|
Fine-able Offense posted:...the fact that the RMB is the world's most well-known fixed-rate currency? There's no appreciation? Here is FDI in Canada from 1996-2011: http://www.international.gc.ca/econ...r.aspx?lang=eng Here is the inflation rate in Canada from 1998-2013: http://www.rateinflation.com/inflation-rate/canada-historical-inflation-rate?start-year=1998&end-year=2013 Tell me where FDI drove inflation. If it was inflationary the Bank of Canada would reduce the money supply to hedge off inflation. As for the Renmenibi being fixed, Wikipedia posted:The RMB is now moved to a managed floating exchange rate based on market supply and demand with reference to a basket of foreign currencies
|
#
?
Apr 8, 2013 21:35
|
|
|
|
| # ? May 9, 2024 22:06 |
|
|
dethslayer666 posted:Even if it was fixed to one currency, it would still float relative to all other floating currencies. It's not fixed, it's not fixed to the Canadian dollar, and it sure as poo poo isn't fixed to every floating currency in the world. Canada is one of the basket currencies. God drat, dude. Also, the fact that you keep mistaking GDP-wide inflation for inflation in a specific sector is making me laugh my rear end off. They are two entirely different things; foreign currency derived asset bubbles have happened all over the world, time and again. Entire BOOKS have been written about the 1997 Asian financial crisis! Here's a little thought-puzzle to hopefully help you: if every single person on Earth decided that they needed to buy real estate in Vancouver no matter what (like, there was a terrible plague that would strike non-Vancouverites on May 1st), do you think that the price of real estate in Metro Vancouver would rise? Do you think your weird theory about hot money not having any material impact on sectoral inflation would prevent the bid-pull effect? I'm honestly curious.
|
|
#
?
Apr 8, 2013 21:41
|
|
|
Fine-able Offense posted:Canada is one of the basket currencies. God drat, dude. Here, the Bank of Canada even has a graph! http://www.bankofcanada.ca/rates/exchange/cad-selected-currencies/#IEXM2201 You'll notice that a similar trend was followed by the Renmenibi, US Dollar, Hong Kong dollar and the Japanese Yen against the Canadian dollar. Show me a definition of inflation that only includes housing and you may have a point. Inflation is defined as a general rise in the level of prices, and doesn't always include housing prices for just this reason. If everyone in the world decided to buy housing in Vancouver, the supply of housing available on the market would fall and prices rise. If they rise enough, people will sell their houses and move away. This has nothing to do with inflation, it's just prices adjusting to supply and demand to clear the market. When oil prices rose from $10 a barrel in 2000 to $120 a barrel in 2007, this wasn't inflation. It was greatly increased demand that outpaced supply. Justin Trudeau fucked around with this message at 22:39 on Apr 8, 2013 |
|
#
?
Apr 8, 2013 21:59
|
|
|
Guy DeBorgore posted:Are you new to this planet or something? Come on, this isn't "in depth economic analysis" here. 1 post above mine you said quote:I think everyone can agree that's a good thing. How do people who own houses already (which is most people) "agree that's a good thing"?
|
|
#
?
Apr 8, 2013 22:13
|
|
|
dethslayer666 posted:Uuhhh, you guys are lobbing sentences at each other, yet, by my reading, you actually don't really disagree on anything. You both seem to be arguing a variant of the same point.
|
|
#
?
Apr 8, 2013 22:38
|
|
|
Throatwarbler posted:Come on, this isn't "in depth economic analysis" here. 1 post above mine you said I meant everyone in this thread. Do you not agree it's a good thing? Most people, I imagine, would be in favour of deflating housing bubbles if it was explained to them, but opposed to anything that lowers their personal house's price. Guy DeBorgore fucked around with this message at 04:08 on Apr 9, 2013 |
|
#
?
