Canada Housing/Debt: Trust me, I'm a landlord.

The Something Awful Forums > Discussion > Debate & Discussion > Canada Housing/Debt: Trust me, I'm a landlord.

Precambrian Video Games: Aug 19, 2002; Can't post for 5 hours!

So household spending increases were the greatest contributor to GDP growth and were basically funded by a decrease in the household savings rate. I'm sure this is totally sustainable guys.

# ? Aug 29, 2014 14:48

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# ? May 22, 2024 00:30

Grand Theft Autobot: Feb 28, 2008; I'm something of a fucking idiot myself

I don't know what you're concerned about. As I recall it, in the US in the 1920's increasing standards of living were mostly funded by a rapid swelling of consumer credit and decreased household savings, and that just continued uninterrupted forever.

# ? Aug 29, 2014 16:02

Antifreeze Head: Jun 6, 2005; It begins; Pillbug

peter banana posted:

I like the "WIN AN INCOME PROPERTY WORHT OVER $60,000!!!!!"

Man, I'd love to see what $60k for an "income property" gets you these days.

If you're older than 35, you need to have some property in order to become a senator, which is a job and that means you would have an income, therefore it is an income property.

# ? Aug 29, 2014 17:57

Professor Shark: May 22, 2012

Grand Theft Autobot posted:

I don't know what you're concerned about. As I recall it, in the US in the 1920's increasing standards of living were mostly funded by a rapid swelling of consumer credit and decreased household savings, and that just continued uninterrupted forever.

Heh, I'm not sure if your textbooks went up this high, but you're missing out on a very important period of history where this was actually disastrous to the world. They called it the Great Depression, and people had to light oranges on fire, truckers gave large tips to the ones that didn't need it, and men drank from women's breasts because there was so little food :smuggo:

# ? Aug 29, 2014 17:58

namaste friends: Sep 18, 2004; by Smythe

Professor Shark posted:

Heh, I'm not sure if your textbooks went up this high, but you're missing out on a very important period of history where this was actually disastrous to the world. They called it the Great Depression, and people had to light oranges on fire, truckers gave large tips to the ones that didn't need it, and men drank from women's breasts because there was so little food

bro, it was (pretty hilarious) sarcasm

# ? Aug 29, 2014 18:14

Professor Shark: May 22, 2012

Cultural Imperial posted:

bro, it was (pretty hilarious) sarcasm

# ? Aug 29, 2014 20:34

namaste friends: Sep 18, 2004; by Smythe

http://www.financialpost.com/m/wp/n...date=2014-08-31

No one really knows if the foreigners have any effect on the canadian housing market. Surprise canadians are dumb as poo poo.

# ? Aug 31, 2014 20:03

namaste friends: Sep 18, 2004; by Smythe

Attention SJWs, don't click on this or read it at all because it's from a ~neoliberal source and not socialist people's revolution weekly or whatever.

http://www.economist.com/news/finan.../pe/frothyagain

quote:

BEFORE the financial crisis of 2007-08 low long-term interest rates fuelled an extraordinary house-price boom around the world. That bubble was pricked in the crisis and subsequent recession. Since then, however, central banks� attempts to crank up the recovery by pushing down long-term interest rates to new lows have had a predictable consequence in many property markets. House prices are now rising in 18 of the 23 economies that we track, in eight of them at a faster pace than three months ago (see table).

There remain some weak spots, especially in Europe. Prices in Spain, which had one of the biggest bubbles before the crisis, are still falling. They have also been declining in France and Italy, reflecting continuing economic weakness in the euro zone�s second- and third-largest economies. In contrast, housing markets are buoyant in some northern European countries, notably Britain.
Since some recovery was bound to occur after the housing slump, how worrying are the renewed signs of exuberance? To assess whether house prices are at sustainable levels, we use two yardsticks. One is affordability, measured by the ratio of prices to income per person after tax. The other is the case for investing in housing, based on the ratio of house prices to rents, much as stockmarket investors look at the ratio of equity prices to earnings. If these gauges are higher than their historical averages then property is deemed overvalued; if they are lower, it is undervalued.

