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Bank of Canada also held its rate at its Wednesday announcement. Meanwhile housing prices rage out of control, many working class people can't afford rent even

Bank of Canada also held its rate at its Wednesday announcement. Meanwhile housing prices rage out of control, many working class people can't afford rent even in peripheral cities, and there's homeless encampments in most public parks. But this is not a factor they consider when setting the rate. And somehow the public narrative has shifted so that high interest rates (not even actually high by historic standards) are to blame for the affordability problem, and not the bubble in housing prices that was created by low interest rates (compounded by low supply) in the first place. Seems the central banks is content with having gotten unemployment rates back up again and wage growth down, and the provincial governments are happy to sit and do really nothing about real estate regulations and serious housing construction while everybody points the finger at the (ineffective and terrible) federal government, who actually can't do much about this situation . Yay.

onlyrealcuzzo 3y ago
Not sure what's confusing. >60% of people own a home - it's their largest investment & it's leveraged. They want it to go up, not down. In Canada, you don't have fixed mortgages. If interest rates go up - they're largest expense is going to go up A LOT. They're going to vote to make sure that doesn't happen. Nobody cares about people trying to get into the market - unfortunately. Governments are typically in the business of protecting wealth, not destroying it. However, recent central bank shenanigans have led them to be able to create wealth by lowering interest rates - and that is distributed highly unevenly. They don't care. >50% of people are on the winning side of the trade, and majority rules. Not sure about in Canada - but in the US - the winning side is doing their best to suppress the losing side from voting. Don't fight the system. Get stronger from it.
- cmrdporcupine 3y ago
  I don't think I said I was confused by it? I understand the levers in motion. But it's clear that in the longer term this doesn't work -- even for the majority home owners like you imply. a) Just because your home appears to go up in value doesn't mean that your home purchasing power has, if other homes have just done the same. b) It undermines local business because their workers increasingly cannot afford to live where they work. When rent in a 2 bedroom in an industrial town like Hamilton creeps up to $3000, we've hit crisis proportions. c) it's not sustainable, and will eventually blow. What it shows is that there's no leadership at the top capable of making adult decisions.
  - onlyrealcuzzo 3y ago
    No one is going to get re-elected if they pop a bubble on purpose. The system is pretty much designed not to make "adult decisions".
- toyg 3y ago
  > >60% of people own a home Er, no. According to this source [0], 66% of people live in owner-occupied houses. If you're a pennyless 20+ year old living with your parents, you're in that number but you're not owning anything - your boomer parents do. [0] https://madeinca.ca/homeownership-statistics-canada/ https://madeinca.ca/homeownership-statistics-canada/
  - didgeoridoo 3y ago
    If you’re 20+ years old in 2023, your parents are most likely Gen X (1965-1980), not Boomer.
    - deleted 3y ago
      [deleted]
  - onlyrealcuzzo 3y ago
    ~35% of Canadians 18-34 live with their parents. There's ~7.75M Canadians in that age group. There's ~8M children and ~30M total adults. So ~35% of ~25% of adults live with their parents. ~8%. Congratulations ~58% of Canadians own their own home (worst case) instead of ~60%. Not sure why kids living with their parents is any different than a married couple living together. Maybe the kid is going to inherit the house. Often times, the kid is living with the parents not out of necessity for the kid - but because the parents are the ones that need help. You're seeing what you want to see, and distracting yourself from the important part - majority rules, and the majority of people own homes - and a much larger majority of voters own homes. I'd be impressed if that ~58% doesn't become >64% when you look at voters.
    - toyg 3y ago
      > Not sure why kids living with their parents is any different than a married couple living together. Lol; because kids have no agency, of course. They didn't choose where to live and how, their name is not on the deed. They are disenfranchised from the system. > a much larger majority of voters own homes. I do not disagree there, but you ignore minorities at your peril. You don't need 50% of voters to create serious political turbulence; in fact, you don't even need 10%.
- helloooooooo 3y ago
  We have fixed mortgages. We also have variable. We do not have 30 year term mortgages, but only 5 year financial terms, and sometimes a 10 year.
Yeul 3y ago
The fact that prices go up means somebody can still afford to pay it. I live in a small, peaceful, free and rich enclave in Europe. People will keep immigrating here. Also the massive increase of "one-person households" doesn't help the housing stock. The last time housing prices tanked was in the 1980s and it coincided with a deep recession and high unemployment. So be careful what you wish for.
- Our_Benefactors 3y ago
