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

[P'tit Renard]

BC Landlords actively circumventing rent control:

Some B.C. landlords asking tenants for out-of-bounds rent increases, imply eviction

https://www.theglobeandmail.com/cana...ent-increases/

The Globe and Mail reported on the conflict at her Surrey building a year ago. Since then, the tactic of pressing tenants to accept huge rent increases has remained a perfectly legal win-win for landlords: If they get written permission, they can raise rent well above the legal limit. And, if the renter leaves, they can charge a new person more in line with a rental market that has skyrocketed since the pandemic

[Nite]

Originally Posted by lio45

I will repeat for the 1000th time:

The supply and demand imbalance (a.k.a. immigrants) is what causes Canadian housing costs (i.e. what Canadians are forced to pay, if they want to avoid being homeless) to be higher than ever right now and still climbing;

For a given housing cost (which is fixed by demand), THEN interest rates and nominal real estate prices are directly (inversely) correlated, so that the metric “monthly mortgage cost that people will have to accept to pay to have a roof over their head” is directly correlated with the metric “excess demand vs lack of supply for Canadian housing”.

It’s weird, pretty much everyone else gets it, but with you, it’s like talking to a brick wall. I’m betting anything that you still wont get it, and that we’ll have this exact conversation again in the future.

then why have house prices been falling since 2022 while immigration levels have been at record highs, if immigrant is the main reason for housing cost increase?
Shouldn't record immigration level correlate with record house price growth.
but house prices have gone in the opposite direction with this record immigration rate.

Maybe interest rates play a bigger factor than population growth on demand.

[lio45]

Originally Posted by Nite

then why have house prices been falling since 2022 while immigration levels have been at record highs, if immigrant is the main reason for housing cost increase?
Shouldn't record immigration level correlate with record house price growth.
but house prices have gone in the opposite direction with this record immigration rate.

Maybe interest rates play a bigger factor than population growth on demand.

Record immigration levels correlate with record rents and record monthly mortgage payments, yes. Demand for housing has never been this high, which is why the cost of housing is currently the highest it’s ever been (and still climbing).

And… as predicted, I won my bet! This post shouldn’t have been necessary, I just repeated the same things for the 1,001th time.

[Truenorth00]

Price =\= affordability.

And most people are concerned about affordability, of which price is just one marker.

[Nite]

Originally Posted by lio45

Record immigration levels correlate with record rents and record monthly mortgage payments, yes. Demand for housing has never been this high, which is why the cost of housing is currently the highest it’s ever been (and still climbing).

And… as predicted, I won my bet! This post shouldn’t have been necessary, I just repeated the same things for the 1,001th time.

You are using carrying cost or mortgage payment as the reason for high house prices but these are because of increased interest rates not because of immigration.
You are basically proving my point in your argument.
The whole point of increase interest rates is to increase mortgage cost so Canadian don't spend as much money. this is the whole reason why interest rates ever increase or decrease, it has nothing to do with how many immigrants come to canada.
If Canada zero immigrants since 2022 interest rates would have still been risen to 5% to fight inflation.

if you disagree explain how someone who bought a house lets say 5 years ago is currently paying a higher mortgage cost than in the past because of current immigration levels.

[Xelebes]

Originally Posted by Nite

then why have house prices been falling since 2022 while immigration levels have been at record highs, if immigrant is the main reason for housing cost increase?
Shouldn't record immigration level correlate with record house price growth.
but house prices have gone in the opposite direction with this record immigration rate.

Maybe interest rates play a bigger factor than population growth on demand.

Housing price at peak = ~800,000, so we'll go with $800,000
At Prime+1 (1.25%), cost of mortgage is $931,554

At interest rates of 6%, the principal would be $485,331. So a housing dip that matched the interest rates would see a dip in housing prices would match a 44% drop in prices. Now prices on real estate are sticky and as liquid as other assets, but the prices only fell 2%.

[Nite]

Originally Posted by Xelebes

Housing price at peak = ~800,000, so we'll go with $800,000
At Prime+1 (1.25%), cost of mortgage is $931,554

At interest rates of 6%, the principal would be $485,331. So a housing dip that matched the interest rates would see a dip in housing prices would match a 44% drop in prices. Now prices on real estate are sticky and as liquid as other assets, but the prices only fell 2%.

i could debate how long it takes or how much prices are falling, but the whole fact that prices are falling during record immigration and a 6% growth in population proves the main cause of price increase/decrease is not immigration and it is the reduction in demand caused by increased interest rates causing mortgage cost to increased.

going back to the peak price in Feb 2022, how did we get to that peak when there only a small amount of immigration for the 2 years before?
With very few immigration from April 2020 to Feb 2022, average house price grew from 534K to 836K or 56% growth
Interest rates were also constant at 0.25% for that entire time.
To me immigration played no role in a 56% increase in house price but a 0.25% interest rate sure did.
I would conclude that interest rates are the determining factor in price increase based on this alone.

