Quote:
Originally Posted by PeteMoss
I don't think the bank of canada is responsible for worrying about housing prices. They worry about inflation so housing doesn't factor in - but housing prices were going up like mad and they didn't alter interest rates until after overall inflation rose.
And yes - housing prices are going down but they aren't any more affordable for any first time home buyer now.
If you bought a $500,000k house with a 5% down payment when mortgage rates were 1.5% - you were paying about $2000/month.
If the same house went down 20% to $400,000 now and you are making the same $25k down payment - you are now paying $2200/month at 4.59% interest.
And I don't think the lower end homes that first time home buyers typically buy have gone down anywhere near 20% yet.
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You are incorrect about housing being factored into inflation. However you are correct about affordability.
The lack of affordability is being driven by increasing population and lack of supply. Baby boomers aren't leaving their larger houses, millennials are the biggest cohort ever, Canada is adding 400k immigrants per year, housing expansion and densification is abysmal. On top of that he pandemic further delayed building.
Canada has the lowest number of houses per capita in the G7 and one of the highest birth and immigration rates. Canada also has by far the lowest population density in the G7, so it's actually impressive how effective our red tape has been at destroying people's lives and denying them a basic right.
With a housing shortage, no matter how they manipulate rates or inflation, it will always become increasingly unaffordable. We might see some price drops, but only because mortgage payments have increased. The idea that you can make housing affordable via increasing interest rates is absurd. In fact that only helps people with large amounts of capital.