  What about 2008? Was it worse in the 80s?
- dragonwriter 3y ago
  [deleted -- too quick interjection with US analysis where not applicable]
  - randomdata 3y ago
    How did you determine which European enclave he lives in in order to know that its housing market tanked in 2007?
- happyraul 3y ago
  I'm not sure the fact that somebody can afford to pay it is a good argument. Do we really want more landlords/more concentration of wealth and power in fewer hands?
supertrope 3y ago
Central banks generally have a mission of keeping money supply growth in line with growth of the economy. They’re not authorized to spend money on a government program (for example subsidized affordable housing) or change local laws (loosening zoning). I do agree COVID-19 crisis response zero interest rate policy contributed to bidding up the price of housing even further.
- FirmwareBurner 3y ago
  >I do agree COVID-19 crisis response zero interest rate policy contributed to bidding up the price of housing even further. Something known beforehand and by deign.
- cmrdporcupine 3y ago
  > They’re not authorized to spend money on a government program Not sure how you got the idea I was advocating for that. I clearly pointed the finger at prov/fed gov't for that kind of thing, not the BoC. My problem is with holding the rates. It sent the wrong message. Inflation on basic goods remains high, and the housing market has not stabilized. In my opinion, the BoC responded to political pressure, and should not have.
  - randomdata 3y ago
    > Inflation on basic goods remains high Not at the source level anymore, though. Things have already crashed hard there. Retail is still working off futures contracts from last year when prices were very high, so it is expected to be still high. Nothing happens overnight. However, that is not indicative of a long-term trend. Deflation is the greater risk in the near future as those older contracts start to expire and vendors start sharpening their pencils on the much lower new contracts. > the housing market has not stabilized It is true that the home ownership market is still falling (now down around 20% from the peak), but that is no doubt a promising indicator in the BoC's eyes. That will eventually relieve the rental market as well. Rents are extra high currently because people are holding off buying a home until the ownership market bottoms out, which has created a situation where more people are looking to rent than usual. > In my opinion, the BoC responded to political pressure CPI is the last leg in a long tour. While it may still look grim, all the leading indicators are telling a different story right now. From my perspective, the BoC responded to what is going on in the economy. Their actions are directed towards managing the future, not the present.
ajross 3y ago
> And somehow the public narrative has shifted so that high interest rates (not even actually high by historic standards) are to blame for the affordability problem, and not the bubble in housing prices that was created by low interest rates (compounded by low supply) in the first place. This is true, but tends to be overstated also. Here's a FRED graph of US data, showing median home price as a fraction of median household income: https://fred.stlouisfed.org/graph/?g=1aHX4 https://fred.stlouisfed.org/graph/?g=1aHX4 The ratio was ~4 through the 90's, jumped up to ~5 over the dot com boom, dropped back to 4.5 over the financial crisis, rose back to 5 through the recovery, and is now a little above 6 in the post-covid world. A 50% change in affordability over 30 years (or even the 19% rise since 2017) is a real effect. It's worth discussing and probably addressing. But it's not the disaster it's being presented as. In point of fact things are great right now. The global industrial economy is growing rapidly, inflation has largely halted, unemployment is low and still dropping, wages are rising. But no one wants to talk about that. Really the Big Story about economics news in the modern world is how shockingly disconnected public perception is from the metrics that we used to think drove it.
- toyg 3y ago
  > wages are rising. The problem is that wages are rising in absolute terms, but tanking or stagnating in relative ones. The rise is also very, very unevenly distributed; the top percentile are making great strides but the so-called "low skilled" are getting shafted badly.
  - ajross 3y ago
    > The problem is that wages are rising in absolute terms, but tanking or stagnating in relative ones. Again, that's not true, at least not to the extent you think. It's a meme. It's something you believe because everyone else believes it. > the top percentile are making great strides but the so-called "low skilled" are getting shafted badly. Tell that to the UAW and the monster contract they just negotiated. Or the minimum wage laws that keep getting passed in almost every major metro area. (Again, this is all US stuff because those are the facts in my head, but this is a global phenomenon). I mean, how about you personally: are you personally making more or less in nominal terms than you were ~6 years ago. By how much? If it's not less than the 26% rise in CPI inflation since then, you are doing better, not worse. Again, the data doesn't support your impression. It just doesn't. And I find it absolutely fascinating that these impressions persist in the complete absence of evidence.

