Cost of housing in Canada

[IKnowNothing]

Car sales are down. Way way down, even compared to this time last year.

What's your source on that? Reports I see are of a strong start to the year, and reported data supports. Is it particular classes that are down despite aggregate increases?

As of the end of Jan 24 I see year over year month, 3-month, and 12 month all up 13+%.

 

[Good2Golf]

With all this doom and gloom over bank rates, how are car sales actually doing? They are a good indicator of a person's actual financial position. Are they buying or keeping the old girl going for another year? Are they buying lower end models or are monster trucks with all the trimmings still the vehicle of choice?

EVs are softening slightly it would seem, but the curve is still trending up.

 

[Halifax Tar]

I'm in a Ford dealership right now, haggling on a new F150 5L.

 

[Good2Golf]

I'm in a Ford dealership right now, haggling on a new F150 5L.

No Lightenings?

 

[mariomike]

Regarding the cost of housing.

This one in the Dufferin - Dupont area sold for $2,309,000.



And, this one in Scarborough $4,000,000.

 

[Quirky]

And $1.2m in Saskatoon.



People can stay in the GTA.

 

[mariomike]

And $1.2m in Saskatoon.

That doesn't go far in Toronto.

These places are under $1.2 million.

Property Search

The source for Toronto Real Estate - We currently have 6865 homes for sale in Toronto ranging in price $1 to $1,200,000.

www.byjesseandjoe.com

Average price in the C12 area is $4,296,250.

 

[Eaglelord17]

A million dollars out where I live will get you a large water front home, a mansion, or 1000 acres with a house. Literally saw one a few months ago for 1 million with 1000 acres, its own private lake (well as private as can be, own all the land surrounding it), and a large house. 30 min from the city but thats a excellent trade off to me.

The absurdity of million dollar average homes is insane to me. Your average Canadian only makes a bit over 63k which after taxes is more like 52k a year.

Thats almost 20 years of work without spending a dime of it on anything else just to afford the house. Add in a mortgage which roughly doubles the cost, and now your at 40 years of work to simply afford a house. No maintenance, no renos, no extras. It is simply not a sustainable price.

Something is going to give sooner or later. The wealth inequality is growing substantially, currently it is worse than it was before the French Revolution. The good news for the rich is Canadians are much more peaceful than the French.

 

[daftandbarmy]

A million dollars out where I live will get you a large water front home, a mansion, or 1000 acres with a house. Literally saw one a few months ago for 1 million with 1000 acres, its own private lake (well as private as can be, own all the land surrounding it), and a large house. 30 min from the city but thats a excellent trade off to me.

The absurdity of million dollar average homes is insane to me. Your average Canadian only makes a bit over 63k which after taxes is more like 52k a year.

Thats almost 20 years of work without spending a dime of it on anything else just to afford the house. Add in a mortgage which roughly doubles the cost, and now your at 40 years of work to simply afford a house. No maintenance, no renos, no extras. It is simply not a sustainable price.

Something is going to give sooner or later. The wealth inequality is growing substantially, currently it is worse than it was before the French Revolution. The good news for the rich is Canadians are much more peaceful than the French.

Meanwhile, in Oak Bay

$2.649M

1179 Monterey Ave - Oak Bay Single Family Detached For Sale, 3 Bedrooms -

Luxury one level living in the heart of South Oak Bay, built by the award winning Customs House developers, Cielo Group. Nestled on a picturesque street, this West Coast ...

www.oakbaylistings.ca

 

[Halifax Tar]

With these house prices elsewhere you could come to NS and buy a small town or a private island. Then you'd have to live in NS too.

 

[IKnowNothing]

Something is going to give sooner or later. The wealth inequality is growing substantially, currently it is worse than it was before the French Revolution. The good news for the rich is Canadians are much more peaceful than the French.

While is true, the wealth inequality divide created by the housing crisis is not the same one as with the billionaires, in fact the proportions are almost flipped- which is what makes it such a fractious issue. The "housing haves" are not the "rich" they're the average Canadian that got into the market pre-run up - which is currently a majority.

