Canada Housing Bubble Avoids Crash

[Economy 52,837]

https://www.google.ca/amp/s/business.financialpost.com/real-estate/canadas-housing-market-shows-increasing-signs-of-soft-landing/amp

 

What was feared for over a decade did not materialize, and the soft landing legislators sought very hard became reality

 

After several rounds of lending and downpayment rule tightening, credit quality has gone up, delinquencies stayed low, and home prices stopped rising

 

Sales volumes are rising but prices are falling at about 1% per year (3% when adjusted for inflation) yet with rising incomes and wages affordability is improving

 

Interest Rates continue to rise and regulators suggested once rates get high enough the new 2% higher than you get rate stress test rule could be removed and keep market stable

 

Experts say tight supply and high immigration/population growth prevented a US style crash by keeping demand chronically high

[Lord Temptation 11,209]

Guess selling all that discounted oil paid off! Maybe this is proof that the oil was overpriced for too long to begin with (factoring transportation costs)

Btw here in Oz house prices have fallen for the third straight quarter. Values are down by 10% in Sydney and about 6% in Melbourne. While over on the Indian ocean coast Perth has suffered 30% falls in the last 3 years.

Once the world catches on to Australian property crashing, there will be no escape. 2020s Depression here we come! 

[Economy 52,837]

3 hours ago, Lord Temptation said:

Guess selling all that discounted oil paid off! Maybe this is proof that the oil was overpriced for too long to begin with (factoring transportation costs)

Btw here in Oz house prices have fallen for the third straight quarter. Values are down by 10% in Sydney and about 6% in Melbourne. While over on the Indian ocean coast Perth has suffered 30% falls in the last 3 years.

Once the world catches on to Australian property crashing, there will be no escape. 2020s Depression here we come! 

Oil wasn't overpriced. It's sold at a big discount because we do not have enough pipeline space

 

Anyway I don't think oil had anything to do with the soft landing. There were many factors at play

 

And hopefully housing will stabilize there.

 

I'd like to see further cooling in Canada cuz the biggest markets are still expensive AF

[Lord Temptation 11,209]

7 hours ago, Economy said:

Oil wasn't overpriced. It's sold at a big discount because we do not have enough pipeline space

 

Anyway I don't think oil had anything to do with the soft landing. There were many factors at play

 

And hopefully housing will stabilize there.

 

I'd like to see further cooling in Canada cuz the biggest markets are still expensive AF

We all crave a little bit of stability. Not too much though! Sometimes it’s good for the heartbeat to get lost on a wild ride 

[Economy 52,837]

3 hours ago, Lord Temptation said:

We all crave a little bit of stability. Not too much though! Sometimes it’s good for the heartbeat to get lost on a wild ride 

Yeah. If prices keep falling at 1% to 3% a year, sales volumes remain stable and incomes keep rising... We might really be off the hook for good

 

By most measures our housing bubble and consumer debt was more inflated than the US housing bubble that led to the crisis

 

- USA peak housing prices: 7X annual incomes

Canada peak housing prices: 9X annual incomes

- USA Peak Consumer debt: 134% of disposable income

- Canada peak consumer debt: 174% of disposable income

 

#1 But our lending rules and downpayment rules were stricter to avoid buyers that might default. 

 

#2 because of the slow world recovery after great recession interest rates are going up more slowly this time around giving housing market more time to adjust

 

#3 we did not get over construction like the US cuz rapid population growth kept vacancy rates low so demand continues to support prices and prevent a crash

 

#4 we had rules added to stabilize market like max amortization reduced to 25 years and a stress test (you gotta qualify for a rate 2% higher than what you actually get and pay)

 

All that prevented the bubble from bursting. So far it's deflating slowly which is awsome

 

 

 

[Lord Temptation 11,209]

38 minutes ago, Economy said:

Yeah. If prices keep falling at 1% to 3% a year, sales volumes remain stable and incomes keep rising... We might really be off the hook for good

 

By most measures our housing bubble and consumer debt was more inflated than the US housing bubble that led to the crisis

 

- USA peak housing prices: 7X annual incomes

Canada peak housing prices: 9X annual incomes

- USA Peak Consumer debt: 134% of disposable income

- Canada peak consumer debt: 174% of disposable income

 

#1 But our lending rules and downpayment rules were stricter to avoid buyers that might default. 

