mastershakeman posted:

What do canadian banks/govt use as the guideline for affordable mortgages? In the US, its an absurdly high number - there's a program called HAMP (home affordability blabla) and if you spend less than 31% of your gross monthly income on your principle, interest, taxes and insurance, it's deemed 'affordable.' It doesn't include utilities or anything else. Of course, after tax that number could well be 40-50% of the takehome income. Does Canada have a similar program/guideline?

CMHC posted:

The first rule is that your monthly housing costs shouldn't be more than 32% of your gross monthly income. Housing costs include your monthly mortgage payments (principal and interest), property taxes and heating expenses. This is known as PITH for short — Principal, Interest, Taxes and Heating.

...

The second rule is that your entire monthly debt load should not be more than 40% of your gross monthly income. Your entire monthly debt load includes your housing costs (PITH) plus all your other debt payments (car loans or leases, credit card payments, lines of credit payments, etc.). You have calculated these on the Monthly Debt Payments form. This figure is called your Total Debt Service (TDS) ratio.

Subjunctive posted:

(I wonder if Barrie residents consider Toronto emigrees to be foreign money.)

Furnaceface posted:

Yes, we do actually.

Femtosecond posted:

Vancouver's big problem is that the prices are not grounded in the local reality and local incomes. Transactions by those with incomes independent of the local situation is I think a major contributing reason for this.

Furnaceface posted:

Yes, we do actually.

Subjunctive posted:

I know they are now, I just didn't know that they were doing that before the bubble started, kicking off the bubble.

The marginal cost argument is interesting, but if it's foreign money driving marginal price up, then blocking foreign investments should kill the bubble -- or at least plateau it. I haven't heard anyone make the argument that foreign money is the only factor pushing marginal price up.

the talent deficit posted:

that graph has gone up another 60% since the right most portion

Meat Recital posted:

What happened to account for the spike in 1980-81?

Powershift posted:

14% inflation, 21% interest, and a recession. Real estate was seen as a safe place to put money.

McGavin posted:

Here's a link that explains the history of the situation in Vancouver.

Subjunctive posted:

tagesschau posted:

Of course there's not just one cause, but if you're blaming several thousand people trying to safeguard their money in Canada instead of several million households being able to borrow massive sums of money, in excess of what their income and assets would indicate, in a historically and artificially low interest-rate environment, it's more than fair to say you're missing the forest for the trees.

A lot of Canadian households will be discovered swimming naked once the tide goes out, but it'll be incorrect, tempting as it may be, to point the finger at some nebulous group of foreigners.

quote:

Nine out of 10 Vancouver houses now worth more than $1 million, study finds

VANCOUVER — More than 90 per cent of all detached homes in Vancouver are now worth more than $1 million, up from just 19 per cent a decade ago, a new study by a local urban planner has found, showing how rapidly housing prices have escalated in the Canadian city.

The biggest jump came in the last two years, with the proportion of million-dollar homes in the city climbing to 91 per cent in 2016 from just 59 per cent in 2014, according to the study by Andy Yan, acting director of Simon Fraser University’s City Program.

“This shows how what used to be the earnest product of a lifetime of local work is perhaps quickly becoming a leveraged and luxurious global commodity,” said Yan.

The median household income in Vancouver, meanwhile, rose just 8.6 per cent between 2009 to 2013, according to the most recent data from Statistics Canada. Adjusted for inflation, it would be about $77,000 a year in 2016.

That puts typical incomes well below the threshold needed to purchase million-dollar homes, said Yan, noting other factors must be driving the sharp increase in home values in Vancouver.

“It’s global cash, meeting cheap money, meeting limited supply,” he said, adding that all three factors are working to “magnify each other” and drive further speculation.

Foreign investment has long been blamed for soaring housing prices in Vancouver, with the most recent wave of offshore cash coming mostly from mainland China.

A widespread corruption crackdown launched by Chinese president Xi Jinping in late 2012 has led to massive currency outflows, which have coincided with a sharp jump in housing prices in Vancouver’s prime neighborhoods.

The new data comes as Canadian Prime Minister Justin Trudeau is in Vancouver for a two-day visit. Trudeau on Thursday said that his government needs to take measures to ensure residents of cities like Vancouver and Toronto can afford housing.

Yan’s study looked at provincial assessment data, which lags sales data by several months, and was focused exclusively on the roughly 67,000 detached homes in the City of Vancouver. All values were adjusted for inflation.