onlyrealcuzzo 3y ago

Not sure what's confusing. >60% of people own a home - it's their largest investment & it's leveraged. They want it to go up, not down. In Canada, you don't have fixed mortgages. If interest rates go up - they're largest expense is going to go up A LOT. They're going to vote to make sure that doesn't happen. Nobody cares about people trying to get into the market - unfortunately. Governments are typically in the business of protecting wealth, not destroying it. However, recent central bank shenanigans have led them to be able to create wealth by lowering interest rates - and that is distributed highly unevenly. They don't care. >50% of people are on the winning side of the trade, and majority rules. Not sure about in Canada - but in the US - the winning side is doing their best to suppress the losing side from voting. Don't fight the system. Get stronger from it.

cmrdporcupine 3y ago
I don't think I said I was confused by it? I understand the levers in motion. But it's clear that in the longer term this doesn't work -- even for the majority home owners like you imply. a) Just because your home appears to go up in value doesn't mean that your home purchasing power has, if other homes have just done the same. b) It undermines local business because their workers increasingly cannot afford to live where they work. When rent in a 2 bedroom in an industrial town like Hamilton creeps up to $3000, we've hit crisis proportions. c) it's not sustainable, and will eventually blow. What it shows is that there's no leadership at the top capable of making adult decisions.
- onlyrealcuzzo 3y ago
  No one is going to get re-elected if they pop a bubble on purpose. The system is pretty much designed not to make "adult decisions".
toyg 3y ago
> >60% of people own a home Er, no. According to this source [0], 66% of people live in owner-occupied houses. If you're a pennyless 20+ year old living with your parents, you're in that number but you're not owning anything - your boomer parents do. [0] https://madeinca.ca/homeownership-statistics-canada/ https://madeinca.ca/homeownership-statistics-canada/
- didgeoridoo 3y ago
  If you’re 20+ years old in 2023, your parents are most likely Gen X (1965-1980), not Boomer.
  - deleted 3y ago
    [deleted]
- onlyrealcuzzo 3y ago
  ~35% of Canadians 18-34 live with their parents. There's ~7.75M Canadians in that age group. There's ~8M children and ~30M total adults. So ~35% of ~25% of adults live with their parents. ~8%. Congratulations ~58% of Canadians own their own home (worst case) instead of ~60%. Not sure why kids living with their parents is any different than a married couple living together. Maybe the kid is going to inherit the house. Often times, the kid is living with the parents not out of necessity for the kid - but because the parents are the ones that need help. You're seeing what you want to see, and distracting yourself from the important part - majority rules, and the majority of people own homes - and a much larger majority of voters own homes. I'd be impressed if that ~58% doesn't become >64% when you look at voters.
  - toyg 3y ago
    > Not sure why kids living with their parents is any different than a married couple living together. Lol; because kids have no agency, of course. They didn't choose where to live and how, their name is not on the deed. They are disenfranchised from the system. > a much larger majority of voters own homes. I do not disagree there, but you ignore minorities at your peril. You don't need 50% of voters to create serious political turbulence; in fact, you don't even need 10%.
helloooooooo 3y ago
We have fixed mortgages. We also have variable. We do not have 30 year term mortgages, but only 5 year financial terms, and sometimes a 10 year.

Yeul 3y ago

The fact that prices go up means somebody can still afford to pay it. I live in a small, peaceful, free and rich enclave in Europe. People will keep immigrating here. Also the massive increase of "one-person households" doesn't help the housing stock. The last time housing prices tanked was in the 1980s and it coincided with a deep recession and high unemployment. So be careful what you wish for.

