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> Where is the money coming from to drive this housing bubble? A bubble constrained to a handful of specific markets within the country. Which, a common theme

> Where is the money coming from to drive this housing bubble? A bubble constrained to a handful of specific markets within the country. Which, a common theme I hear is that people choose to live in those markets because their income is higher than if they lived elsewhere. It seems that the market is simply correcting on the expense side so that incomes between those locations and other parts of the country even out. If it were more lucrative to live elsewhere, people would. To put it another way, if, hypothetically, your expected revenue is $50,000/year in Toronto and $35,000/year in rural Manitoba, and your expenses are $20,000/year in each location, you have $15,000/year additional money that you can put into the Toronto housing market. On the other hand, if expenses rose to $45,000 in Toronto, then your income would actually be $10,000/year higher in rural Manitoba. You'd be hard-pressed to not consider moving for a $10,000/year raise. But the population of Toronto, and similar markets, keep on growing by leaps and bounds, which indicates that there is still extra money to be made there. Money that can eventually be spent on housing.

Camillo 10y ago
Funny how these spherical cow models of perfectly efficient and fungible markets end up justifying a huge and growing transfer of wealth from the productive part of the economy to pure (and literal) rent-seekers, which is perhaps the worst possible outcome for actual economic efficiency.
mistermann 10y ago
If it was just Vancouver and Toronto that would be one thing, but housing across Canada (except perhaps the maritimes) has seen huge gains in the last decade, far beyond income growth. These price increases have been excluded from inflation (price inflation) numbers, as has the massive growth in consumer credit (monetary inflation). I don't have an article for you, but Canada has surpassed the US at the peak of their housing bubble in most any metric you look at, some of them substantially. Unsurprisingly, convincing anyone to acknowledge this reality is near impossible, the numbers can stare people in the face and they simple refuse to believe them.
- randomdata 10y ago
  > If it was just Vancouver and Toronto that would be one thing, but housing across Canada (except perhaps the maritimes) has seen huge gains in the last decade The biggest trouble with Canadian data is that, unlike most of the rest of the world, they calculate it using the mean. A figure that is easily skewed by the sale of multi-million dollar mansions, which means little to the typical family budgeting for a home. It is true that the average home nationwide has risen substantially, but mainly because of Toronto and Vancouver specifically. Median home prices would be much more useful here, but data is nonexistent (as far as I can tell). As for the growth, inflation over the period is 16%, so you would expect that much for sure. Historically, houses have followed inflation. Conveniently, I purchased my Canadian (non-Maritime, non-Toronto/Vancouver) home 10 years ago, and that sounds just about right for what I could expect to get out of it a decade on. Maybe slightly more, but the local economy has also improved dramatically in that timeframe, so I expect the locals have seen real increases in their income as well. The best data I can find for the localized area seems to confirm that. > far beyond income growth. The government redesigned their website and I have never been able to find it again, but they used to have a really good chart showing incomes over time. For most, their incomes have been been stagnant in real (adjusted for inflation) dollars. That is true. However, the income of the top 20% has skyrocket in the last 10-15 years. The most liberal figure I have ever seen for sales volume in the GTA is 80,000 units per year. A region with 2.6 million households. That is just 3%. It may be a bit of a misnomer to think that average people are buying places at all. If only 3% per year in the GTA are buying homes, that can easily be satisfied by the top 20% who are making huge income gains, especially when you consider that they can buy more than one home.
  - mistermann 10y ago
    > Inflation over the period is 16%, so you would expect that much for sure. Historically, houses have followed inflation. Conveniently, I purchased my Canadian (non-Maritime, non-Toronto/Vancouver) home 10 years ago, and that sounds just about right for what I could expect to get out of it a decade on. Are you saying that your house in non-maritimes Canada has only appreciated 16% in the last decade? Are you able to disclose where this is, because I might move there. Some more statistics on the insanity: http://business.financialpost.com/news/economy/life-after-oil-makes-real-estate-the-new-crutch-of-canadas-economy-and-its-huge http://business.financialpost.com/news/economy/life-after-oi... It's so strange to me to see articles like the above, charts like this: http://www.macleans.ca/economy/economicanalysis/canadas-housing-bubble-looks-disturbingly-familiar/ http://www.macleans.ca/economy/economicanalysis/canadas-hous..., read newspaper articles from around the world discussing our bubble, but then encounter people like yourself who witness literally nothing historically unusual, at all. It is truly bizarre.