Based on an average of these measures, houses are at least 25% overvalued in nine countries. Judged by rents, the most glaring examples are in Hong Kong, Canada and New Zealand. The overshoot in these economies and others bears an unhappy resemblance to that prevailing in America at the height of its boom before the crisis.

Following an agonising housing slump, America�s property market now looks in good shape. Prices are rising again, but there are few signs yet of history repeating itself. Although low borrowing rates are supporting the market, frothiness seems to be confined to some cities such as San Francisco where the supply of new homes is especially curtailed. This forms part of a broader tendency for property markets to be especially bubbly in big cities, particularly capitals such as London.

With global monetary conditions so loose, governments are using regulatory tools to cool overheated housing markets. In Canada, for example, the maximum term of the riskiest mortgages has been lowered from 40 to 25 years. Regulators in both Hong Kong and Singapore have repeatedly raised stamp duties and tightened lending restrictions. The measures seem finally to be working, especially in Singapore, where prices are now falling.

China�s market is on the turn. Though prices are still higher than a year ago they have edged down over the past three months. Developers are cutting back as a glut of newly-built homes has swamped the market. Since property and construction make up 13% of GDP, a big fall would pose trouble for the economy. But that may be contained since Chinese homebuyers have to chip in big deposits while the government has the fiscal capacity to prop up the market if things turn really nasty.

# ? Aug 31, 2014 20:07

Professor Shark: May 22, 2012

Cultural Imperial posted:

Attention SJWs, don't click on this or read it at all because it's from a ~neoliberal source and not socialist people's revolution weekly or whatever.

You don't need to provide warnings for your sources, we just use your avatar as a system.

# ? Aug 31, 2014 20:25

tagesschau: Sep 1, 2006; D&D: HASBARA SQUAD
THE SPEECH SUPPRESSOR

Remember: it's "antisemitic" to protest genocide as long as the targets are brown.

Hey, now we've got Australia and New Zealand joining the bubble club.

# ? Sep 1, 2014 18:11

Franks Happy Place: Mar 15, 2011; It is by weed alone I set my mind in motion. It is by the dank of Sapho that thoughts acquire speed, the lips acquire stains, stains become a warning. It is by weed alone I set my mind in motion.

Professor Shark posted:

You don't need to provide warnings for your sources, we just use your avatar as a system.

If you don't have him on ignore by now you are doing this thread wrong.

# ? Sep 1, 2014 18:48

namaste friends: Sep 18, 2004; by Smythe

http://www.moneysense.ca/columns/did-i-just-make-a-big-mistake-by-buying-a-house

quote:

A few weeks ago�after spending much of the last decade warning readers against the perils of Canada�s overheated housing market�I did the unthinkable: I bought a place. When I told MoneySense investing columnist Norm Rothery, he was dismayed. Didn�t I know that homes in Toronto are way overpriced? Why would any sane person pay such a ridiculous sum for such a tiny shack?

He has a point. Canadian homes are indeed rather pricey by almost any measure: the cost of buying versus renting, historical house price trends, even by basic affordability measures. I have predicted several times that the market is due for a nasty 20% correction. So how could I�a happy renter for many years�suddenly turn around and squander my life savings on an overpriced pile of bricks?

The reason is simple: I want to eventually retire with a paid-off house, and I was running out of time. Besides, I don�t see my house as an investment, as a means to an end. It�s a purchase�it�s what I�ve been saving my money for. But I haven�t completely lost my mind. I did do some risk analysis before buying. If you�re wondering whether your house purchase is at risk, read on for three easy tests to find out how safe you really are.

Can you afford it? Rather than assuming I could afford my house because they approved my mortgage, I decided to subject my finances to a more rigorous test recommended by the Globe and Mail�s Rob Carrick. He advises that you take your after-tax monthly income and subtract not only the mortgage payment on your new house, but all of your other non-discretionary monthly payments, such as property taxes, utilities, car loan payments, daycare fees, home maintenance costs, and even 10% for retirement savings. If the percentage of your income consumed by those costs is 75% or less, you can do it. If not, you�re taking a risk. (For the record, I passed.)