Apr 9, 2013 04:06
|
|
|
Guy DeBorgore posted:Most people, I imagine, would be in favour of deflating housing bubbles if it was explained to them, but opposed to anything that lowers their personal house's price. Therein lies the problem. I think, actually, a lot of boomer types are really starting to regret the fact that many of their families have zero chance of living in the same neighbourhood. Visits to see the grandparents will entail a 1 hour plus drive in lovely traffic, not a 10-block bike ride. So it goes.
|
|
#
?
Apr 9, 2013 04:18
|
|
|
Honest question but does anyone here own a house? I don't know a single person even in my most extended of social circles that does. No wait I do, I know a single person who moved way out to some village north of Ottawa and managed to get like a farm house or something. Everyone else, from retail workers to PHD's, all rent small apartments or a duplex at the most luxurious. In my anecdotal experience there's a HUGE generational gap. Everyone in my parents generation owns a house, but no one in my generation does, despite often making (adjusted for inflation) the same or better wages than their parents. What will happen when all those boomers sell? About the only locals left in neighbourhoods here are boomers who often rent to my generation as most have basement/garden suites. But every time a new house goes up or an old house sells, it's always some extremely rich person from Ontario or Alberta or the US. They never made their money here, they're just moving here after finally becoming rich enough. None of the boomers can afford their houses now and the taxes on their bloated values are hurting them, they've all gone up like 500% or more in just a decade or two. I can't imagine what our neighbourhoods are going to look like in 10 years, who's going to be living in all these houses that generations were born and raised in. An entire city's stock of houses can't be just 50+ retired or nearly retired rich folk, or can it? This has to be a bubble, but at the same time it seems that anyone in Canada rich enough to want to retire here does. Then again rich people have always tried to retire to Victoria for the last 100 years and prices were never like this. 20 years ago a single-income family supported by a bus driver could afford a house that now only 2 semi-retired lawyers who were very wise with their money can afford. The city has always been desirable, population growth has been fairly steady, there's no actual shortage of housing as there's tons of construction. I'm not an economist but I really don't understand what could make the prices go up that fast and keep them up. I guess that's why everyone says it's a bubble since it doesn't make sense?
|
|
#
?
Apr 9, 2013 04:21
|
|
|
I'm in my mid 30s and I have several friends who own houses. All of them have family incomes of at least 150-200k. The majority have at least 2 degrees. The majority are dissastisfied with their current homes and plan on upgrading in the future. In other words, they bought tiny homes or duplexes and rent out the basement suite. None of them think the market in Vancouver could crash. Save your money and do your worst when the crash comes.
|
|
#
?
Apr 9, 2013 04:32
|
|
|
Baronjutter posted:20 years ago a single-income family supported by a bus driver could afford a house that now only 2 semi-retired lawyers who were very wise with their money can afford. The city has always been desirable, population growth has been fairly steady, there's no actual shortage of housing as there's tons of construction. I'm not an economist but I really don't understand what could make the prices go up that fast and keep them up. I guess that's why everyone says it's a bubble since it doesn't make sense? 20 years ago, mortgage rates were a lot higher. They have come down from 20% in 1980 over time. If interest rates were higher, not only would mortgages cost a lot more, you wouldn't have money chasing returns into the housing market (which is also one of the few areas you can highly leverage yourself as a typical investor).
|
|
#
?
Apr 9, 2013 06:14
|
|
|
BoC tried to raise interest rates but then they got the "YOU CAN'T RAISE INTEREST RATES!! YOU WILL REGRET THIS!!" guy and backed off.
|
|
#
?