There's a wide range there- millenials that got in just before the boom, boomers and older X's that bought/built for dimes or nickels on the current dollar through the 80's, 90's, and early 00's. In many cases families with both working semi-cooperatively. The common thread is that the "average adult canadian" is facing these prices not as first time home buyers- but instead with large amounts of equity. And with falling fertility rates that equity is going to get less diluted through intergenerational wealth transfer- boomers with million dollar estates and 4 grandchildren instead of 15.

It's not fair- but part of the reason the bubble hasn't already burst.

 

[Kirkhill]

Regarding the cost of housing.

This one in the Dufferin - Dupont area sold for $2,309,000.

View attachment 83871

And, this one in Scarborough $4,000,000.

View attachment 83872

From the style of the Scarborough house I would guess that it was built in the late 60s early 70s. If so it probably sold new for under $10,000 to the upper end of the market.

 

[Kirkhill]

While is true, the wealth inequality divide created by the housing crisis is not the same one as with the billionaires, in fact the proportions are almost flipped- which is what makes it such a fractious issue. The "housing haves" are not the "rich" they're the average Canadian that got into the market pre-run up - which is currently a majority.

There's a wide range there- millenials that got in just before the boom, boomers and older X's that bought/built for dimes or nickels on the current dollar through the 80's, 90's, and early 00's. In many cases families with both working semi-cooperatively. The common thread is that the "average adult canadian" is facing these prices not as first time home buyers- but instead with large amounts of equity. And with falling fertility rates that equity is going to get less diluted through intergenerational wealth transfer- boomers with million dollar estates and 4 grandchildren instead of 15.

It's not fair- but part of the reason the bubble hasn't already burst.

Our parents not only bought/built for nickels and dimes on the dollar they were paid nickels and dimes on the dollar. Houses cost $6000 in 1966 but salaries were about $6000 as well. Coffee was a dime. We shopped at dime stores like Woolworths who put 5 and Dime on their signboards.
Bread cost a nickel a loaf.

My first full time pay after graduating University as a Food Scientist working in my field was $15,000 a year after the oil shock and devaluations of the early 70s. I sold my parents' house after they died for $60,000. My sister and I split the proceeds and had enough for down payments on mortgages of our own.

That Scarborough house was built at about the era of the jump from 6 to 60 and is now selling for 2000. My salary never matched that inflation rate.

 

[Halifax Tar]

Our parents not only bought/built for nickels and dimes on the dollar they were paid nickels and dimes on the dollar. Houses cost $6000 in 1966 but salaries were about $6000 as well. Coffee was a dime. We shopped at dime stores like Woolworths who put 5 and Dime on their signboards.
Bread cost a nickel a loaf.

My first full time pay after graduating University as a Food Scientist working in my field was $15,000 a year after the oil shock and devaluations of the early 70s. I sold my parents' house after they died for $60,000. My sister and I split the proceeds and had enough for down payments on mortgages of our own.

That Scarborough house was built at about the era of the jump from 6 to 60 and is now selling for 2000. My salary never matched that inflation rate.

Excellent post.

 

[IKnowNothing]

Our parents not only bought/built for nickels and dimes on the dollar they were paid nickels and dimes on the dollar. Houses cost $6000 in 1966 but salaries were about $6000 as well. Coffee was a dime. We shopped at dime stores like Woolworths who put 5 and Dime on their signboards.
Bread cost a nickel a loaf.

My first full time pay after graduating University as a Food Scientist working in my field was $15,000 a year after the oil shock and devaluations of the early 70s. I sold my parents' house after they died for $60,000. My sister and I split the proceeds and had enough for down payments on mortgages of our own.

That Scarborough house was built at about the era of the jump from 6 to 60 and is now selling for 2000. My salary never matched that inflation rate.

So a 1:1 ratio, with the cost of the home locked and income increasing over time.

I'm not sure the point you're tying to make- but none of this in any way counters or changes what I said. People that got in through the 80's/90's/early 00's are in aggregate sitting on massive amounts of equity. Salaries didn't match the inflation rate on homes- but net worths ballooned, against much lower book value/ input costs.

Also -you are the parent/grandparent in the current market.