What happens if house prices plunge? I still think we could see house prices drop by 20% in the medium term, so I decided to model what would happen if they did. I�m not planning to sell for at least 20 years, so I�m not concerned about my home�s short-term resale value. My big concern is ending up �under water.� That�s what happens if your house price drops so dramatically you owe more on your mortgage than your house is worth. Because your bank views your house as collateral for its loan, you could have trouble renewing your mortgage. The solution was a cushion in the form of a large down payment. If you make a down payment of 20%, you can withstand a 20% drop without any issues, and as a bonus, you don�t have to pay CMHC mortgage insurance either.

What if interest rates suddenly jump? The last big risk is a hike in rates. You can protect yourself in the short term by taking out a fixed-rate mortgage. (Mine was the standard five-year fixed variety.) But eventually you have to renew, and rates could be much higher by then. So I visited an online mortgage rate calculator and looked at what my monthly payments would be if rates doubled. I could still afford my payments, but I could see rates going even higher, so I plan to aggressively pay down my mortgage with pre-payments (extra payments) over the next five years to give myself some wiggle room.

So do I feel like I got a good deal on my house? Not at all. By historical measures, I overpaid by quite a bit. But it was either that or no house at all, and I don�t regret my decision�in fact I love my new house. Of course, now that I�ve finally bought, house prices are sure to plunge, but the important thing is I�ll be okay if they do.

I love how houses aren't held to the same standard of scrutiny when ascertaining affordability. It's the only consumer good out there where you can justify measuring affordability by your ability to service the debt. This guy has admitted that the house is so expensive that he has convinced himself that it isn't an investment and it's ok to spend a shitload of money on it because he's buying it for the right reasons (whatever the gently caress they might be). loving dumb rear end

e: great rebuttal

http://www.holypotato.net/?p=1261

quote:

Let�s replace �house� with some other thing that isn�t so loaded and traditionally linked with a mortgage and the point should be clearer: �I want to eventually retire with a paid-off boat.� Well now it�s clearer: you could buy a boat now with a boat loan and pay it down, or you could rent a boat, save up, and buy one with cash when appropriate. That makes even more sense if you think there�s a good chance boats might be 20% cheaper in the future and that renting is less expensive for now � how does buying now make sense if your goal is to have one at some point before retirement? If there was a big boat sale on then maybe it would make sense to take the plunge and get a loan if you needed to. Instead, it looks like many buyers these days are getting suckered by the no interest until 2018 promotional event.

This whole �running out of time� thing reminds me of the Stockdale Paradox*: James Stockdale was in a POW camp in the Vietnam war for almost 8 years. When asked about his coping strategy, he said:

�I never lost faith in the end of the story, I never doubted not only that I would get out, but also that I would prevail in the end��

When asked who didn�t make it out of Vietnam, Stockdale replied: �Oh, that�s easy, the optimists. Oh, they were the ones who said, �We�re going to be out by Christmas.� And Christmas would come, and Christmas would go. Then they�d say, �We�re going to be out by Easter.� And Easter would come, and Easter would go. And then Thanksgiving, and then it would be Christmas again. And they died of a broken heart.�

The paradox is that you have to believe in the fundamentals, that sanity will return. Trust the math, trust the logic, and trust that you will prevail in the end, but do not be too optimistic � the unrealistic hope for short-term salvation that is dashed again and again will wear you down and end you over time. You need to live in the gritty reality we face. When the bubble first started becoming a �popular� concern around 2008, some were calling for corrections to be as fast or faster than the US, especially given that we had the opportunity of witnessing their meltdown as a kind of sneak preview. I always figured it would be a slow, grinding process � but even I have been greatly surprised by how long the insanity has gone on for, originally pegging 2012 as the timeframe to be prepared to wait (4-5 years). The differences between the US and Canada that people loved to point out (such as how subprime lending was arranged, or non-recourse states) were largely differences of accelerating factors. It would make a Canadian implosion a painful, drawn-out affair compared to the US�s relatively fast (but still multi-year) implosion, but did not immunize us from a bubble.

