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?
One hundred percent.
This isn’t just some overvalued tulip in need of a correction. People need homes and can’t afford to exit the housing market entirely. If people can’t afford housing, that means they can’t really afford anything. Expect the economy to have collapsed. Wages and employment will be down. Home ownership will decline.
Only those with capital to ride out a bumpy economy will be able to snatch up the cheap housing.
The solution to our housing crisis is not to tank the economy. The solution is to tackle the supply of housing, income inequality, and corporate equity in residential real estate.
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.
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.
Except in the US it brought prices back down to “normal” levels. Their were still expensive but they remained more affordable than here.
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.
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!
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).
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.
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.
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.
Even though I had to pay though the nose to buy a house years ago, I hope for a crash so that people are not screwed forever more.
What I find really odd is the commercial market in smaller towns, its cheap as shit.
Crashes only hurt regular people. People who have money/capital can wait it out and then buy even more housing to make the bubble bigger next cycle.
source: lived through 2008 and that fucking sucked
Same and I don’t think a housing crash would hurt just the poor like say a 2008 style crash (it would still hurt the poor because everything does). I also don’t think there is any other option other then a crash, things are too out of hand bubble wise. It would be cool if someone in power could get crazy serious about the issue but there is no will and it is likely to late.
I don't think a housing crash would hurt just the poor like say a 2008 style crash
How about you expand on your ideas a bit, because I could say I don’t believe in a lot of things without explaining why and that wouldn’t make me right.
No politicians want to tackle the issue because we’re the ones who guarantee risky mortgages through the CMHC.
The downtown strip of the town I grew up in (about 2hrs from Toronto) is a ghost town. I doubt retailers want to risk starting a lease on a commercial property when in many situations, brick&mortar isn’t much of an asset.
That is the crazy part I am talking full on buying not renting. I run a few stores in more rural areas and my company just bought the building because the owner would not rent/lease to us but would sell it for less then you could buy a shed for.
I guess it is crazy you could buy a storefront in a small town for much less then a house in a small town (maybe a protip?).
Because there’s zero opportunity in small towns. Another major issue with Canada right now
Remote work is a thing now and small towns = smaller mortgage so you don’t need to shop for a job with the same salary as you would in the city…
I’m shopping for a house in a small town at the moment and I’m finding things as low as 200k and I just sold my one bedroom condo (that I could afford alone working part time) in the city for close to the same price…
I am doing well in small towns mostly due to the impression that there is no opportunity. Starting a small business in a major city is nigh impossible without a lot of money, but small towns don’t. The issue I see most often is people opening places in small towns without any business plan or market research, leading to failure. I think some of that will change when more business realizes that they can save money by going to a smaller town.
My dad ran a business in a small town his whole life and said it’s not a good idea anymore. Been a struggle for him for the last like 20 uears. Always told me to never be a business owner so I’ll follow that advice
Hello from Australia. if you’re expecting this bubble to pop, don’t.
Especially because the people who own houses have much more political power than the people who want houses. Any government that wants to have and use political power will cater to the people who don’t want a crash.
It seems like the only realistic hope (and an outside chance at that) is for prices to stagnate for decades. If that happened, your grandkids might be able to afford houses on normal wages (assuming their parents didn’t emigrate in frustration).
Alternately, as boomers die and many of their homes go into REITs instead of younger generations as they reverse-mortgage to fund extremely expensive senescence more and more housing moves out of the voting public and populists get more and more power by catering to this disenfranchised group.
The question then is whether those populists do it with good policy or with scapegoats and hate.
Thanks for always being there to show us what our future is like. It’s the time zone thing, and it’s great that you’re always a step ahead. Will these fires consume us or will we find a way out? What will the rains and the stampede of spiders be like?How’s Thursday going so far?
“I could never get the hang of Thursdays” – Douglas Adams, writing for Arthur Dent
What is bnnbloomberg, anyway? I see them in my feed sometimes and they have highly-produced news, but they don’t seem to have a lot of it, which makes me feel like it is carefully targeted (ie propaganda)
They’ve been around forever and it’s for financial wonks so their intended audience in this case is people involved in everything financial as it pertains to houses from C level to keener analysts.
It’s legit.