[Xelebes]

Originally Posted by Nite

i could debate how long it takes or how much prices are falling, but the whole fact that prices are falling during record immigration and a 6% growth in population proves the main cause of price increase/decrease is not immigration and it is the reduction in demand caused by increased interest rates causing mortgage cost to increased.

going back to the peak price in Feb 2022, how did we get to that peak when there was basically zero immigration for the 2 years before?
With almost no immigration from April 2020 to Feb 2022 average house price grew from 534K to 836K or 56% growth
Interest rates were also constant at 0.25% for that entire time.
To me immigration, which there was barely any, played no role in 56% increase in house price but a 0.25 interest rate sure did.
I would conclude that interest rates are the determining factor in price increase based on this alone.



with almost no immigration from April 2020 to Feb 2022 house price grew from 534K to 836K or 56%
https://i.postimg.cc/ncQz65bm/Capture.png

And that is all non sequitur. None of those conclusions can be gleaned from the data you are posting. It just doesn't follow.

So at this point I believe you are posting to boost mindlessly or are trolling. In which case I'm politely going to ask you to step away.

[Nite]

Originally Posted by Xelebes

And that is all non sequitur. None of those conclusions can be gleaned from the data you are posting. It just doesn't follow.

So at this point I believe you are posting to boost mindlessly or are trolling. In which case I'm politely going to ask you to step away.

I posted this annotated graph to better illustrate my point

[IMG][/IMG]

[Xelebes]

Originally Posted by Nite

I posted this annotated graph to better illustrate my point

[IMG][/IMG]

It's not helping.

[Nite]

Originally Posted by Xelebes

It's not helping.

So what to you led to the a 56% increase in house prices during the pandemic.

[Xelebes]

Originally Posted by Nite

So what to you led to the a 56% increase in house prices during the pandemic.

Where did the elasticity come from? And where did it go shortly thereafter?

[Nite]

Originally Posted by Xelebes

Where did the elasticity come from? And where did it go shortly thereafter?

Well my answer has always been interest rates are the biggest determinant for house prices..
But I still want to hear what you think caused the 56% rise during the pandemic however

[Xelebes]

Originally Posted by Nite

Well my answer has always been interest rates.

So you don't understand the concept of elasticity. Good. You can kindly go away now.

[lio45]

Originally Posted by Nite

You are using carrying cost or mortgage payment as the reason for high house prices but these are because of increased interest rates not because of immigration.
You are basically proving my point in your argument.

I’m using the rents that people will accept to pay, and the mortgage payments that people will accept to pay, as the correct metrics to judge demand for Canadian housing.

And I’m pointing out that these metrics (the cost of Canadian housing, in other words) are the highest they’ve ever been right now, and that that’s mostly because supply is finite and constrained by very real factors while demand is through the roof due to the crazy amounts of FNSs we import every year and who all want a roof over their head.

You are totally incorrect when you say that monthly mortgage payments are high because of high interest rates; they are high because of high immigration. If we had no immigration / a balanced supply-demand, both rents and monthly mortgage payments (i.e. what people have to bid to get housing) would have stayed stable, like they were through the GFC when interest rates fell and values more than doubled.

[Nite]

Originally Posted by Xelebes

So you don't understand the concept of elasticity. Good. You can kindly go away now.

I am not interested in calling other names, but i am curious on your thoughts about how elasticity caused the rapid price increase during the pandemic and prices fall after the pandemic.

[Xelebes]

Originally Posted by Nite

I am not interested in calling other names, but i am curious on your thoughts about how elasticity caused the rapid price increase during the pandemic and prices fall after the pandemic.

1) Interests rates played a role but entirely all of it. 4% to 1.25% would only cause 36% increase in price. That is 20% price difference that cannot be explained.

2) Migration explains the other 20% as people seek new housing solutions in stagnant but more rural real estate markets. This is later sustained by elevated immigration and the immigration has accelerated since then, resulting in a loss of elasticity in the markets. That means, another 20% is caused by immigration beyond the 20% caused by intranational migration.

[Nite]

Originally Posted by lio45

I’m using the rents that people will accept to pay, and the mortgage payments that people will accept to pay, as the correct metrics to judge demand for Canadian housing.

And I’m pointing out that these metrics (the cost of Canadian housing, in other words) are the highest they’ve ever been right now, and that that’s mostly because supply is finite and constrained by very real factors while demand is through the roof due to the crazy amounts of FNSs we import every year and who all want a roof over their head.

You are totally incorrect when you say that monthly mortgage payments are high because of high interest rates; they are high because of high immigration. If we had no immigration / a balanced supply-demand, monthly mortgage payments (i.e. what people have to bid to get housing) would have stayed stable, like they were through the GFC when interest rates fell and values more than doubled.

Didn't we have this for 2 years (April 2020 to Feb 2022) and saw one of fastest increase in house prices ever.

[theman23]

I may have misread the graph. But population growth broke records in 2022 and 2023 and looks like it was well above historical trends in 2021 (around 420k). 2019 was also the highest population growth we had in about 30 years:
https://www.nbc.ca/content/dam/bnc/t...ort_240115.pdf


No one is saying that interests rates have no effect. But right now it isn’t interest rates propping up property values.

[Nite]

Originally Posted by theman23

I may have misread the graph. But population growth broke records in 2022 and 2023 and looks like it was well above historical trends in 2021 (around 420k):
https://www.nbc.ca/content/dam/bnc/t...ort_240115.pdf


No one is saying that interests rates have no effect. But right now it isn’t interest rates propping up property values.

the 2 years of low immigration i am referring to is from April 2020 to Feb 2022 so only the first 2 months of 2022. The record numbers of immigration pretty much started right after housing peaked. It's these 2 years especially that i can't see how anyone can say immigration is the main cause of a 56% rise in house prices when immigration was at record low, and not interest rates.