about how 5% Bank of Canada rates would affect housing prices in a low immigration scenario.

I am not going to claim to know how this would work out. There are far two many free variables at play for a simple supply-demand model to work. That said it would be an interesting modeling experiment to do.

The interest rates went up to control inflation.

Inflation was in part driven by increases in commodity prices and finished goods from domestic and foreign sources.

Inflation was in part driven up by scarcity of labour in the Canadian market as many relocated or retired during COVID years.

The increased immigration likely had downward pressure on labour costs in Canada. That contributed to reduce inflation.

The reduction in inflation over the last year has allowed the Bank of Canada to stop increase in interest rates. We are likely getting to the point where it can go back down.

That still leaves it as an option question, if we did not have high immigration where would we be today?

[thewave46]

Interesting to note the relative stagnation of housing prices celebrated here under conditions that ordinarily should deflate them much more significantly while the Statistics Canada thread reports South Sudanese level annualized growth rates, even in places where the economy shows the vitality of a corpse.

I mean, if you’re the winner of these things, yeah man, go for 4% annual population growth unto infinity. You can’t lose (much) because even if the $800k home one bought at the peak at zip interest rates (1.4% for 5 year closed in December 2020) still sells for $700k, despite being much more costly to carry for the new owner ($3k/mo. for the former versus $4.1k for the latter), you’re not getting that hosed.

Maybe it’ll be the rising unemployment rates that’ll squash it as those 5% Bank of Canada rates hit all those cheaply financed mortgages that are coming up for renewal soon. 2025 is just around the bend, and zip interest rates unto forever was a fever dream.

[lio45]

It’s pretty simple: how high people can bid up rents and monthly mortgage payments is directly linked to both 1) people’s ability to pay and 2) supply vs demand. (And then, monthly mortgage payments being “fixed” by supply and demand, house prices are directly linked to interest rates.)

The behavior is fairly simple because housing is a pretty damn essential “purchase”. It’s like selling a bottle of water to someone stranded in the desert and about to die of thirst: no need for deep historical water market trends analysis to declare that what that person will be willing to pay is “all his $$$, whatever that is”. Very simple situation.