*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[Azure]

Real estate inventors are not going to go 'out' of the market once rates come down.

The increase in rates hasn't necessarily brought prices down or even done major damage to the market nor discouraged investment enough to create some hurt.
We are still sitting on what most call a massive bubble.

Things we know to be true.

There is a still a massive supply issue.
There is still massive demand.
Prices are still inflated and rates are not driving them down enough.
Our market still allows for investment firms to buy up real estate which creates a massive issue for the everyday Canadian.

From what I can tell the government is doing absolutely nothing to solve any of those things.

But yes, inflation is coming down, seemingly. Of course if you ask the normal person on the street still struggling to pay rent / mortgage, groceries, utilities, they'd probably disagree.

As the argument goes, cost of living might be going down a bit, but can't find a home to live in, or can't make payments on the one we have.

[Slava]

^ Well no, the cost of living is not going down. The rate it’s rising is less than it was, but prices are still rising. This is the biggest issue when you talk about inflation and the rates dropping because people see that prices are still going up.

[GGG]

Originally Posted by calgarygeologist

I'm not sure what good comes out of removing mortgage interest from CPI other than turning a blind eye on a bad situation.

It’s not Turing a blind eye though. It’s setting policy based on the things the policy rate can control. If mortgage interest is driving 90% of inflation you know it’s transitory and you wouldn’t raise or lower interest rates to fight it.

The goal is avoiding persistent high inflation.

[Winsor_Pilates]

Originally Posted by Slava

How is the market there? I thought that prices had come down considerably over the past year or two there, but maybe it’s still a supply issue?

GTA prices overall Jan 2023 to Jan 2024 are relatively unchanged; though they had gone up and back down at the end of 2023.
People overestimate price decreases when sales decrease. It takes a prolonged down market for pricing to really fall.
Detached housing Jan 2023 to Jan 2024 are actually up in price.

Jan 2024 sales are about 32% higher than Jan 2023 & 27% higher than Dec 2023.
From what I'm hearing from Toronto colleages is things are moving again and supply is crunched depending on location and property type.

[Sidney Crosby's Hat]

I'm no economist, but this is how I understand it:

If housing prices go up (due to actually going up as a result of lower general interest rates or people being forced to re-up their mortgage at a higher fixed interest rate as the pandemic rates start to come due), won't that actually create a downward pressure on inflation (non-housing related) because people will have less disposable income?

Sure, maybe actual inflation numbers would be higher because people are paying more for their mortgages than they were before, but Bank of Canada raising interest rates would probably really hurt the economy in that case, right?

[#-3]

Originally Posted by Sidney Crosby's Hat

I'm no economist, but this is how I understand it:

If housing prices go up (due to actually going up as a result of lower general interest rates or people being forced to re-up their mortgage at a higher fixed interest rate as the pandemic rates start to come due), won't that actually create a downward pressure on inflation (non-housing related) because people will have less disposable income?

Sure, maybe actual inflation numbers would be higher because people are paying more for their mortgages than they were before, but Bank of Canada raising interest rates would probably really hurt the economy in that case, right?

In general the two problems I can see with this theory are how renters fit into the mix, when you have home owners with fixed mortgages costs, and an escalating rent market because of rising interest rates, you could actually end up cycling more money through the economy in the short term.

Second wage responses. Mortgages and Rents are such sticky payments, that people are more willing to risk demanding wage increases, or move to higher paying jobs than to lose their house, which it the actual cycle the BOC was worried about. It's one thing to see the CPI up for a period of time, but spiraling wage increase, cause that to continue in a way that is hard to stop, and because people benchmark price expectations over ~18 months, if you can't slow inflation for a period of ~18 months before an election, the chances of turning over a sitting government are much much higher.

[Firebot]

.double post

[Firebot]

Wrong thread, but rates stayed the same again current announcement

[blankall]

Originally Posted by #-3

In general the two problems I can see with this theory are how renters fit into the mix, when you have home owners with fixed mortgages costs, and an escalating rent market because of rising interest rates, you could actually end up cycling more money through the economy in the short term.

Second wage responses. Mortgages and Rents are such sticky payments, that people are more willing to risk demanding wage increases, or move to higher paying jobs than to lose their house, which it the actual cycle the BOC was worried about. It's one thing to see the CPI up for a period of time, but spiraling wage increase, cause that to continue in a way that is hard to stop, and because people benchmark price expectations over ~18 months, if you can't slow inflation for a period of ~18 months before an election, the chances of turning over a sitting government are much much higher.

To add to this. The concept of a "renter" has changed in Canada. In the major cities there are now a large group of lifetime renters. Families and individuals that will never own a home. This has been common in Europe but is only now occurring in large rates in North America.

[timun]

On the contrary, historically home ownership was much lower than it is now. In Toronto home ownership peaked about 15 years ago, a shade under 70% (source). In the late 19th century the rate was less than 30% (source, see Table 1 on page 11; PDF). For the first 300ish years of European settlement of what we now call Canada, home ownership was overwhelmingly concentrated in the hands of wealthy landlords.