Camillo 10y ago

Funny how these spherical cow models of perfectly efficient and fungible markets end up justifying a huge and growing transfer of wealth from the productive part of the economy to pure (and literal) rent-seekers, which is perhaps the worst possible outcome for actual economic efficiency.

mistermann 10y ago

If it was just Vancouver and Toronto that would be one thing, but housing across Canada (except perhaps the maritimes) has seen huge gains in the last decade, far beyond income growth. These price increases have been excluded from inflation (price inflation) numbers, as has the massive growth in consumer credit (monetary inflation). I don't have an article for you, but Canada has surpassed the US at the peak of their housing bubble in most any metric you look at, some of them substantially. Unsurprisingly, convincing anyone to acknowledge this reality is near impossible, the numbers can stare people in the face and they simple refuse to believe them.

randomdata 10y ago
> If it was just Vancouver and Toronto that would be one thing, but housing across Canada (except perhaps the maritimes) has seen huge gains in the last decade The biggest trouble with Canadian data is that, unlike most of the rest of the world, they calculate it using the mean. A figure that is easily skewed by the sale of multi-million dollar mansions, which means little to the typical family budgeting for a home. It is true that the average home nationwide has risen substantially, but mainly because of Toronto and Vancouver specifically. Median home prices would be much more useful here, but data is nonexistent (as far as I can tell). As for the growth, inflation over the period is 16%, so you would expect that much for sure. Historically, houses have followed inflation. Conveniently, I purchased my Canadian (non-Maritime, non-Toronto/Vancouver) home 10 years ago, and that sounds just about right for what I could expect to get out of it a decade on. Maybe slightly more, but the local economy has also improved dramatically in that timeframe, so I expect the locals have seen real increases in their income as well. The best data I can find for the localized area seems to confirm that. > far beyond income growth. The government redesigned their website and I have never been able to find it again, but they used to have a really good chart showing incomes over time. For most, their incomes have been been stagnant in real (adjusted for inflation) dollars. That is true. However, the income of the top 20% has skyrocket in the last 10-15 years. The most liberal figure I have ever seen for sales volume in the GTA is 80,000 units per year. A region with 2.6 million households. That is just 3%. It may be a bit of a misnomer to think that average people are buying places at all. If only 3% per year in the GTA are buying homes, that can easily be satisfied by the top 20% who are making huge income gains, especially when you consider that they can buy more than one home.
- mistermann 10y ago
  > Inflation over the period is 16%, so you would expect that much for sure. Historically, houses have followed inflation. Conveniently, I purchased my Canadian (non-Maritime, non-Toronto/Vancouver) home 10 years ago, and that sounds just about right for what I could expect to get out of it a decade on. Are you saying that your house in non-maritimes Canada has only appreciated 16% in the last decade? Are you able to disclose where this is, because I might move there. Some more statistics on the insanity: http://business.financialpost.com/news/economy/life-after-oil-makes-real-estate-the-new-crutch-of-canadas-economy-and-its-huge http://business.financialpost.com/news/economy/life-after-oi... It's so strange to me to see articles like the above, charts like this: http://www.macleans.ca/economy/economicanalysis/canadas-housing-bubble-looks-disturbingly-familiar/ http://www.macleans.ca/economy/economicanalysis/canadas-hous..., read newspaper articles from around the world discussing our bubble, but then encounter people like yourself who witness literally nothing historically unusual, at all. It is truly bizarre.