Quote:
Originally Posted by Slava
This is exactly why the BoC has such an incredibly difficult job. The past 6-7 years have seen prices sky rocket in two markets. So, naturally, pundits (largely Americans in the finance realm) see this as a Canadian home price bubble. The central bank should raise rates to quell this. Makes sense.
The problem is everywhere on the prairies would’ve been absolutely crushed. We had no growth from about 2015 until 2021, or growth that was far from concerning.
What’s a central banker to do? You can’t raise rates to deal with two white-hot markets. But you let those run wild and run the risk of a bubble popping instead of slowly deflating. A very unenviable decision.
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I don't think the bank of canada is responsible for worrying about housing prices. They worry about inflation so housing does 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.