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I don't think it's a bubble. There are no places to buy or to rent. Our major cities simply do not have enough housing. We have to build more, and higher intere

I don't think it's a bubble. There are no places to buy or to rent. Our major cities simply do not have enough housing. We have to build more, and higher interest rates make that even more difficult.

Retric 3y ago
Saying cities are running out of housing is really just saying that jobs in cities still look attractive at current housing prices. Double current prices and suddenly most of those jobs wouldn’t look attractive which instantly reduces demand for housing until you’re back to current prices. Interest rates do little to discourage home construction, the limitations are from transportation and zoning issues. Ie: The worse the transportation system the fewer areas are viable to build housing, and the more important existing housing and zoning restrictions in those areas are.
- onlyrealcuzzo 3y ago
  It's almost as if outsourcing all jobs that aren't done in cities to China wasn't a great idea.
- chongli 3y ago
  As long as people continue to buy up housing as an investment, without even trying to earn rental income, we’re going to see this crisis continue. Higher interest rates put the squeeze on ordinary Canadians with mortgages but investors are just buying housing with cash. It’s brutal!
  - mitthrowaway2 3y ago
    > investors are just buying housing with cash That seems unlikely. Investors are, if anything, the most rate-sensitive, both in terms of borrowing costs and opportunity costs (they will move their cash out of housing and into bonds, if the bond yield is higher than what they'll earn on rent and price appreciation). Ordinary residents will buy even at the peak, risking loss, because they need a place to live, but investors don't buy housing because they need it. They can't rely on other investors being the bigger fool, and so in a rising-rate environment they either buy if they can raise rents high enough, or else they will put their cash elsewhere.
- stubybubs 3y ago
  > Double current prices and suddenly most of those jobs wouldn’t look attractive which instantly reduces demand for housing until you’re back to current prices. Sure, but we've already done this several times in our major cities, and it hasn't killed demand. > Interest rates do little to discourage home construction https://financialpost.com/real-estate/cmhc-housing-starts-drop-high-interest-rates https://financialpost.com/real-estate/cmhc-housing-starts-dr... “With interest rates remaining high, it continues to be challenging for developers and homebuilders to get projects started,” he said in a press release. That article is from April and housing starts dropped further. In the 1970's Canada had a lot of purpose built rental stock subsidized by the government. You could find a place to live anywhere. I think there has to be some of that, plus some top-down work on zoning (which is happening in some provinces, overriding municipalities) and then we need to just build and build.
  - Retric 3y ago
    > Sure, but we’ve already done this several times in our major cities, and it hasn’t killed demand. Not over an afternoon. Housing prices haven’t grown in a vacuum, massive increases in productivity and population over time feed back into peoples ability to pay for things. Beachfront vacation homes have also become vastly more expensive for related reasons, but that obviously gets less press than peoples primary residences. Most things are priced based on what it costs to create them, other stuff is based on how much people can afford. Urban housing has entered the second category and it’s going to take a lot more than minor interest rate changes to reverse this trend.
- softfalcon 3y ago
  Your point about transportation is key. Many of our cities are un-walk-able, un-transit-able, and sometimes even un-drive-able. If we can't easily provide multiple options for getting from A to B in a city, there is little hope of providing viable housing options. We already have the "must own a car" requirement for most of Canada, but even that's becoming not enough thanks to the fact our roadways are under-developed and the price of gas (and owning a vehicle) is rising rapidly. Those are some pretty massive road blocks in the way of home ownership for an average person, I can't imagine developers are keen to keep adding to the problem.
- asdf6677 3y ago
  The problem with this theory is that almost nobody who lives in these cities is paying current prices for a home. A person in Vancouver or Toronto needs a top 1% income to buy a detached house. Almost everyone with a home can only afford it because they bought a long time ago. Almost every city is like this so “just move” isn’t a realistic option. People will continue living here because they either don’t have to care about the price (bought long ago, inheritance, love with family, etc) or because they’re a poor immigrant that’s happy to share a 1 bedroom apartment with 5 strangers for $600 a month The average Vancouver house dweller makes 44k which is way lower than people in any other home type. People are buying houses with wealth, not income. It doesn’t matter what jobs pay.
  - Retric 3y ago
    Homeowners don’t as a rule directly set prices just as people holding stocks indefinitely don’t set stock prices. However there’s a constant stream of people dying etc which brings such homes onto the market and needs to be offset by people buying in. Renters are different because they regularly sign a new lease and so very much do care about changes to the prices. Renters leave cities for many reasons, but high rent is a common one especially at retirement.
- Tiktaalik 3y ago
  The shortage of housing is even worse outside of the major cities.