Region-wide, the price of a detached home soared 130 per cent over the last 10 years to hit $1.5 million in May, according to the local real estate board. Adding in apartments and townhomes, the typical home in Greater Vancouver now costs $889,100.

Ikantski posted:

and we get super salty at all the lakefront mansions that are vacant for 48 weeks of the year.

After sitting on the market for a few years, some professional lady from Toronto bought my parent's house in Oro last summer. Came in with contractors and paint swatches while she was doing her inspections and was going to flip it quick or some genius idea. She wanted a rush close, like 3 weeks and paid full price. Neighbours said nobody ever came to do renos. She never moved in. Never mows the grass, didn't disconnect the hoses for the winter or anything. Pretty sure my childhood home is a grow op now.

Subjunctive posted:

I look forward to the legislative balm for that.

quote:

We're Still Not Sure What Causes Big Recessions

There is an important, but quiet debate in the economics profession about what leads to big recessions: wealth or debt.

Almost everyone agrees, at this point, that the Great Recession of 2007-09 was caused by the financial system. But that leaves the question of what, exactly, happens in a financial system that leads an economy to crash. Formal economic models of financial shocks are not very realistic. They usually assume the harm comes from disruption to the banking system, which acts like a supply bottleneck that chokes off economic activity. But the Great Recession and similar episodes look very much like demand shocks, with low inflation and lots of spare capacity.

So economists are asking what kind of financial disasters have the biggest impact on demand. Roughly, the two answers are wealth effects and debt overhangs. The wealth-effects school holds that when asset bubbles pop, people suddenly feel poorer. This causes them to cut spending, which sends demand crashing. The debt-overhang school believes that people have sudden shifts in their willingness to take on debt -- when they go into balance-sheet repair mode, they stop spending.

The argument between these two schools fortunately hasn’t been very politicized (yet). But it does have important policy implications. If wealth effects are the big culprit, then taming asset bubbles becomes the central task for recession prevention. If it’s debt that does it, the key is to stop households from borrowing so much.

The main evidence for the importance of debt overhangs comes from the observation that bubbles that involve lots of borrowing seem to cause more damage when they burst. This has been confirmed -- as much as historical patterns can really be confirmed -- by economists Oscar Jorda, Moritz Schularick and Alan Taylor. That would explain why the recession following the 2000 stock-market crash was so much milder than the carnage after 2008 -- though both involved similar-sized losses of paper wealth, the latter included much more borrowing. Paul Krugman, for example, embraces this reading of history. It’s also the idea of the balance-sheet recession, popularized by Nomura economist Richard Koo.

Others beg to differ. Center for Economic and Policy Research founder Dean Baker says that the collapse in wealth was much more important than the run-up in debt. He attributes the difference between 2000 and 2008 to the fact that the latter crash was a hit to middle-class wealth, while the former affected mostly the fortunes of the rich (who are less likely to cut back spending after suffering losses).

What does the academic literature have to say on the question of wealth versus debt? One of the most famous papers, by economists Atif Mian, Kamalesh Rao and Amir Sufi, found in 2013 that the fall in housing wealth had a big negative impact on consumption. But it also found that the effects of falling wealth were stronger for more indebted households.

The paper’s authors are therefore on the fence in the debate. They say that debt is dangerous -- it enables greater speculation in boom times, which pushes prices up too much, only to fall later. They also say that debt does a poor job of insuring against risk, and can lead to costly and inefficient legal processes like foreclosure. But they stop short of endorsing the idea of balance-sheet recessions.

Other economists who have followed up on Mian et al., however, have come down more firmly on Baker’s side. For example, Greg Kaplan, Kurt Mitman and Giovanni Violante re-did Mian et al.’s analysis using publicly available data. They focused on areas where house prices declined more and checked to see if consumption fell more in those places. This team looked mainly at changes from 2006 -- before the epic housing collapse -- to 2009, the trough of the recession.

Kaplan et al. found big wealth effects on consumption. Basically, when housing prices fall, people spend a lot less. But they didn’t find that housing leverage in 2006 had a measurable effect on consumption. And unlike Mian et al., they didn’t find that it exacerbated the wealth effect. Essentially, Kaplan et al. come down solidly on the side of the wealth-effects hypothesis, and against the idea of the balance-sheet recession.

