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.
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.
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.
>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.
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.
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.
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%.
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.
The system is pretty much designed not to make "adult decisions".
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.
The last time was 2007 (market peak in 2007Q1), and it coincided with the deepest recession since thw Great Depression; not only was the 1980s not the last time, but it would be hard to charcaterize any drop in the 1980s, even around the recession at the beginning of the period, as “tanking” (and if it was, a lot of the fluctuations during the subsequent expansions were “tanking”, too.)
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
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.
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.
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.
For the record, I currently make what I was making 6 years ago in absolute terms (pathetic, I know), but I am just about in the top 10% of wage-earners in the country I live in (UK), so it doesn't really matter.
As far as I know, the story is not particularly different across the big European countries.
Yes! Exactly! This is the disconnect right here. First: real wage growth is always a good thing. It's not always above zero, by definition. Sometimes real wages contract. This i good news you're posting.
And specifically it's historically good news: making a reasonable assumption about your age, wages are growing faster for your market right now than they have at any time in your career so far.
And... you're trying to spin that... as... "bad" news? Seriously, how?
Again, this is a meme. Someone sold you a line and you bought it. Seriously, what number do you think should be in that box to make you happy if "best in two decades" doesn't qualify?
Not good news, it's "slightly better than it could be" news.
> wages are growing faster for your market right now than they have at any time in your career so far.
Best in two decades doesn't mean "best in the postwar era", which is the usual horizon for labor conditions. And yeah, having started working in 2000, I've been blessed with real-terms wage stagnation for most of my working life. What luck! Why am I not grateful to unbridled capitalism?!?
The average over 160 years has been above 2%, and between 1950 and 2008 we've sailed close to double digits at times. This in a situation where, obviously, return from capital grew at much higher rates, increasing inequality - so hardly ideal, but decent.
> What fraction of historical workers have lived under those conditions?
The modern economy was effectively forged with Bretton Woods. Wages hit the brakes in the mid '90s, so for roughly 50 years workers had it decent - not always great, but decent. The subsequent 25 years have sucked. Here in UK we kinda papered over the cracks with an increase in public service provisions until roughly 2008, and it's been effectively "managed impoverishment" since then.
I just don't know what you want. You're doing well relative to your recent compatriots and very acceptably relative to your ancestors. You're fine. If you can't find a way to be happy with that kind of wealth, well, that's on you and not macroeconomics. There's clearly no number someone can give you that's going to make you happy.
[1] Which seems awfully cherry picked. It moves the boundary all the way back to before the industrial revolution. Surely you'd agree that the turn of the century was a huge economic outlier, no?
[2] Not 2%, I can't find that number anywhere.
HN, Reddit, twitter and Facebook are all flooded with right wing bots.
The more fascinating part is why these platforms continue to enable clear bot presence.
Hilariously, HN limited my account on the basis of replying to these bots with actual facts, so get ready for your rate limit to fire up.
Here is a chart for Canada: https://nitter.net/pic/orig/media%2FE0PIr9kXoAQvbeR.jpg unfortunately only goes up to 2020. Things got even crazier in 2021/2022 (though have leveled off this fall, but just a bit)
Now tell me again how disconnected my thinking is. In Canada it actually is a disaster. We have people unable to make their rent (because naturally landlords are passing on inflated housing prices to tenants).
I don't know if Canada has an equivalent to FRED and I'm too lazy to do your research for you, but I'm 100% convinced that if you find a measurement in the right units (c.f. "median household income" that I used -- be sure that if you find a graph that is inflation-corrected ("real median household income" in FRED-speak) that you use corrected values for both your data points!) you will find that Canada and the US look broadly the same throughout the past century or so.
I mean, come on. You guys are literally right there, we read the same media. You really think that if things were that different we wouldn't notice? You don't think americans whine about housing prices too?
It still remains the case that housing prices in Canada did not go through the downward correction that US housing prices did in 2008. That and our immigration rates are very high, so pressure from population growth has also been high.
I gotta get back to work, so can't go hunting for raw data right now. I think you'll find though that US and Canadian data don't co-relate in the way you're assuming they should.
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.