Our_Benefactors 3y ago
What about 2008? Was it worse in the 80s?
dragonwriter 3y ago
[deleted -- too quick interjection with US analysis where not applicable]
- randomdata 3y ago
  How did you determine which European enclave he lives in in order to know that its housing market tanked in 2007?
happyraul 3y ago
I'm not sure the fact that somebody can afford to pay it is a good argument. Do we really want more landlords/more concentration of wealth and power in fewer hands?

supertrope 3y ago

Central banks generally have a mission of keeping money supply growth in line with growth of the economy. They’re not authorized to spend money on a government program (for example subsidized affordable housing) or change local laws (loosening zoning). I do agree COVID-19 crisis response zero interest rate policy contributed to bidding up the price of housing even further.

FirmwareBurner 3y ago
>I do agree COVID-19 crisis response zero interest rate policy contributed to bidding up the price of housing even further. Something known beforehand and by deign.
cmrdporcupine 3y ago
> They’re not authorized to spend money on a government program Not sure how you got the idea I was advocating for that. I clearly pointed the finger at prov/fed gov't for that kind of thing, not the BoC. My problem is with holding the rates. It sent the wrong message. Inflation on basic goods remains high, and the housing market has not stabilized. In my opinion, the BoC responded to political pressure, and should not have.
- randomdata 3y ago
  > Inflation on basic goods remains high Not at the source level anymore, though. Things have already crashed hard there. Retail is still working off futures contracts from last year when prices were very high, so it is expected to be still high. Nothing happens overnight. However, that is not indicative of a long-term trend. Deflation is the greater risk in the near future as those older contracts start to expire and vendors start sharpening their pencils on the much lower new contracts. > the housing market has not stabilized It is true that the home ownership market is still falling (now down around 20% from the peak), but that is no doubt a promising indicator in the BoC's eyes. That will eventually relieve the rental market as well. Rents are extra high currently because people are holding off buying a home until the ownership market bottoms out, which has created a situation where more people are looking to rent than usual. > In my opinion, the BoC responded to political pressure CPI is the last leg in a long tour. While it may still look grim, all the leading indicators are telling a different story right now. From my perspective, the BoC responded to what is going on in the economy. Their actions are directed towards managing the future, not the present.

ajross 3y ago

> And somehow the public narrative has shifted so that high interest rates (not even actually high by historic standards) are to blame for the affordability problem, and not the bubble in housing prices that was created by low interest rates (compounded by low supply) in the first place. This is true, but tends to be overstated also. Here's a FRED graph of US data, showing median home price as a fraction of median household income: https://fred.stlouisfed.org/graph/?g=1aHX4 https://fred.stlouisfed.org/graph/?g=1aHX4 The ratio was ~4 through the 90's, jumped up to ~5 over the dot com boom, dropped back to 4.5 over the financial crisis, rose back to 5 through the recovery, and is now a little above 6 in the post-covid world. A 50% change in affordability over 30 years (or even the 19% rise since 2017) is a real effect. It's worth discussing and probably addressing. But it's not the disaster it's being presented as. In point of fact things are great right now. The global industrial economy is growing rapidly, inflation has largely halted, unemployment is low and still dropping, wages are rising. But no one wants to talk about that. Really the Big Story about economics news in the modern world is how shockingly disconnected public perception is from the metrics that we used to think drove it.

toyg 3y ago
> wages are rising. The problem is that wages are rising in absolute terms, but tanking or stagnating in relative ones. The rise is also very, very unevenly distributed; the top percentile are making great strides but the so-called "low skilled" are getting shafted badly.
- ajross 3y ago
  > The problem is that wages are rising in absolute terms, but tanking or stagnating in relative ones. Again, that's not true, at least not to the extent you think. It's a meme. It's something you believe because everyone else believes it. > the top percentile are making great strides but the so-called "low skilled" are getting shafted badly. Tell that to the UAW and the monster contract they just negotiated. Or the minimum wage laws that keep getting passed in almost every major metro area. (Again, this is all US stuff because those are the facts in my head, but this is a global phenomenon). I mean, how about you personally: are you personally making more or less in nominal terms than you were ~6 years ago. By how much? If it's not less than the 26% rise in CPI inflation since then, you are doing better, not worse. Again, the data doesn't support your impression. It just doesn't. And I find it absolutely fascinating that these impressions persist in the complete absence of evidence.