165
Canada likely sitting on the largest housing bubble of all time: Strategist - BNN Bloomberg
(www.bnnbloomberg.ca)
this post was submitted on 23 Aug 2023
165 points (96.6% liked)
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I’m ready for this bubble to pop.
The last time a housing bubble popped, so did the entire economy.
You sure you're ready for that?
Not the same at all. The previous housing bubble was a result of widespread fraud by the banks. Now, people know very well to look out for that exact thing happening, and it isn't.
If there is a bubble right now, which there probably is, it is a speculative bubble. People believe that housing will forever quickly grow in price, so they are willing to pay above reasonable price to not miss out on the opportunity. Which in turn increases the prices further. It's a self-sustaining cycle, but at some point there won't be enough capital to sustain it any longer. Can happen in a year, can happen in a decade, can happen tomorrow.
Yes, I am ready for that. I don’t buy this “but the economy” line. It smacks of “too big to fail”, and I think that occasional failure is necessary and healthy.
You haven't lived through enough cycles then.... Even 2008 saw a million people in Canada lose their jobs. The one in the early 90s was probably double that.
Besides, nobody understands what the real numbers would even be. Do you know how much of an implosion is required to return Vancouver or Toronto to "affordable" levels? Prices would need to drop something around 80-85%. That's absolutely massive, and would wipe out the life savings of 10 million Canadians, who are now going to need more government support to make it through retirement.
There are ways to fix this problem, but they need to be gradual to not end up causing more problems than they fix.
Same. Burn it all down. I’m tired of paying my landlord the equivalent of a mortgage for fuck all security because I don’t have enough for a downpayment.
If you're unable to save money for a downpayment while paying the equivalent of a mortgage then you're not ready to own.
You guys believe you just buy a house and that's it, you know how much you're paying every month and it will be the same for the next 25 years or something? Freaking hell, some of you are in for a big surprise the first time a pipe bursts and you need to pay to redo a bathroom!
That’s ridiculous. I do put money away. The problem is that the size of downpayment needed is growing way faster than I could hope to save. How often do these adverse affects actually happen? Once or twice? You can also DIY.
Other things you can reliably budget for, new roof is every 20 years, maybe new appliances every 10 years. General upkeep? Renters do that already but you can DIY and you have a say in what happens.
Your argument is basically if you can’t save for a home while already paying for a home you can’t afford a home.
That’s ridiculous. I do put money away. The problem is that the size of downpayment needed is growing way faster than I could hope to save. How often do these adverse affects actually happen? Once or twice? You can also DIY.
Other things you can reliably budget for, new roof is every 20 years, maybe new appliances every 10 years. General upkeep? Renters do that already but you can DIY and you have a say in what happens.
Your argument is basically if you can’t save for a home while already paying for a home you can’t afford a home.
A downpayment is 5% minimum, you're unable to save 15k to 20k to buy a house because you're paying the equivalent of a mortgage? Then sorry bud, you just don't have the finances to own, it's that's simple. I do everything myself and a bathroom still costs thousands to renovate when it's not an emergency, if you need to redo everything? Add a couple thousands again.
Your argument is basically if you can’t save for a home while already paying for a home you can’t afford a home.More like if you can't save for a house while already paying for a house you won't be able to maintain a house.
You're saying this but no you're not.
The riskier mortgages are guaranteed by the government, that means everyone pays if people stop paying their mortgage.
Retirement for most owners without a pension fund depends on being able to sell their property, that's also something the whole country would end up paying for through safety nets.
If prices crash that means even more easy to snatch properties for the richest, so even less supply.
The housing bubble bursting would lead to the same social crisis they had to go through in the USA, wishing for it to burst is wishing for people to die, more than are now because of the bubble.
We really have to be taxing the hell out of the rich like we did in the "make Canada great again" days, if we want a cushion for this crash.
Yeah, this.
A crash isn't a bad thing if you can build a firewall against profiteering. Governments could buy property, instead of allowing the wealthy to, and governments could force the rich to take a haircut and/or tax the hell out them and then spend our way out of recession.
It won't happen, but it isn't impossible or even improbable.
Except in the US it brought prices back down to "normal" levels. Their were still expensive but they remained more affordable than here.