So how can we reconcile the historical finding that debt exacerbates bubbles with the microeconomic evidence that the wealth effect was the biggest factor? One possibility is that Baker is right, and that housing bubbles -- which generally involve more debt -- simply hit the middle class harder than stock bubbles. If that’s the case, it means that much of our recent focus on household leverage might be misplaced. The real task for policy makers might be not to restrain people from borrowing, but to keep their wealth from dropping precipitously. Preventing asset markets from bubbles and busts might therefore be our top policy priority to prevent a repeat of 2008.

Furnaceface posted:

Barrie is in a weird spot where average income for residents actually working here is, well, bad. As more people from Toronto move here it skews the results of the incomes in the city upwards because for some dumb reason they dont separate the income by where youre working but where you live.

namaste faggots posted:

The real task for policy makers might be not to restrain people from borrowing, but to keep their wealth from dropping precipitously. Preventing asset markets from bubbles and busts might therefore be our top policy priority to prevent a repeat of 2008.

McGavin posted:

So they're either gonna bail out everyone when the bubble pops or prevent it from popping in the first place? Awesome! Time to buy that $2 million McMansion in White Rock! Leverage me to the TITS!

Guigui posted:

Following this thread, I'm left to wonder just how much money would be at stake if a man-made catastrophe were to occur in Vancouver, causing the value of much of the properties to plummet from a million, to next to zero...


IE: If some fringe terrorist group were to get ahold of a dirty bomb and detonate it within the vancouver city core. It wouldn't create a lot of casualties, but much of the interior of the city would be unliveable for a few years (maybe save for some Radscorpions and Super-mutants) until radiation levels drop to acceptable again.

(Or if a giant alien spacecraft hovered above the city, and constantly broadcasted this on loudpseakers 24/7)
http://www.somethingawful.com/hosted/firemancomics/mygoodness.htm

quote:

Agent of change

Evan Siddall, president and CEO of Canada Mortgage and Housing Corp., on shaking up a public institution

Midway through lunch in downtown Toronto, Evan Siddall offers up an unexpected insight coming from someone who runs a federal housing regulator.

“Houses are a hassle,” says the president and CEO of Canada Mortgage and Housing Corp. over mushroom pizza and decaf Americano. Then, catching himself, he demurs: “The head of CMHC shouldn’t say that.”

Years before finding his way into the public sector, Mr. Siddall was a rising star in the investment banking world with a large home in Toronto, a Muskoka cottage and a winter cabin. These days, the head of Canada’s housing agency owns little in the way of real estate.

He and his wife sold their Toronto laneway house last year. Mr. Siddall, 51, rents in Ottawa and usually commutes to meetings in Toronto from his home in Collingwood, Ont., where his wife, fellow former investment banker Garnet Pratt Siddall, now heads craft brewery Side Launch Brewing Co. In fact, Mr. Siddall has chosen the restaurant, Pizzeria Libretto, in part because it serves his wife’s beer.

I ask the man in charge of steering Canada’s uneven housing market through turbulent economic waters whether he thinks houses are a good financial investment.

“You know, I’m not sure they are now in Canada,” he replies. “I’ve never made a lot of money in the housing market, strangely enough, even though my generation has, and I’ve lived in New York and I’ve lived in Toronto.”

Mr. Siddall’s opinion seems less surprising if you consider that, since being hired in 2014 to run CMHC, he has been tasked with pouring buckets of ice water on housing markets in B.C.’s Lower Mainland and Southern Ontario that refuse to cool down amid historically low interest rates.

Once an organization that largely toiled in obscurity, CMHC has been thrust into the spotlight by a global financial crisis precipitated in part by “irrational exuberance” about the infallibility of residential real estate prices.

Canada managed to avoid the worst of the meltdown, but now there are mounting concerns that the country is in the midst of its own housing bubble, prompting questions about whether taxpayers are shouldering too much of the risk by backstopping CMHC’s mortgage insurance and securitization businesses.

Mr. Siddall is not indifferent to those concerns. “There are things that keep me up at night all the time,” he says. “We run a half-trillion dollars of risk, and I don’t want to be the [first] CEO of CMHC who experiences a loss.”

Mr. Siddall arrived at CMHC after a two-year stint at the Bank of Canada as a special adviser to Mark Carney, a long-time friend. He says he came to the agency without any preconceived notions, though he was attracted by former Conservative finance minister Jim Flaherty’s comments that the Crown corporation had grown too grand and needed to be refocused.