 

[jOnAnder]

Yes, hence the word"despite". Government was saying one thing, despite that:
-inflation had been rising starting January 2021, breaking the 2% target threshold in March, 3% upper bound in April, and by the time October rolled around was sitting above 4% with 4 straight months of increases
-in October the 5yr fixed discounted rate started climbing steeply month over month, meanwhile the variable rate bottomed out for Nov-Jan
-the overnight rate didn't start moving until March 2022

There was a 5 month period where the warning signs were there and worsening to anyone paying attention. And during that period variable rate election peaked at unprecedented levels, and sustained that peak right through the BoC starting to raise rates.

Do you think mortgage "advisors*" at banks were doing their best to point out the warning signs and urge caution during this period, or were they pointing to the government assurances, sweeping the warning signs under the rug, and pointing out the lower payments? Keep in mind that
A- they had all these loans had a lot of stress runway, and many/most had either both of insurance or a co-signor - bank risk was heavily mitigated.


This is incorrect. Stress test provisions dictate max approvals being calculated at the higher of 5.25 (before june 2021 it was 4.8) or your approved rate + 2. So regardless of the decision between .85 variable and 1.7 fixed the max was the same - based on 5.25 The decision wasn't to take on more risk to enable higher loans, it was to take on more risk to get lower payments. Now- some people left big banks to get around the stress test and did as you said- but not nearly enough to explain the spike.

I didn't say that banks caused it, I said they exacerbated it. And they did.


None of this has anything to do with people with an approval in place choosing between fixed and variable.

Yeah save the patronization. You can maintain your schadenfreude towards the dumdums. I have some of it too. I certainly agree that it's their bed to deal with, and have next to zero sympathy for the "plight" of people in 900k homes driving late model trucks unironically complaining that they can't make ends meet. It's time for lifestyle change's and co-signors to put their money where their signature is.

But "people are responsible for the consequences of their decisions" and "there was an unprecedented systemic anomaly of ignorant people making the same bad decision at the worst time -likely spurred on by unethical corporate behavior- it should be addressed" are not mutually exclusive statements.

In the context of your comment and information from the article about the potential decrease in mortgage rates, it's important to consider several key aspects that affect the mortgage market and the economy as a whole. Global events, military conflicts, inflation, and central bank decisions are significant factors that can influence the cost of home loans.

According to analysis presented by Dallasfed.org, the Federal Reserve's interest rate hikes in response to inflation led to a sharp increase in mortgage rates in 2022, reaching an average level of 6.9% for 30-year fixed mortgages. This was the highest level since May 2002, significantly impacting buyers' ability to afford new home purchases and affecting the housing market overall.

Themortgagereports.com emphasizes that global events directly impact mortgage rates, as investors seeking safety in times of global uncertainty often invest in U.S. government bonds, which, in turn, can lower mortgage interest rates.

Research published by the Urban Institute highlights the long-term decline in interest rates over the past 35 years, which ended when rates began to rise after 2016. This had several important consequences for the mortgage market, including reduced credit accessibility for households.

A review from Noradarealestate.com points out that the Federal Reserve's interest rate hikes, starting in March 2022, had an immediate impact on the housing market, increasing the cost of mortgage loans and decreasing housing market activity. The rate increases aimed at combating inflation also resulted in higher monthly payments for homebuyers.

Sources here:
Existing low-rate mortgages blunt impact of recent rate surge
Housing Market Interest Rates: Impact and Outlook 2024
The Impact of Higher Interest Rates on the Mortgage Market
25 Free Spins No Deposit Canada | Newest Bonuses 2024
How the global economy affects your mortgage rate (and what to do about it) | Mortgage Rates, Mortgage News and Strategy : The Mortgage Reports

 

[Kirkhill]

1966 - $6000 middle manager salary bought you a $6000 house. Your neighbours were a a fireman, a truck driver, a hydro lineman, a teacher, as shoe store owner and a bunch of factory workers. About 1000 square feet, detached, no garages, single lane driveways. Boats and snowmobiles in evidence. Some cottages. 3 or 4 kids. One income.

1976 - Salaries in the 15-25,000 range. Houses in Peterboro, a factory town, selling for $60,000 as people were selling up and being moved to Toronto to follow their jobs as their factories closed and worried how they were going to pay for houses in the $100-120,000 range. Cottages sold, boughts and snowmobiles sold. Wives went to work.