Christmas has come and gone, and Easter too, but that does not mean that prices will continue to grow at triple the rate of inflation forever until only the Pentaverate** can buy in Toronto.

That�s why I focus so much on the price:rent metric and rent-vs-buy comparison: you have to live somewhere, so you may as well settle in somewhere nice because it�s gonna be a while. Even after the crash, it�s likely that there will be an undershoot in prices that will last for years, so you�ll have plenty of time to dance out of a stock portfolio. Of course you invest it.

namaste friends fucked around with this message at 01:50 on Sep 2, 2014

# ? Sep 2, 2014 01:46

computer parts: Nov 18, 2010; PLEASE CLAP

tagesschau posted:

Hey, now we've got Australia and New Zealand joining the bubble club.

I've been hearing about Australia being in a bubble for like 2 years now.

# ? Sep 2, 2014 13:59

Precambrian Video Games: Aug 19, 2002; Can't post for 5 hours!

computer parts posted:

I've been hearing about Australia being in a bubble for like 2 years now.

... so?

# ? Sep 2, 2014 15:51

computer parts: Nov 18, 2010; PLEASE CLAP

eXXon posted:

... so?

That's not really "joining".

# ? Sep 2, 2014 15:52

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

http://datarific.blogspot.ca/2014/08/we-are-not-resource-economy.html

quote:

We Are Not A Resource Economy!!
Read any newspaper, switch on BNN or just listen to anyone talking about the Canadian economy and you are sure to come away with the idea that Canada relies on the Mining & Energy sectors. The numbers, as always, tell a different story. The monthly GDP figures released by StatCan show that we spend a disproportionate amount of time talking about the resource sector, when in fact, it is not the 1st or even 2nd component of our economy. It is actually, #3 on the list.

The largest component of our GDP is actually...Real Estate!
Real Estate and it's associated activities (leasing, agents, renting etc) makes up 12.6% of our GDP. The resource sector doesn't even touch the 10% mark. Even Manufacturing, the oft discounted as a lost sector, is bigger than resources (and thus it's decline should be a cause for concern).

We're not a mere resource economy you guys! :toot:

# ? Sep 2, 2014 16:02

namaste friends: Sep 18, 2004; by Smythe

Good to hear we have a strong diversified economy.

# ? Sep 2, 2014 16:36

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Cultural Imperial posted:

Good to hear we have a strong diversified economy.

I'm struggling to understand how real estate can be an economic driver on its own as opposed to a natural consequence of robust other economic activity (as occurs in the Bay Area, for example).

e.g. It's not uncommon to hear the logic "real estate is doing well, so we have a robust economy" when it seems to me that the converse is the only thing that could possibly make sense as a statement.

# ? Sep 2, 2014 17:53

sbaldrick: Jul 19, 2006; Driven by Hate

Lexicon posted:

I'm struggling to understand how real estate can be an economic driver on its own as opposed to a natural consequence of robust other economic activity (as occurs in the Bay Area, for example).

e.g. It's not uncommon to hear the logic "real estate is doing well, so we have a robust economy" when it seems to me that the converse is the only thing that could possibly make sense as a statement.

Home building creates a ton of jobs, which drives demand, drives up prices as the construction workers can afford to buy houses and etc. Home construction is one of the few full cycle industrial activities left.

That said the reason the US, Ireland, Spain are and where so hosed is so many people worked in construction that a slow down of building caused layoffs which caused missed mortgages and foreclose that rippled into the rest of the economy.

# ? Sep 2, 2014 18:15

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

sbaldrick posted:

Home building creates a ton of jobs, which drives demand, drives up prices as the construction workers can afford to buy houses and etc. Home construction is one of the few full cycle industrial activities left.

That said the reason the US, Ireland, Spain are and where so hosed is so many people worked in construction that a slow down of building caused layoffs which caused missed mortgages and foreclose that rippled into the rest of the economy.

But doesn't that ultimately just borrow demand from the future if there's not an underlying economy to support it? I simply don't see how house trading and house building can be causal of a strong economy. I can see how it is a consequence of one.