Apr 9, 2013 06:20
|
|
|
shots shots shots posted:20 years ago, mortgage rates were a lot higher. They have come down from 20% in 1980 over time. If interest rates were higher, not only would mortgages cost a lot more, you wouldn't have money chasing returns into the housing market (which is also one of the few areas you can highly leverage yourself as a typical investor). To clarify, if mortgage rates were higher, prices would be a lot lower because hundreds of thousands of people wouldn't be able to afford their payments and would be forced to exit the market, increasing supply AND decreasing demand. More can "afford" to be in the market now (i.e. can get approved for mortgages and make monthly payments) than if rates went up even a few percentage points, never mind 10% -- to say nothing about 20%. So someone who is stretched on a 25 year $300k mortgage at 3% couldn't keep that at 20%. Their monthly payments would almost quadruple, i.e. they would go from ~$1400 to ~$5000. Prices would plunge like you've never seen before. Even if rates go up 4% to 7%, the $1400 monthly payment jumps to $2120. That's killer for a lot of people. Low rates artificially inflate prices because they make houses "affordable". Fraternite fucked around with this message at 06:48 on Apr 9, 2013 |
|
#
?
Apr 9, 2013 06:39
|
|
|
Fraternite posted:To clarify, if mortgage rates were higher, prices would be a lot lower because hundreds of thousands of people wouldn't be able to afford their payments and would be forced to exit the market, increasing supply AND decreasing demand. More can "afford" to be in the market now (i.e. can get approved for mortgages and make monthly payments) than if rates went up even a few percentage points, never mind 10% -- to say nothing about 20%. I can afford to carry a 5k credit card balance, the payments are only $75 a month! edit: But also, if bank interest rates were 7-8% and mortgage rates were 15%, you'd see that people wouldn't "invest" in real estate when they can get an easy 7-8% return. shots shots shots fucked around with this message at 07:06 on Apr 9, 2013 |
|
#
?
Apr 9, 2013 07:03
|
|
|
shots shots shots posted:I can afford to carry a 5k credit card balance, the payments are only $75 a month! That's why there's quotation marks around "afford", but that's what the banks look at and that's what an awful lot of people believe -- and that's why prices are so goddamn high. There are tons of people in the market that shouldn't be there, in my opinion. Banks aren't worried if you have zero retirement savings, or if a 3% bump in interest rates on renewal 5 years from now will kill you, or anything like that. All they're worried about is your ability to currently make payments, and that's how they figure out how much they will lend to you. And then you throw in people who buy as much house as they can to leverage gains because *obviously* the housing market always goes up, and you end up with a lot of people who can't take any sort of shock at all to their finances or they're hosed. And that's where we are now. Fraternite fucked around with this message at 17:02 on Apr 9, 2013 |
|
#
?
Apr 9, 2013 17:00
|
|
|
So if interest rates were higher, normal working class people would be able to afford houses again? Or prices would come down but still only the rich could afford them due to the interest rate?
|
|
#
?
Apr 9, 2013 17:18
|
|
|
Fraternite posted:Low rates artificially inflate prices because they make houses "affordable". Wouldn't the mortgage payment be the same even if the purchase price has a more favorable ratio to my income?
|
|
#
?
Apr 9, 2013 17:21
|
|
|
SpaceMost posted:What are the meaningful differences between a $400,000 mortgage @ 10% and a $200,000 mortgage @ 5%? (pretend my examples are in equilibrium) You're looking at it backwards- the (stupid) idea was that we should relax CMHC rules to push more money out into the system, so that people could "afford" to buy homes. Of course, it just resulted in inflationary pressure as more and more money chased limited assets around. Trying to back that out in reverse in terms of what meaningful effect it would have on an individual buyer is pointless, since an individual buyer's ability to buy was never a reasonable metric to use on a macroeconomic level. Once you have a lot of hot money sloshing around in the system, it no longer becomes just a simple calculation that looks like: X (original price) + Y (inflation caused by new money) = Z (new price); ...because humans are irrational and classical economics is Dumb and Wrong. Now you're dealing with a momentum play and sentiment, because people see a specific asset class going "up" in value, as the hidden costs remain hidden. So they pull cash from other sectors (First-Time Homebuyer's Plan being a notorious example) and pile into this hot asset class; the momentum begets momentum, because it's a "can't-lose proposition". You draw in more and more marginal buyers, until you're at a historically-abnormal ownership percentage, mostly caused by people buying something they normally wouldn't, because they think they are making money on the speculative aspect. So now the new calculation is: X (original price) + Y (inflation caused by new money) +  (speculation from marginal buyers) = Z-squared (new price);Et voila, an asset bubble. Three men are on a desert island. Two of them each have one dollar; the third has a spare coconut. Since both guys want to buy the coconut and each only have a dollar, the coconut is worth one dollar (plus a handjob or whatever they can use to sweeten the deal). One day, each of the two dollar-holders independently comes across a suitcase stuffed with cash, and now each of them has $1,000,001 dollars. Coincidentally, guess what? The coconut is now worth $1,000,001 dollars, too. Franks Happy Place fucked around with this message at 17:38 on Apr 9, 2013 |
|
#
?