The housing situation in the USA and in Canada are different though. You would be shifting the cost from those able to snatch the good deals while the crash happens to the whole population having to pay back banks through increased taxes over decades.
Don't forget all the job losses that come with that, can't buy a cheap house if you don't even have a job!
Government decides who pay taxes. Shitty governments decide everyone pays the same. Good government redistribute.
In the early 20th century people responsible for crisis, bubbles and stuff were severly punished. It can be done.
Also, you should get familiar with the story of the boiling frog. Wishing things won't get worse will only get you dead eventually.
Side note: the boiling frog analogy is actually false, when the frog gets hot it will jump out of the water regardless of how slowly you increase the temperature once it hits a critical heat threshold. Also in the original experiment they had removed the frogs brain (because science?).
It is true in human psychology though -- humans will not notice small enough changes. Like when my cat slowly creeps onto my lap and I don't notice her.
Every damned time. Replace 'lap' with 'counter' and 'notice her' with 'stop her from knocking something off' #ragdoll
I've trained my cats to not go on the counter, which means 15 minutes after I go to bed I hear a cat jump down off of it.
TIL how to poach brains
Our housing market as a whole is worth 6.1T
You think you could tax the rich enough to compensate for the insurance on... $400B worth now insured by the CMHC...
Good luck refunding this without impacting everyone in the long term and good luck not getting all those houses in the hands of those who already have a fortune to buy them!
Remember 2008 in the USA? The people who ended up getting their hand on the cheap houses were those that already had a stack, including foreign investors, regular folks came out of that worse off because they lost their house and couldn't afford to buy another one, in the end you just increase the number of people in the market for cheap housing! 👍
Insurance can collapse and their owners die in an alley. The mistake in 2008 was to save their asses. In early xxth century they would have. Now we pay them billions so they would have the courtesy to retire.
Also congratulations on discovering about how fucked up a free market is for things people need to live. Housing should not be a market.
Dude, that insurance is US! The government insures mortgages with less than 20% in downpayment because banks don't want to loan money for mortgages because they don't want to deal with repossession and having to sell them!
You don't care about selling houses. Their purpose is to shelter people, not to be sold on a market.
The sooner the market crash to oblivion, the sooner people can actually live there. A government has the power to say no to bank and insurance shitters. You don't actually have to pay them your right to live. The society doesn't have to comply to every desire of these shitlords.
Yes, the economy would collapse. That would be for the best if you take care of the things that actually mater : house and food.
But I have no illusion about this kind of event happening in America. You guys are too hard into the free market and your capitalist overlords.
Ok, let me repeat that.
CMHC is an insurance ran by the government. The government not respecting 400b in financial engagement would lead to the total collapse of our economy as businesses pull out of Canada. You and me are the ones who would be eating shit at that point, it wouldn't impact people that are already rich.
What you're wishing for is worse than the status quo and would kill more people than what's currently happening and you probably would be one of the ones who would be affected the most otherwise you wouldn't be complaining about the system in place at the moment.
Island defaulted on its debt in 2008. Island is still there with us. It wasn't the end of the world even it there were tough times.
Now you can have tough times for a few years while you rebuild a sane system, or you can have tough times until the end of times.
Saying that the rich will benefit more is a fallacy, or a tautology. It shouldn't be a reason to do nothing.
The situation is vastly different. In Iceland it was the banks going bankrupt that lead to their economy crashing, what you're suggesting in Canada would be the citizens getting their house repossessed leading to the economy crashing and then bringing banks along for the ride.
Look at the USA in 2008, not Iceland. Shit didn't get better for the vast majority, it only got worse, even today.
Btw I'm a privileged one. I live in Europe and I have a salary quite above average. Which means I'm in the 30% wealthy.
Fear of things getting worse is how the rich keep people in apathy: do nothing, or else it'll get worse. It's how they discard left arguments and solutions : this will mean the apocalypse door you and me, but especially you.
It's propaganda. Do nothing while people die rather than trying your chance at the future. If you look at the propaganda you'll see that the only chance they encourages you to take is the one that earn them your money for a chance to become one of them. "there is no alternative".