# ? Sep 2, 2014 18:50

namaste friends: Sep 18, 2004; by Smythe

I think it's been policy to shift focus on stimulating FIRE in order to hold Canada over until the US (and the rest of the world) recovered. As to how it'd land softly, I don't think anyone really cared back in 2008.

# ? Sep 2, 2014 20:06

Rutibex: Sep 9, 2001; by Fluffdaddy

Lexicon posted:

But doesn't that ultimately just borrow demand from the future

This is how capitalism works and why debt must always increase. Workers must be paid less than the product of their labor for profit to exist; so you have to steal demand from the future if you want there to be enough money around to pay for the products of today.

# ? Sep 3, 2014 13:19

peter banana: Sep 2, 2008; Feminism is a socialist, anti-family, political movement that encourages women to leave their husbands, kill their children, practice witchcraft, destroy capitalism and become lesbians.

Welp, I heard the craziest condo purchase plan from a coworker yesterday. He bought a condo in Thornhill, ON based off of plans and spec (he brought it up because he drove past the site on the weekend and they had broken ground!) which will be move in ready in January 2016. Instead of coming to the developer with a down payment he said, "I paid $5000 down, and I'll pay $1200 a month until move-in towards the down payment! What a great purchase plan!"

But don't worry guys, the housing bubble in Canada is "different this time."

# ? Sep 3, 2014 13:38

namaste friends: Sep 18, 2004; by Smythe

Haha holy poo poo

# ? Sep 3, 2014 13:58

namaste friends: Sep 18, 2004; by Smythe

https://twitter.com/BenRabidoux/status/507220024596377601

quote:

#Vancouver's real estate market continues to firm with sales up sharply while new and active listings fall.

# ? Sep 3, 2014 18:35

Bip Roberts: Mar 29, 2005

peter banana posted:

Welp, I heard the craziest condo purchase plan from a coworker yesterday. He bought a condo in Thornhill, ON based off of plans and spec (he brought it up because he drove past the site on the weekend and they had broken ground!) which will be move in ready in January 2016. Instead of coming to the developer with a down payment he said, "I paid $5000 down, and I'll pay $1200 a month until move-in towards the down payment! What a great purchase plan!"

But don't worry guys, the housing bubble in Canada is "different this time."

I wonder if they delay opening the condo if he just keeps on paying $1200 a month forever?

# ? Sep 3, 2014 19:01

cowofwar: Jul 30, 2002; by Athanatos

Manufacturing and resource extraction generates incomes for many people which drives consumption.

Credit generates incomes for many people which drives consumption.

Capitalism requires consumption so in the absence of the former I guess the government can print money to drive the latter.

# ? Sep 3, 2014 20:08

Isentropy: Dec 12, 2010

Professor Shark posted:

Heh, I'm not sure if your textbooks went up this high, but you're missing out on a very important period of history where this was actually disastrous to the world. They called it the Great Depression, and people had to light oranges on fire, truckers gave large tips to the ones that didn't need it, and men drank from women's breasts because there was so little food

Just this morning I was at work and saw a front-page article talking about the labour shortage in ~~California~~ Alberta ~~picking oranges~~ doing basic labour

# ? Sep 3, 2014 22:18

Professor Shark: May 22, 2012

Isentropy posted:

Just this morning I was at work and saw a front-page article talking about the labour shortage in ~~California~~ Alberta ~~picking oranges~~ doing basic labour

Let's all hope into our cars and journey there, fellow Mary's!

# ? Sep 4, 2014 02:16

computer parts: Nov 18, 2010; PLEASE CLAP

Rutibex posted:

This is how capitalism works and why debt must always increase. Workers must be paid less than the product of their labor for profit to exist; so you have to steal demand from the future if you want there to be enough money around to pay for the products of today.

This is only true if the laborers are directly buying the things they make. You can have a bunch of laborers that build a rich guy's house, and they can still be paid enough to afford a modest house (though often they aren't).

Also there's a question of scale - for a factory worker, if they get paid X to make a thousand toys, they don't have to buy a thousand toys (nor do they really have the inclination to), they just need one or two of them, if any.