Apr 9, 2013 17:31
|
|
|
Lexicon posted:Uuhhh, you guys are lobbing sentences at each other, yet, by my reading, you actually don't really disagree on anything. You both seem to be arguing a variant of the same point. I think the problem here is that he was mistaking inflation in a specific asset class for the textbook definition of systemic inflation. If you can't distinguish between the two, you are basically saying it is impossible for an asset-class bubble to develop, which I'm sure the Nobel committee for economics prizes would be thrilled to hear.
|
|
#
?
Apr 9, 2013 17:33
|
|
|
Baronjutter posted:Honest question but does anyone here own a house? I don't know a single person even in my most extended of social circles that does. No wait I do, I know a single person who moved way out to some village north of Ottawa and managed to get like a farm house or something. Everyone else, from retail workers to PHD's, all rent small apartments or a duplex at the most luxurious. I don't own a house. I know a few people who own houses, but every single one of them had family help with a down payment and/or helped them go to school.
|
|
#
?
Apr 9, 2013 17:34
|
|
|
SpaceMost posted:What are the meaningful differences between a $400,000 mortgage @ 10% and a $200,000 mortgage @ 5%? (pretend my examples are in equilibrium) I think you got the amounts and percentages backwards, right? A low mortgage amount A at a high percentage B, or a high mortgage C at a low percentage D could conceivably have the same payment for particular appropriate choices of A, B, C, D. Even if the payments are the same, the situations are not equivalent. For one thing, the latter has interest rate risk. The post-2008 ZIRP policy has gone on far longer than I or most other observers would have guessed, but still, interest rates really only have one direction to go, yet many borrowers are leveraged to the limit of their current ability to pay. By contrast, at a higher interest rate, there's reasonable chance your rate could be lower next time the renewal cycle comes up. Right now, mortgages are about as close as possible to free money - over a decade or longer horizon, it starts to look unlikely that this will persist indefinitely. Obviously this is less of an issue in the USA where you can still get 25 or 30 year loans at whatever stupidly low percentage. Not so here.
|
|
#
?
Apr 9, 2013 17:47
|
|
|
Twiin posted:I don't own a house. I know a few people who own houses, but every single one of them had family help with a down payment and/or helped them go to school. Well there's another problem. My parents got tons of help from their parents, as did most of their generations friends, but my parents generation seemed consumed by debt and financial mismanagement and only a couple "rich kids" I knew had ANY help with money for school. A lot of my friends, with boomer parents with big houses, actually worry about inheriting debt rather than assets. The worry is "I hope my parents house covers their retirement costs". It seems by the time we all pay off our student loans we'll be supporting our parents. Once again, anecdotal, but a good chunk of my friends all report the same thing. Generations of family helping the next generation, growing the family's stability and assets. Family homes being passed down, school being paid for, that sort of thing. Then suddenly with our boomer parents the chain was broken. All money went towards the biggest house they could get, the most expensive car they could get, massive consumer spending, ridiculous credit card debt, constantly re-mortgaging their house as it goes up in value rather than paying the fucker off. Ooops no retirement planning, no savings to pay for expensive care if/when they need it. Helping with school? Helping with a downpayment? Actually leaving the next generation anything? Man young people these days are so entitled! No bitterness towards boomers of course.
|
|
#
?