Liberalism survives only because of fear and propaganda. People die everyday because of it, and the next crisis will kill many more only for the system to sustain itself until the planet is no more livable.
The fact that you're in a position of privilege is what allows you to say you don't mind seeing the system crash, you'll be ok while things get worse for the poorest. Even a decade of the economy being in the gutter would be worse for most than the current situation. Better not be able to afford a house and having to rent with roommates than not be able to find a job and having to live in the street.
You don't need to "be able to afford a house" if it's not a free market. But somehow this idea seems unconceavable.
Oh so what you're suggesting is that everyone gets the same government owned apartment... Social housing and cooperatives are already a thing though and it can coexist with a free market, no need to kill people by destroying the economy.
That's not what I'm suggesting. You don't seem very creative about how it can work. Or false alternative is more comfortable to accept this fucked up situation that is already killing people.
That's killing way less people than if the bubble was to burst.
For how long?
You can't buy a house if it's not a free market. That's the whole point.
It is a free market though, it's even advantageous to people who don't have that much money because they can still get a mortgage without a huge downpayment. Back before CMHC mortgages were private loans, the previous owner would be the one financing the new owner at whatever rate they felt was appropriate and at whatever downpayment they felt was appropriate. Today you need 5% and if your credit score is good enough then the bank can't say no.
But you wouldn't know that because you're in Europe and you're here talking about the Canadian housing market like you had any idea how it works.
So you're telling me there are no problem of housing in Canada and no one is poor or dying because of it? But then why are we even talking if housing problems are unknown in your country?
I'm not saying that, I'm saying they people saying they want to see the bubble bursts and everything crash in Canada just don't understand what would happen if it did and it would make the issues with the housing bubble look like a freaking joke and would create a lot more poverty and kill a whole lot more of those who are complaining now and it would solve absolutely nothing for these people in the long run because they would just have more people competing against them for cheap housing while the rich would snatch all the properties getting repossessed. More demand, less offer, we're back to the same bubble in a couple of years with the average citizen even poorer than before, just like in the USA after 2008.
I don't care about Canada. It's a world bubble.
Then get the fuck out of a conversation about Canada's housing bubble.
They remained more affordable, for a time. And then housing prices went right back through the roof.
I bought a foreclosed house in 2012 for ~280k. It had been purchased by the previous owner for about 480k.
I put about 150k into it, 100k the first year to make it a liveable property, and 50k or so over the next ten years.
I sold it last year for about 850k...
I then bought a new house that cost about 450k when it was built 4 years ago, for about 680k, in a less expensive market.
Sorry, but depending on location prices bounced back and surpassed pre-crisis levels within few years in US. Same issue that many already highlighted - folks lost their houses during crisis to the ones who can afford it but they still need place to live. Population grows and so are the real estate prices. Investment firms are busy buying up properties and oh boy will they go wild this time, now that this turned into a very targeted industry. So those prices going down only means some people will lose their homes, others their jobs and corporate investors will gain big time. Selected few with sufficient financial cushion will weather it out and the cycle will repeat itself... because nobody builds housing to keep up with the pace of population growth. With a caveat: some rural areas are still underappreciated and if housing is what you seek - go rural, mind you job selection might be limites if any... so gotta be financially independent... oh guess what? Another pass for the average folk. So yeah... new construction is the only way out of it. Bursting the bubble will hurt folks below median a lot more than status quo. (mind you escalation of institutional investors activity would be as tragic as bursting the bubble).
I’m ready for it to pop and the consequences thereof. I know I will have to shoulder some of the burden. Too bad that businesses love to privatize gains and nationalize risks, but that’s the mess we’re in.
To copy another of my comments, I don’t buy this “but the economy” line. It smacks of “too big to fail”, and I think that occasional failure is necessary and healthy.
We're not talking a dip in the stock market.
We're taking millions of jobs just disappearing, people's savings gone, most banks going bankrupt...
I know it's hard to imagine, but the housing bubble can't burst in a vacuum and in our country it's taking everything with it and could mean decades to come back to some form of normalcy.
Heck, you would probably not get to enjoy the potential drop in price because you would have had to move to another country to find a job, just like the Quebecois had to do at the beginning of last century.