While much of the work to reform CMHC predates Mr. Siddall, under his watch the agency has scaled back its mortgage-default insurance business and curbed risks in the housing market, most recently tightening rules by raising minimum down payments.

He has also continued to shrink CMHC’s share of the mortgage insurance market, from as high as 90 per cent during the depths of the financial crisis to slightly above 50 per cent today. Two successive hikes in CMHC’s mortgage-insurance premiums were aimed at giving the agency’s private-sector competitors an advantage.

Mr. Siddall envisions CMHC’s market share falling no lower than 40 per cent: Too large a share, he says, and CMHC would have trouble scaling up in a crisis; too small and CMHC might struggle to fulfill its mandate to be a truly national insurer and remain profitable. It makes between $1.5-billion and $2-billion a year in profit.

He has also sought to make CMHC more transparent, publishing a slew of housing market research as well as quarterly updates of its mortgage insurance and securitization businesses.

But of all the changes, Mr. Siddall seems most enthusiastic about orchestrating a major internal shakeup of the organization he says had become overly bureaucratic and reflexively defensive to criticism. Since 2014, CMHC has laid off 200 employees, reassigned 500 others and added staff on its research, policy and risk management side.

The moves were not driven by government cost-cutting measures, he says, but by a need to reassert CMHC’s central role in shaping Canada’s housing market strategy.

“We had lost our seat at that table from a policy-making point of view,” he says. “By thinking more profoundly and deeply about the role we could play as a public-policy tool, we’ve regained the credibility of having a seat at the table.”

As an example, he describes past changes to mortgage insurance rules as having been imposed on CMHC from above, while hikes to minimum down payments and other changes announced in December were more collaborative efforts. “The dialogue has changed,” he says.

Still, he sees more work to be done. Mr. Siddall has been a vocal proponent of “risk-sharing” for lenders who rely on CMHC’s mortgage insurance. He also thinks the agency may need to do more to reform its portfolio insurance business, which allows lenders to insure “low-ratio” mortgages, those with at least 20 per cent equity.

The program, which exploded in popularity in the aftermath of the financial crisis, has given lenders a taxpayer-subsidized form of cheap financing and, increasingly, a way around regulatory capital requirements by allowing them to hold what regulators consider to be risk-free insured mortgages on their balance sheets.

This year, however, he is spearheading what is likely to be CMHC’s most politically sensitive exercise: tackling the issue of foreign investment in Canada’s housing market.

Mr. Siddall admits he hasn’t worked out his own stance on the contentious issue. On one hand, he’s worried about the potential for money laundering through the real estate market and also whether an influx of foreign cash could distort CMHC’s economic models, which are premised on the idea that housing markets have historically responded to changes in the local employment, not distant economies.

“To the extent that more and more of that is non-Canadians, then the assumptions about how that model works are a little bit wrong – or maybe a lot wrong,” he says. “So that’s a big concern of mine.”

On the other hand, he considers some of the dialogue around foreign buyers to have elements of xenophobia and nationalism. “We get close to dangerous territory if we start discriminating based on people’s ethnicity or nationality,” he says. “Some of the subtext here is that, which is very un-Canadian.”

Mr. Siddall himself is the child of an immigrant – his father came to Canada from England in 1957. Born in Toronto, he was one of three boys raised in Georgetown, Ont.

By his estimation he has enjoyed a charmed existence. “My life is full of dumb luck, lots of dumb luck,” he says. “Look, I was born white, male, Canadian, able-bodied and in full possession of my mental faculties. I could only screw it up.”

He attended the University of Guelph, playing football and studying management economics, and later getting a law degree. After school, he joined brokerage Burns Fry, which eventually became BMO Nesbitt Burns, getting his first taste of public-sector life as an adviser on CN Rail’s privatization in the early 1990s.

When he joined CMHC nearly 20 years later, he worried his work on a high-profile government privatization might affect his reputation at a time when politicians were musing about privatizing the housing agency itself.

“I was afraid of that when I started,” he said. “First of all I was an investment banker. Secondly, if people saw I’d been involved in the privatization of a major Crown corporation, the employees would say, ‘Oh, here he comes.’”