Apr 9, 2013 17:56
|
|
|
Lexicon posted:I think you got the amounts and percentages backwards, right? A low mortgage amount A at a high percentage B, or a high mortgage C at a low percentage D could conceivably have the same payment for particular appropriate choices of A, B, C, D. Thanks to you and Fine-able Offense for clarifying.
|
|
#
?
Apr 9, 2013 17:56
|
|
|
Fine-able Offense posted:I think the problem here is that he was mistaking inflation in a specific asset class for the textbook definition of systemic inflation. If you can't distinguish between the two, you are basically saying it is impossible for an asset-class bubble to develop, which I'm sure the Nobel committee for economics prizes would be thrilled to hear. Milton Friedman posted:Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. We're in agreement that increased demand for housing increases the price of housing, but you're wrong about the mechanism as to why.
|
|
#
?
Apr 9, 2013 17:59
|
|
|
SpaceMost posted:What are the meaningful differences between a $400,000 mortgage @ 10% and a $200,000 mortgage @ 5%? (pretend my examples are in equilibrium) It's not about the payment, it's about the cost -- and the total cost would only be the same to a buyer with 0 down. If you have saved up a $100k down payment, it goes a hell of a lot further on the $200k mortgage than the $400k one. Remember that the total cost of a house with a small mortgage is a lot less than one with a big mortgage. Fraternite fucked around with this message at 18:07 on Apr 9, 2013 |
|
#
?
Apr 9, 2013 18:03
|
|
|
dethslayer666 posted:A housing bubble is not the same as inflation. Are you trolling me? dethslayer666 posted:(Milton Friedman Quote) Yep, trolling for sure.
|
|
#
?
Apr 9, 2013 18:26
|
|
|
Well if housing prices are going up in real dollars then definitionally it's not inflation.
|
|
#
?
Apr 9, 2013 18:39
|
|
|
Dusseldorf posted:Well if housing prices are going up in real dollars then definitionally it's not inflation. It's "asset-price inflation". I even linked to an entire paper talking about it.
|
|
#
?
Apr 9, 2013 18:41
|
|
|
Fine-able Offense posted:Are you trolling me? The paper you linked deals with the link between asset prices and monetary policy, and the extent to which central banks should consider asset prices when setting policy. Asset price inflation is not the same as inflation. And if loose monetary policy leads to higher asset prices, that proves Friedman's point about inflation being a monetary phenomenon. This isn't what we're talking about either. We're talking about foreign nationals buying condos in Vancouver. This is microeconomic supply and demand models, not macroeconomic aggregate demand and aggregate supply. A foreign national buying a condo in Vancouver doesn't increase the money supply and therefore doesn't have a direct effect on inflation. This is just bickering over the definition of inflation. Unqualified (i.e. "asset price" inflation) it refers to a rise in the general level of prices, not the rise in prices of a single asset in a single market. "Asset price inflation" is not the same as inflation, or if you'd prefer inflation-inflation. Also a Google search suggests that the preferred term is "asset price bubble" or "asset price misalignment." Do you concede that I was right about the Renmenibi exchange rate?
|
|
#
?
Apr 9, 2013 19:47
|
|
|
Edit: pointless.
Franks Happy Place fucked around with this message at 20:08 on Apr 9, 2013 |
|
#
?
Apr 9, 2013 20:03
|
|
|
Baronjutter posted:Well there's another problem. My parents got tons of help from their parents, as did most of their generations friends, but my parents generation seemed consumed by debt and financial mismanagement and only a couple "rich kids" I knew had ANY help with money for school. A lot of my friends, with boomer parents with big houses, actually worry about inheriting debt rather than assets. You can't inherit debt from your parents.
|
|
#
?
Apr 9, 2013 21:34
|
|
|
Paper Mac posted:You can't inherit debt from your parents. Well debt is the wrong term, costs. Like having to go into debt to support them.
|
|
#
?