Bloomberg a legit news source. Two things though:
- This BNN Bloomberg, which is Business News Network after getting acquired by Bloomberg. It’s still a pretty factual news source (sometimes even more so than Bloomberg itself)
- This isn’t news. It’s a person (Phillip Colmar, partner at Global Strategist at MRB Partners) saying what they think. It’s more like an opinion piece, improvised on live television, and most of those are indeed garbage even in otherwise respectable outlets.
For those people who are actually wishing for the bubble to burst, remember that’s exactly what happened in 2008, and what happened back then. Literally the only people who won were the rich as they just bought out all the property that got severely discounted while other rich people got a massive payday from the government (aka regular Joe’s tax dollars) for fucking up. And the bubble simply got restored because those rich people could afford to sit on unproductive products for a decade at a time because they knew that without a constantly increasing supply of housing, the prices will explode again because housing is a requirement, not a luxury.
And the losers was everybody who doesn’t make 7 figures or more. People’s retirements were crushed, their savings crushed, their existing lives crushed. And the economy was set back for years and inflation skyrocketed for a little while, which never came back down.
And in places where such housing bubbles really burst, Japan hasn’t seen any growth for 30 years. They’re still in what they all the Lost Generation, because they realized that calling it the Lost Decade was premature and it didn’t end in 10 years. We’re watching China’s housing implode on itself right now with hundreds of thousands of people losing their entire investments and retirement savings. We’re watching 80 year olds going back to work so that they don’t starve to death while youth unemployment reaches levels so insane that they’ll take a job that only pays under the table because the company can’t afford to pay minimum wage!
You want a dystopia, you’ll get it if the bubble bursts. You’ll also get it if the bubble continues to inflate.
So the only solution is to slowly deflate the bubble by increasing housing construction so that it outpaces demand in a controlled manner until the prices come back down to something reasonable, then to continue keeping pace. And for that, we need the political will for both government subsidized housing and a overhaul of zoning laws to allow for mixed-use residential to replace all residential zoning.
Detached single family housing don’t belong in major cities, and suburbs shouldn’t be subsidized by the downtown core.
Detached single family housing don’t belong in major cities, and suburbs shouldn’t be subsidized by the downtown core.
Truer words were never spoken. If you want to be able to live on your own little plot of land surrounded by other people wanting the same thing - then development, upkeep and maintenance of all infrastructure and services needs to be paid for directly from your property tax. When you drive in to downtown to get to work, you should not expect to find parking. Downtown should belong to the people who actually live there, it’s crazy how far we bend over backwards to support a lifestyle that’s inherently unsustainable.
Whether you hope for it or not, all bubbles burst eventually, and the government has already proven its unwillingness to do anything about it by allowing the bubble to form in the first place.
You want a dystopia, you’ll get it if the bubble bursts. You’ll also get it if the bubble continues to inflate.
Yeah, the range of ways out of this that don’t suck are small. Even if you get the mildest of fixes: property values stay steady for decades while they’re eroded by normal levels of inflation, that’s going to be hell for people waiting for the prices to become reasonable, but also hell for people who bought property as an investment and instead see it losing value. Some of those people are rich, but other people were just using it as a retirement plan.
And for that, we need the political will
The problem is that political will always aligns with the self-interest of the parties or their leaders. Since home owners vote and donate, they’re the ones who get listened to. Since property developers donate, they get listened to. Homeless people don’t vote, and definitely don’t donate to political campaigns. People struggling to make ends meet don’t take time out of their busy days to get involved in politics, they just hope someone will help them.
Since politicians invariably come from a class that not only owns houses, but often owns multiple houses, the idea that they’ll voluntarily take actions that reduce the value of their investments is pretty laughable.
It would be relatively straightforward to block Monopoly getting played should the bubble burst–legislatively speaking–but it would require governments to intervene against it’s donor class.
Hawaii’s post-disaster response is a good template: the government has threatened to buy land to prevent investors and speculators from doing the same. In Canada, this would be like a bizarro-world version of Doug Ford’s Greenbelt giveaway: where the government buys more land, and more houses, to block speculators.
I can’t see it happening, because our leaders are either feckless cowards (on the left) or complete corporate toadies (on the right), but I can dream.