(Mr. Siddall calls privatization an “interesting benchmark” but advocates against it for CMHC. “I don’t think what we do is privatizatable,” he says, “because we’re an instrument of public policy.”)

His work on CN’s public offering got Mr. Siddall noticed by Goldman Sachs, which also worked on the deal. He took a job with the bank in New York, where he met his wife and first crossed paths with Mark Carney. As fellow Canadians, they socialized, chatted policy and briefly shared a client, Ballard Power Systems.

His morning route from his home in Tribeca to Goldman’s offices normally took him past the World Trade Center. But thanks to his “dumb luck,” Mr. Siddall was at Newark airport waiting for a flight to Montreal when terrorists attacked on Sept. 11, 2001.

Mr. Siddall returned to Canada in 2002, recruited as managing director of the Canadian arm of investment bank Lazard. In yet another instance of impeccable timing, he resigned from Lazard the Friday before Lehman Brothers filed for bankruptcy in 2008, and took a job as a senior executive at Irving Oil, commuting between the company’s offices in Toronto and Saint John until his departure in 2010.

That move landed him in the middle of an acrimonious split between Irving family members that culminated in CEO Kenneth Irving leaving the company in 2010. The family’s divisions were obvious to senior managers, though Mr. Siddall says the breakup was being done “amicably” and with professionalism: “I just didn’t want to get anything on me,” he says. “So I left.”

It was around that time that he met up with Mr. Carney for a chat at Balzac’s, a coffee shop in Toronto’s Distillery District. By then, Mr. Carney was Canada’s rock-star central banker and was heading up the international Financial Stability Board.

“I said to him, ‘So, two years on, what have you big brains done to solve the financial crisis and prevent it happening again?’” Mr. Siddall says. “And Mark in his classic way leans across the table to me and he says: ‘We’re working on it. What have you done?’”

Mr. Siddall joined the Bank of Canada in early 2012 as a special adviser to Mr. Carney, working on a “bail-in” proposal for major banks.

When Mr. Carney left to run the Bank of England, Mr. Siddall planned to return to finance, but Mr. Carney once again intervened. “He says ‘not so fast, you kind of like this public sector stuff,’” Mr. Siddall recalls. “And truthfully, I did. Funny, I didn’t even realize then how much.”

His CMHC appointment runs for another two years, though Mr. Siddall is already in talks with the board about a possible extension.

That conversation continues despite a rare setback in Mr. Siddall’s lucky streak. Two years ago, he began to notice that his left hand would shake when he yawned and left leg began to flex when he was cycling. He was diagnosed with early-onset Parkinson’s disease last year, and is now on medication to control his symptoms.

The diagnosis has made him more diligent about exercising and getting enough sleep. But it has otherwise done little to slow him down. An avid cyclist, he launched a charity bike ride in Collingwood that last year raised $200,000 for Parkinson’s research.

“It’s been kind of a dose of perspective,” he says. “I do reflect on how lucky I am. If this is the worst thing that happens to me, life’s pretty good.”

peter banana posted:

are HELOCs going to have a knock on effect and possibly burst this bubble? Do you have to pay your HELOC back or does it just come right out of your equity and it gets paid back as you pay your mortgage back? Not paying a HELOC and having essentially a second mortgage on your house could make the situation even more precarious. I read an article from 2011 that said 11% of people signed one without even reading the papers.

peter banana posted:

are HELOCs going to have a knock on effect and possibly burst this bubble? Do you have to pay your HELOC back or does it just come right out of your equity and it gets paid back as you pay your mortgage back? Not paying a HELOC and having essentially a second mortgage on your house could make the situation even more precarious. I read an article from 2011 that said 11% of people signed one without even reading the papers.

Ultimate Shrek Fan posted:

So the lovely Canadian Forces gave me my stupid loving pension money that I paid in back as a locked in rrsp. Is there any way I can use the stupid piece of poo poo awful locked in rrsp for the first time home buyers plan?

In short gently caress locked in rrsps

namaste faggots posted:

From the Canadian finance thread lmao

Yeah gently caress saving your money #yolo because it feels good right micjeyfinn

Ultimate Shrek Fan posted:

A close family friend offered me a building lot for a 1/3rd of the value before he puts it on the market. And I'm not going to be 65 for another 39 years there's still plenty of time to save for the three months I live after I hit 65.

cowofwar posted:

So where does the money come from to build the house after tapping everything to buy the land?