 

#2 because of the slow world recovery after great recession interest rates are going up more slowly this time around giving housing market more time to adjust

 

#3 we did not get over construction like the US cuz rapid population growth kept vacancy rates low so demand continues to support prices and prevent a crash

 

#4 we had rules added to stabilize market like max amortization reduced to 25 years and a stress test (you gotta qualify for a rate 2% higher than what you actually get and pay)

 

All that prevented the bubble from bursting. So far it's deflating slowly which is awsome

 

 

 

Then perhaps there is no more bubble? Fingers crossed. I mean i joke about it because it’s only speculation (and i love history). But it does seem that depressions happen once every century. It would suck big time if it happened but the last one was 90 years ago. So hopefully we DON’T get a depression in the 2020s. We have China as a counterbalance to US dependancy, which is something that didn’t exist in the 1930s (or even 2008 when Goldman sachs collapsed). There are alot more variables this time round than compared to even ten years ago (Bitcoin and other cryptocurrencies being a prime example). I’m not here to debate their usefulness, just illustrating how different our world is today compared to the 30s, 80s or 2000s. It seems information overload (entropy in both the thermodynamic AND data sense) only increase with the passage of time. Yet our brains are still the same.

[Economy 52,837]

3 hours ago, Lord Temptation said:

Then perhaps there is no more bubble? Fingers crossed. I mean i joke about it because it’s only speculation (and i love history). But it does seem that depressions happen once every century. It would suck big time if it happened but the last one was 90 years ago. So hopefully we DON’T get a depression in the 2020s. We have China as a counterbalance to US dependancy, which is something that didn’t exist in the 1930s (or even 2008 when Goldman sachs collapsed). There are alot more variables this time round than compared to even ten years ago (Bitcoin and other cryptocurrencies being a prime example). I’m not here to debate their usefulness, just illustrating how different our world is today compared to the 30s, 80s or 2000s. It seems information overload (entropy in both the thermodynamic AND data sense) only increase with the passage of time. Yet our brains are still the same.

I don't think there's a pattern to depressions the US had one in 1870s I think it was so 1929 is 60 years later now it's 90 years... It's not like a clock work but who knows. I hope we don't get a depression either

 

As for our bubble perhaps there is no bubble yeah... High home prices could simply be low vacancy rates at this point (supply and demand) and not a result of speculation

[Lord Temptation 11,209]

1 hour ago, Economy said:

I don't think there's a pattern to depressions the US had one in 1870s I think it was so 1929 is 60 years later now it's 90 years... It's not like a clock work but who knows. I hope we don't get a depression either

 

As for our bubble perhaps there is no bubble yeah... High home prices could simply be low vacancy rates at this point (supply and demand) and not a result of speculation

Economists have a definition for recession (two consecutive quarters of negative growth) but not for depression. I doubt there has only ever been one in all of history, or that there will be no more. Statistically if it can happen once it can happen again - and be much worse. Australia had it’s most severe banking recession in the 1890s but it led to the creation of Federation uniting the former colonies into one Commonwealth. So that was a good thing. During the Depression we built the Sydney Harbour Bridge, which was the largest arch bridge in the world at that time. It’s too simplistic to say categorically that “Depressions are bad” or “Recessions are bad”. Often, they lead to unity, creativity and ultimately bring out the best in people. It’s not just a morality tale of good vs evil. People always underestimate their capacity to thrive when under pressure. Whether or not another “Great Recession” or “New Depression” happens is kind of arbitrary. If it does happens though, it will be unlike any other crisis: we might see hyperinflation, mass unemployment, food wars, water wars, internet wars....the list goes on. That’s our fault for championing “progress” through technology - we have made the world economy too big to fail.

[Economy 52,837]

32 minutes ago, Lord Temptation said:

Economists have a definition for recession (two consecutive quarters of negative growth) but not for depression. I doubt there has only ever been one in all of history, or that there will be no more. Statistically if it can happen once it can happen again - and be much worse. Australia had it’s most severe banking recession in the 1890s but it led to the creation of Federation uniting the former colonies into one Commonwealth. So that was a good thing. During the Depression we built the Sydney Harbour Bridge, which was the largest arch bridge in the world at that time. It’s too simplistic to say categorically that “Depressions are bad” or “Recessions are bad”. Often, they lead to unity, creativity and ultimately bring out the best in people. It’s not just a morality tale of good vs evil. People always underestimate their capacity to thrive when under pressure. Whether or not another “Great Recession” or “New Depression” happens is kind of arbitrary. If it does happens though, it will be unlike any other crisis: we might see hyperinflation, mass unemployment, food wars, water wars, internet wars....the list goes on. That’s our fault for championing “progress” through technology - we have made the world economy too big to fail.