[greyshep]

Originally Posted by timun

On the contrary, historically home ownership was much lower than it is now. In Toronto home ownership peaked about 15 years ago, a shade under 70% (source). In the late 19th century the rate was less than 30% (source, see Table 1 on page 11; PDF). For the first 300ish years of European settlement of what we now call Canada, home ownership was overwhelmingly concentrated in the hands of wealthy landlords.

Are those wealthy landlords now renamed 'banks'?

[blankall]

Originally Posted by timun

On the contrary, historically home ownership was much lower than it is now. In Toronto home ownership peaked about 15 years ago, a shade under 70% (source). In the late 19th century the rate was less than 30% (source, see Table 1 on page 11; PDF). For the first 300ish years of European settlement of what we now call Canada, home ownership was overwhelmingly concentrated in the hands of wealthy landlords.

You need to take into account ownership vs age. Millennials, who are the ones largely having children now, have very low ownership rates:

https://www.zoocasa.com/blog/canadia...ational-guide/

The younger you get, the more affected by increased housing prices you are, with home ownership rates actually increasing, over the last 10 years, for those aged 75-84.

[bizaro86]

Originally Posted by blankall

Yhome ownership rates actually increasing, over the last 10 years, for those aged 75-84.

This seems shocking to me, so much so that I wonder if the underlying cause is actually people who have major health problems/chronic diseases (and thus being more likely to die young) being more likely to be renters.

I'd be interest to know if it was the numerator or denominator changing there - ie are there a lot of 80 year old first time homebuyers (seems unlikely to me?) or is the percentage of that group that owns homes going up because the renters are dying faster.

[blankall]

Originally Posted by bizaro86

This seems shocking to me, so much so that I wonder if the underlying cause is actually people who have major health problems/chronic diseases (and thus being more likely to die young) being more likely to be renters.

I'd be interest to know if it was the numerator or denominator changing there - ie are there a lot of 80 year old first time homebuyers (seems unlikely to me?) or is the percentage of that group that owns homes going up because the renters are dying faster.

Yeah, I doubt people are buying new homes. It's likely an issue of baby boomers having very high home ownership rates and more of that cohort reaching age 74+.

But yes, there is a link between life expectancy and wealth.

Interestingly enough, in the USA, millennial home ownership rates are on the rise:

https://www.cnbc.com/2023/11/06/stat...20of%2051.5%25.

51%


Canada's young adults ability to purchase homes was also strongly correlated with whether or not their parents owned homes:

https://financialpost.com/news/mille...ly-to-own-home

[CliffFletcher]

Originally Posted by bizaro86

This seems shocking to me, so much so that I wonder if the underlying cause is actually people who have major health problems/chronic diseases (and thus being more likely to die young) being more likely to be renters.

I'd be interest to know if it was the numerator or denominator changing there - ie are there a lot of 80 year old first time homebuyers (seems unlikely to me?) or is the percentage of that group that owns homes going up because the renters are dying faster.

The Boomers and Silent Generation had higher wealth and home ownership rates than the generations that came before them. They’re hanging onto those homes and living longer. Canadian planners assumed that as the Canadian population aged, older generations would downsize and sell off their homes, freeing up detached SFHs. Hasn’t happened.

Timun’s point is well taken. We assume most Canadians have always been homeowners. But in the first half of the 20th century most people rented. Single people typically rented rooms in boarding houses. That was true of young unmarrieds and older bachelors/spinsters alike. It wouldn’t surprise me if the home ownership rate of single 35 year olds today is higher than it was in the 20s-50s.

[you&me]

Plus, the Millenials will get their turn at home ownership - albeit later than previous generations - when they're on the receiving end of the largest transfer of wealth in history.

[CliffFletcher]

Originally Posted by you&me

Plus, the Millenials will get their turn at home ownership - albeit later than previous generations - when they're on the receiving end of the largest transfer of wealth in history.

People today typically don’t inherit until their mid-to-late 50s. A bit late to buy your first home. So that massive wealth transfer will likely help pay for the retirements of Gen X and Millennials, with some of it skipping a generation to help Gen Z get on the housing ladder.

[timun]

Originally Posted by blankall

You need to take into account ownership vs age. Millennials, who are the ones largely having children now, have very low ownership rates:

https://www.zoocasa.com/blog/canadia...ational-guide/

The younger you get, the more affected by increased housing prices you are, with home ownership rates actually increasing, over the last 10 years, for those aged 75-84.

I get the point you're making, I was just pointing out that the remark "This has been common in Europe but is only now occurring in large rates in North America," isn't entirely accurate. It's not "only now occurring": it used to be the norm. Home ownership steadily rose from through "Lost" Generation, Greatest Generation, Silent Generation and Baby Boomers, and has been on a slow downfall for Gen X, Millennials and Gen Z.

[Jason14h]

Originally Posted by you&me

Plus, the Millenials will get their turn at home ownership - albeit later than previous generations - when they're on the receiving end of the largest transfer of wealth in history.

Isn’t every wealth transfer (generational) the new largest wealth transfer ever?

[Slava]

And millennials are 40 year olds now. Plenty of millennials own homes, have kids and basically everything else we heard they’d never do.