Apr 9, 2013 21:43
|
|
|
Paper Mac posted:You can't inherit debt from your parents. The Japanese offered multi-generational mortgages during their real estate boom. What better gift for your children than a sure-fire investment in real estate? Your children are richer than you think.
|
|
#
?
Apr 9, 2013 23:40
|
|
|
Persona non grata posted:The Japanese offered multi-generational mortgages during their real estate boom. What better gift for your children than a sure-fire investment in real estate? Your children are richer than you think. Jesus Christ that's a terrible idea.
|
|
#
?
Apr 9, 2013 23:43
|
|
|
SpaceMost posted:What are the meaningful differences between a $400,000 mortgage @ 10% and a $200,000 mortgage @ 5%? (pretend my examples are in equilibrium) Most mortgages are paid off on average within 11-15 years, so the extra costs due to interest are cut by a lot. Also, as I mentioned before, a big part of real estate cost increases is people chasing returns. This is especially apparent when you get a lot of immigrants from countries with poorly developed financial systems and institutions, since land is one of the few investment options open that is mostly safe from fraud and also very easy to understand. If you could invest your savings at 7%, it isn't that likely that you'd rush to buy a bunch of real estate.
|
|
#
?
Apr 10, 2013 02:10
|
|
|
According to Ben Rabidoux, Montreal now has almost as many homes on the market as Vancouver and Toronto combined. Just in case you didn't think it was a national phenomenon or anything!
|
|
#
?
Apr 10, 2013 17:37
|
|
|
Fine-able Offense posted:According to Ben Rabidoux, Montreal now has almost as many homes on the market as Vancouver and Toronto combined. I still haven't quite managed to pick my jaw up after reading that this morning. I thought for sure that the Vancouver SFH market, or maybe the Toronto condo glut was going to lead the charge into the abyss. How did Montreal manage to sneak in there so quietly? The prices out in Montreal didn't seem to be too crazy last I looked, though having lived in Vancouver for 15 years I no longer can tell. Did they over build, and the scale of it was just hidden behind Toronto's ridiculous over-development?
|
|
#
?
Apr 10, 2013 17:53
|
|
|
Fine-able Offense posted:According to Ben Rabidoux, Montreal now has almost as many homes on the market as Vancouver and Toronto combined. To recall a previous talking point: that it's so widespread nationwide supports the view that it's not predominantly foreign money bidding up the prices, in my opinion. A collective mania.
|
|
#
?
Apr 10, 2013 20:51
|
|
|
Lexicon posted:To recall a previous talking point: that it's so widespread nationwide supports the view that it's not predominantly foreign money bidding up the prices, in my opinion. I agree that it's not predominantly foreign, but you'd have to be blind not to see that the two most inflated areas in all of Canada- Richmond and the Dunbar area of Vancouver- are also attracting the vast majority of the hot money. Every bubble has it's worst locale or what have you, driven by an added element specific to that area- this one is no different. Like I said earlier, it's mostly a shame because of all the racism this will spawn, and the fact that it would have been so easily preventable with even basic currency import controls.
|
|
#
?
Apr 10, 2013 20:58
|
|
|
Fine-able Offense posted:According to Ben Rabidoux, Montreal now has almost as many homes on the market as Vancouver and Toronto combined.  e. Holy good God they have condos for sale at <$150,000 http://www.remax-quebec.com/en/inscription/M/10085615.rmx?source=centris unlimited shrimp fucked around with this message at 21:09 on Apr 10, 2013 |
|
#
?
Apr 10, 2013 21:03
|
|
|
|
| # ? May 9, 2024 22:06 |
|
|
Fine-able Offense posted:I agree that it's not predominantly foreign, but you'd have to be blind not to see that the two most inflated areas in all of Canada- Richmond and the Dunbar area of Vancouver- are also attracting the vast majority of the hot money. Well yeah. The points are not mutually exclusive.
|
|
#
?
Apr 10, 2013 21:31
|
|