61–70 of 161 posts
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It’s because interest rates are so low. A combined income of $225 can easily afford a $1m home at todays rates.
Canada doesn't have a 30-year fixed rate mortgage, though. So anyone making that trade better be betting that interest rates never go up...
Meanwhile in Toronto a house is $1m+ while salaries are 100k-150k.
That's driven by the farmland bubble. Southern Ontario farmland prices are up 700% since the mid-2000s, which has priced urban sprawl out of the market. With Toronto (i.e. the cities around the City of Toronto) unable to expand like they once were able able to, that has increased buying pressure on the land that is already within the city limits, thereby also driving up the cost of housing in those cities. While Cana…
>The gigantic gains seen, which bring up the country average, are limited to the prime agricultural areas, namely Toronto and Vancouver, where farmers are now willing to pay more than developers for undeveloped land. Something that is historically unusual.
Why is farmland in those areas so sought after? Were canadian farmland historically underpriced? Is the land just really good farmland? Are speculators buying it because of global warming?
Earlier quoted context omitted.
Canada doesn't have a 30-year fixed rate mortgage, though. So anyone making that trade better be betting that interest rates never go up...
Aren’t the rates fixed? If not then it’s a fairly ridiculous trade to take on. If no one has a fixed rate then without massive inflation any kind of interest surge will decimate the country.
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Aren’t the rates fixed? If not then it’s a fairly ridiculous trade to take on. If no one has a fixed rate then without massive inflation any kind of interest surge will decimate the country.
If that is the case, then banks in US are taking the same "ridiculous" trade by offering fixed rates to almost everyone, and will be decimated by any kind of interest surge. It's not clear to some countries stick almost exclusively to fixed rate mortgages, and others stick almost exclusively to variable rates, but the people in "variable rate countries" have saved a lot of money historically.
Fixed rates are always a better option for the person borrowing the money as you can refinance if rates go lower, lowering your monthly payment.
Variable rate loans are far more regulated for a reason.
I can't wait for the housing prices to go down, but there is no sign they will in France. They kept going up, even during the covid crisis.
You just described every bubble. The whole point of bubbles is that you can't predict when they'll pop.
Earlier quoted context omitted.
Aren’t the rates fixed? If not then it’s a fairly ridiculous trade to take on. If no one has a fixed rate then without massive inflation any kind of interest surge will decimate the country.
Wonder if we’ll have bailouts for the banks or homeowners if interest rates go up. I’m not confident the answer is no.
What you can’t have is millions of bag holders underwater with mortgages on homes valuations cut in half.
Earlier quoted context omitted.
Canada doesn't have a 30-year fixed rate mortgage, though. So anyone making that trade better be betting that interest rates never go up...
I lot of people have been making that bet and they haven't been wrong so far.
Honestly I’m of the opinion we won’t see any serious rise in rates. Too many mortgage holders and indebted governments would be broken.
Just look at the last month. The Fed threatens a few hikes that would push a 10 year bond to 2.5-3% and the market crashes.
Meanwhile in Toronto a house is $1m+ while salaries are 100k-150k.
Earlier quoted context omitted.
That's driven by the farmland bubble. Southern Ontario farmland prices are up 700% since the mid-2000s, which has priced urban sprawl out of the market. With Toronto (i.e. the cities around the City of Toronto) unable to expand like they once were able able to, that has increased buying pressure on the land that is already within the city limits, thereby also driving up the cost of housing in those cities. While Cana…
>That's driven by the farmland bubble. [...] >The gigantic gains seen, which bring up the country average, are limited to the prime agricultural areas, namely Toronto and Vancouver, where farmers are now willing to pay more than developers for undeveloped land. Something that is historically unusual. Why is farmland in those areas so sought after? Were canadian farmland historically underpriced? Is the land just real…
Further, the way into these sectors is to buy what we call quota. Dairy farmers in Ontario imposed a price cap on quota back in 2006 in an effort to make it accessible to young farmers. While the fair market value of quota has likely doubled in the meantime, the maximum price you can pay is what it was in 2006. This means that there is even more cash floating around, that historically would have been tied up in quota purchases, in which to buy farmland with.
2. Increased profitability in agriculture in general. The US ethanol subsidy program of 2007 set the stage for significant increases in the price of field crops. As that program winded down and prices were coming back down, the US midwest got hit with three major weather events over the intervening years that decimated their crops, boosting prices again for those who had one. Not to mention that the US Farm Bill has been modified over the years to be more favourable to foreign countries like Canada.
Because that's the nature of bubbles? Though bubbles are a bad analogy: actual bubbles burst, economic bubbles deflate - not because of a puncture, but because they were continuously filled with air from a source that at some point can't provide it anymore.
Don't they burst because the source doesn't stop before the bubble gets larger than what it can be? The source stopping would just lead to a deflation where it slowly gets smaller if the air hole is still open, or remain the same size until tiny leaks make it not be the same size anymore.