I don't think it's a bubble. There are no places to buy or to rent. Our major cities simply do not have enough housing. We have to build more, and higher interest rates make that even more difficult.

Retric 3y ago

Saying cities are running out of housing is really just saying that jobs in cities still look attractive at current housing prices. Double current prices and suddenly most of those jobs wouldn’t look attractive which instantly reduces demand for housing until you’re back to current prices. Interest rates do little to discourage home construction, the limitations are from transportation and zoning issues. Ie: The worse the transportation system the fewer areas are viable to build housing, and the more important existing housing and zoning restrictions in those areas are.

onlyrealcuzzo 3y ago
It's almost as if outsourcing all jobs that aren't done in cities to China wasn't a great idea.
chongli 3y ago
As long as people continue to buy up housing as an investment, without even trying to earn rental income, we’re going to see this crisis continue. Higher interest rates put the squeeze on ordinary Canadians with mortgages but investors are just buying housing with cash. It’s brutal!
- mitthrowaway2 3y ago
  > investors are just buying housing with cash That seems unlikely. Investors are, if anything, the most rate-sensitive, both in terms of borrowing costs and opportunity costs (they will move their cash out of housing and into bonds, if the bond yield is higher than what they'll earn on rent and price appreciation). Ordinary residents will buy even at the peak, risking loss, because they need a place to live, but investors don't buy housing because they need it. They can't rely on other investors being the bigger fool, and so in a rising-rate environment they either buy if they can raise rents high enough, or else they will put their cash elsewhere.
stubybubs 3y ago
> Double current prices and suddenly most of those jobs wouldn’t look attractive which instantly reduces demand for housing until you’re back to current prices. Sure, but we've already done this several times in our major cities, and it hasn't killed demand. > Interest rates do little to discourage home construction https://financialpost.com/real-estate/cmhc-housing-starts-drop-high-interest-rates https://financialpost.com/real-estate/cmhc-housing-starts-dr... “With interest rates remaining high, it continues to be challenging for developers and homebuilders to get projects started,” he said in a press release. That article is from April and housing starts dropped further. In the 1970's Canada had a lot of purpose built rental stock subsidized by the government. You could find a place to live anywhere. I think there has to be some of that, plus some top-down work on zoning (which is happening in some provinces, overriding municipalities) and then we need to just build and build.
- Retric 3y ago
  > Sure, but we’ve already done this several times in our major cities, and it hasn’t killed demand. Not over an afternoon. Housing prices haven’t grown in a vacuum, massive increases in productivity and population over time feed back into peoples ability to pay for things. Beachfront vacation homes have also become vastly more expensive for related reasons, but that obviously gets less press than peoples primary residences. Most things are priced based on what it costs to create them, other stuff is based on how much people can afford. Urban housing has entered the second category and it’s going to take a lot more than minor interest rate changes to reverse this trend.
softfalcon 3y ago
Your point about transportation is key. Many of our cities are un-walk-able, un-transit-able, and sometimes even un-drive-able. If we can't easily provide multiple options for getting from A to B in a city, there is little hope of providing viable housing options. We already have the "must own a car" requirement for most of Canada, but even that's becoming not enough thanks to the fact our roadways are under-developed and the price of gas (and owning a vehicle) is rising rapidly. Those are some pretty massive road blocks in the way of home ownership for an average person, I can't imagine developers are keen to keep adding to the problem.
asdf6677 3y ago
The problem with this theory is that almost nobody who lives in these cities is paying current prices for a home. A person in Vancouver or Toronto needs a top 1% income to buy a detached house. Almost everyone with a home can only afford it because they bought a long time ago. Almost every city is like this so “just move” isn’t a realistic option. People will continue living here because they either don’t have to care about the price (bought long ago, inheritance, love with family, etc) or because they’re a poor immigrant that’s happy to share a 1 bedroom apartment with 5 strangers for $600 a month The average Vancouver house dweller makes 44k which is way lower than people in any other home type. People are buying houses with wealth, not income. It doesn’t matter what jobs pay.
- Retric 3y ago
  Homeowners don’t as a rule directly set prices just as people holding stocks indefinitely don’t set stock prices. However there’s a constant stream of people dying etc which brings such homes onto the market and needs to be offset by people buying in. Renters are different because they regularly sign a new lease and so very much do care about changes to the prices. Renters leave cities for many reasons, but high rent is a common one especially at retirement.
Tiktaalik 3y ago
The shortage of housing is even worse outside of the major cities.