2026 (Poetic Licence) - Salaries in the $60,000 range if you can find a job. Peterboro's factories closed. Classmates scattered all over North America. Houses in Toronto selling for $2,000,000 that used to sell for $10,000.

We Boomers didn't drive the price up. We didn't have the money to do that.

So where did the money come from?

Inflation was part of the answer.

Inflation Calculator

Calculate how much the cost of a fixed "basket" of consumer purchases has changed, using monthly consumer price index (CPI) data from 1914 to now.

www.bankofcanada.ca

10,000 in 1976, according to the Bank of Canada would be 52,000 in 2024(6)

Still a long jump from 52,000 to 2,000,000. 52,000 is only 2.6% of 2,000,000.

That is the definition of a bubble. The price is driven purely by market demand. And, as I said, the demand wasn't coming from local boomers.
Or their kids or grandkids.

PS - in the 70's we were paying mortgage rates that were closer to the rates that you pay on credit cards these days.

 

[Brad Sallows]

We Boomers didn't drive the price up. We didn't have the money to do that.

Trying to answer "who drove prices up" is a popular game, but there's not much point talking about it qualitatively.

We first have to know the mathematics of the stability of housing prices down to neighbourhood granularity. Crudely: a "stable" neighbourhood probably has approximately the same number of listings at any given time, rising slightly during warmer weather, and some number of active buyers not too much in excess of the number of listings (falling and rising with the number of listings). The question is, how many additional buyers does it take to destabilize the situation?

My guess is that it only takes a few to get bidding wars going, provided some of the buyers don't start looking in the next tier of affordability. But there's a limit to how far down people will go, and then increased offers will cascade up the chain.

 

[Kirkhill]

Trying to answer "who drove prices up" is a popular game, but there's not much point talking about it qualitatively.

We first have to know the mathematics of the stability of housing prices down to neighbourhood granularity. Crudely: a "stable" neighbourhood probably has approximately the same number of listings at any given time, rising slightly during warmer weather, and some number of active buyers not too much in excess of the number of listings (falling and rising with the number of listings). The question is, how many additional buyers does it take to destabilize the situation?

My guess is that it only takes a few to get bidding wars going, provided some of the buyers don't start looking in the next tier of affordability. But there's a limit to how far down people will go, and then increased offers will cascade up the chain.

Immigrant Status
According to the 2021 Census, 8,361,505 people, that is, 23.0% of the population, were foreign-born (immigrants), 27,042,125 (74.4%) were Canadian-born (non-immigrants) and 924,850 (2.5%) were non-permanent residents.

Focus on Geography Series, 2021 Census - Canada

Focusing on a selected geographic area, this product presents data highlights for each of the major releases of the 2021 Census. These data highlights are presented through text, tables and figures. A map image of the geographic area is also included in the product. The geographic levels...

www12.statcan.gc.ca

I would suggest that the proximate source of the money was the people that arrived in Canada. We like to think of ourselves as giving the poor new starts in our safe haven. The reality is that we have been giving safe haven to people that were doing reasonably well in their homelands. They were the people that could afford the cost of passage and had the cash to start up their own businesses in Canada. Or elsewhere in the OECD.

Class, Citizenship, and Global Migration: The Case of the Canadian Business Immigration Program, 1978-1992 on JSTOR

Trevor Harrison, Class, Citizenship, and Global Migration: The Case of the Canadian Business Immigration Program, 1978-1992, Canadian Public Policy / Analyse de Politiques, Vol. 22, No. 1 (Mar., 1996), pp. 7-23

www.jstor.org

 

[IKnowNothing]

We Boomers didn't drive the price up. We didn't have the money to do that.

And I didn't say you did. I said that boomers and early x's (and adding now- a large swathe of millenials) that got into the housing market pre run up (the majority of home owners) have significant equity built up, and as such can approach current housing prices very differently than the proverbial first time home buyer making average salary. They can also choose to not approach current housing prices at all and be happy paying down mortgages on homes they bought at 2/3's, 1/2, or 1/3 of their current price.

This is about understanding the now, and it's potential impact on the future- not assigning blame for how we got here.