Countries like Canada and Australia would likely see deflation in a depression. Depressions tend to cause deflationary pressures

 

Countries that are so bad financially that are forced to print money or default, those are the ones that get hyper inflation

 

Canada and Australia both have very low government debt. Printing would be unlikely. So we'd likely see deflation like Japaan often has

[Lord Temptation 11,209]

1 hour ago, Economy said:

Countries like Canada and Australia would likely see deflation in a depression. Depressions tend to cause deflationary pressures

 

Countries that are so bad financially that are forced to print money or default, those are the ones that get hyper inflation

 

Canada and Australia both have very low government debt. Printing would be unlikely. So we'd likely see deflation like Japaan often has

Don’t know about Canada but Australia has low public debt BUT it has one of the highest private debts in the world, mostly tied to mortgages. The fact that property has fallen by 10% is definitely worrying for our Big 4 banks (basically an oligopoly) that collectively own 95% of the home loans. If one of them buckles they will all feel the squeeze. The big fear is that they ask for a bailout. There is already lots of scrutiny in the banking and insurance industry, so many scandals of malpractice have occurred in the last 10-15 years. There are calls for a Federal Corruption Commision because the banks blame the regulator (ASIC and APRA) but the regulators blame the banks as well as past Prime Ministers. So even though our banks avoided recession in 08-09, and delivered record profits in 15-16, they are all hanging by a thread. The situation is like a drought in a dusty woody area- the slightest “surprise bad news” can cause a wildfire panic. All eyes are on house prices. If they continue to fall again, then the dominoes and the knives will be out (many people complain that Australia’s record immigration intake - not unlike Canada’s - has made Sydney and Melbourne unliveable or downright unaffordable for young and elderly people)

[Woolfsmck 2,763]

Saudi's cut oil exports to US ...should be a plus for Canada

[Economy 52,837]

35 minutes ago, Woolfsmck said:

Saudi's cut oil exports to US ...should be a plus for Canada

Yeah... And how do we sell more oil without you know... A way to sell it...

 

Ahem pipelines.... Trains are full too

[Economy 52,837]

5 hours ago, Lord Temptation said:

Don’t know about Canada but Australia has low public debt BUT it has one of the highest private debts in the world, mostly tied to mortgages. The fact that property has fallen by 10% is definitely worrying for our Big 4 banks (basically an oligopoly) that collectively own 95% of the home loans. If one of them buckles they will all feel the squeeze. The big fear is that they ask for a bailout. There is already lots of scrutiny in the banking and insurance industry, so many scandals of malpractice have occurred in the last 10-15 years. There are calls for a Federal Corruption Commision because the banks blame the regulator (ASIC and APRA) but the regulators blame the banks as well as past Prime Ministers. So even though our banks avoided recession in 08-09, and delivered record profits in 15-16, they are all hanging by a thread. The situation is like a drought in a dusty woody area- the slightest “surprise bad news” can cause a wildfire panic. All eyes are on house prices. If they continue to fall again, then the dominoes and the knives will be out (many people complain that Australia’s record immigration intake - not unlike Canada’s - has made Sydney and Melbourne unliveable or downright unaffordable for young and elderly people)

Canada is just like Australia in the debt situation. Low Government debt but high consumer and private debt

 

Actually both Canada and Australia are the only 2 Nations in the world where consumer debt is over 100% of GDP (more than the annual economic output) so we are in the exact same boat

 

Our banks are highly capitalized in cash reserves due to our regulations tho so in that sense were a bit better off than Australia

[Lord Temptation 11,209]

5 hours ago, Economy said:

Canada is just like Australia in the debt situation. Low Government debt but high consumer and private debt

 

Actually both Canada and Australia are the only 2 Nations in the world where consumer debt is over 100% of GDP (more than the annual economic output) so we are in the exact same boat

 

Our banks are highly capitalized in cash reserves due to our regulations tho so in that sense were a bit better off than Australia

I love how similar we are! But unlike Canada we don’t really have a back up plan...we literally have one big fat egg (our mortgage) in one of four big fat baskets. Our internet speeds are slow af and we pay more for alcohol than any other OECD country. Like i almost feel our country is a miracle how it survives with such dysfunctionality. We’ve sold most of our agricultural land, closed most of our factories. We literally have nothing to sell except houses !!!!

[Economy 52,837]

4 hours ago, Lord Temptation said:

I love how similar we are! But unlike Canada we don’t really have a back up plan...we literally have one big fat egg (our mortgage) in one of four big fat baskets. Our internet speeds are slow af and we pay more for alcohol than any other OECD country. Like i almost feel our country is a miracle how it survives with such dysfunctionality. We’ve sold most of our agricultural land, closed most of our factories. We literally have nothing to sell except houses !!!!

Sounds like Canada so reliant on housing tho manufacturing has been rebounding but no where near enough we are still in trade deficit

 

We could make a lot more money with oil but environmentalists have successfully blocked all our attempts to build more pipelines so we don't sell at such big discounts

 

We loose billions in tax revenue a year cuz of that non-sense