# ? Sep 4, 2014 02:21

namaste friends: Sep 18, 2004; by Smythe

https://businessincanada.com/2014/09/04/canada-trade-balance-july-big-surplus/

Canada's exports are doing really really really well.

# ? Sep 4, 2014 15:01

sbaldrick: Jul 19, 2006; Driven by Hate

Lexicon posted:

But doesn't that ultimately just borrow demand from the future if there's not an underlying economy to support it? I simply don't see how house trading and house building can be causal of a strong economy. I can see how it is a consequence of one.

At one point during the start of the boom there was a huge demand for housing after mass scale building stopped in the late 70's/early 80's. While building did go on it wasn't to the scale that went on from about 1995 to 2008 or so in the US and is still going on today in Canada. At least some of that building was pent of demand from the economy that snowballed boosting the economy as a whole. So yes, at least 5 or 6 years of building was supply/demand building.

If you take a look at my city of Ottawa at least 300,000 people now live in areas of the city that didn't exist in 1995 (that is by the way a lowball estimate of population change in Ottawa-Gatineau)

# ? Sep 4, 2014 20:09

Precambrian Video Games: Aug 19, 2002; Can't post for 5 hours!

Cultural Imperial posted:

https://businessincanada.com/2014/09/04/canada-trade-balance-july-big-surplus/

Canada's exports are doing really really really well.

That's two quarters in a row of strong exports to Europe. Harper will surely take credit for implementing the still-unapproved CETA.

How does this relate to the housing bubble though?

# ? Sep 4, 2014 20:14

namaste friends: Sep 18, 2004; by Smythe

It means the loonie will keep going down which means inflation may accelerate. If this keeps happening we might see an increase in interest rates sooner rather than later.

This is all supposed to balance out with employment increasing and salaries increasing, however you can't export houses or any other FIRE products. I don't really see how this will help the largest contributing sector of the GDP as housing completion ramps up.

Maybe some of the pros can weigh in on this.

namaste friends fucked around with this message at 23:59 on Sep 4, 2014

# ? Sep 4, 2014 23:55

ocrumsprug: Sep 23, 2010; by LITERALLY AN ADMIN

The odd bit is that exports increased at the same time as unexportable industries became larger pieces of the GDP pie. Is there any explaination for the seeming contradiction?

# ? Sep 5, 2014 00:44

Pixelboy: Sep 13, 2005; Now, I know what you're thinking...

JawKnee posted:

The horror!

CI, has Seattle imploded yet from the $15 minimum wage?

I believe we have a phase in period....

# ? Sep 5, 2014 01:46

Precambrian Video Games: Aug 19, 2002; Can't post for 5 hours!

Cultural Imperial posted:

It means the loonie will keep going down...

What, just because of a trade surplus? That seems backwards.

Also, most of the increase was still from exports to the US. So if the US economy recovers at a similar pace and the price of oil doesn't drop much further, why should CAD keep falling?

# ? Sep 5, 2014 02:09

namaste friends: Sep 18, 2004; by Smythe

eXXon posted:

What, just because of a trade surplus? That seems backwards.

Also, most of the increase was still from exports to the US. So if the US economy recovers at a similar pace and the price of oil doesn't drop much further, why should CAD keep falling?

http://www.frbsf.org/education/publications/doctor-econ/1999/october/trade-deficit-import-export-imbalance-currency

e: edited for snark

namaste friends fucked around with this message at 02:21 on Sep 5, 2014

# ? Sep 5, 2014 02:19

Precambrian Video Games: Aug 19, 2002; Can't post for 5 hours!

But the article you posted was about a record trade surplus :psyduck:

# ? Sep 5, 2014 02:29

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# ? May 22, 2024 00:30

namaste friends: Sep 18, 2004; by Smythe

eXXon posted:

But the article you posted was about a record trade surplus

I'm not sure what you mean.

# ? Sep 5, 2014 02:48

The Something Awful Forums > Discussion > Debate & Discussion > Canada Housing/Debt: Trust me, I'm a landlord.

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