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Baby, we got a bubble!?

You do realise that deflation negatively affects wages, right? It's not some sort of magic Boxing Week Sale kill switch.

Do you know that inflation erodes the purchasing power of the middle class and anyone who has the sense to save (yeah a forgotten concept in this debt binge house of cards economic we have nowadays).

Do you know that the cost of things that one needs to survive and sustain life has risen exponentially while incomes have gone nowhere?

When I graduated university in 1999, the starting salary of an Engineer was roughly 50K (mine was 55K). Today, its maybe 55-60 (undergrad degree).

Lets see now, I paid $3800 tuition in my last year of a electrical engineering degree from Ontario University in 1999. My starting salary was was 55K. In the same year I graduated, my parents bought their home in a northern Toronto suburb for 280K. Now that house sells for 1.4-1.6m.

Recap:

1999 Starting Salary for undergraduate level Engineer: 50K
1999 Tuition full year Electrical Engineering: $3.8K (my first year tuition cost = 1.8K)
1999 Toronto suburb detached home (2500 sqft): $280K

2017 Starting Salary for undergraduate level Engineer: 60K
2017 Tuition full year Electrical Engineering: $12.2K (first year tuition cost)
2017 Toronto suburb detached home (2500 sqft): 1.4-1.6m

Note: the tuition numbers do not include cost of books, which has also risen exponentially.

Inflation has done a great job hasn't it?

Incomes haven't done jack all while the cost of everything one needs to survive and thrive has ballooned.

No one needs a flat screen tv. People need a roof to live under, education, books, healthcare etc.
 
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We have had general inflation that has barely been 2%, that's part of the reason why wages haven't moved much....the exponential rise in home prices isn't reflective of that but rather of the low interest rates we've had for the last few years and demand pressures.
Look, I'm sorry that tuition has gone up so much, really I am as I plan on going back to school in three years, but to suggest that deflation is somehow good and that sudden 50% corrections in house prices are going to be all fine and holiday-like is delusion. Do you know what would happen to supply if prices drop by even 25%? How many people will sell a house for less than they paid for it? What will this do to the rental market?
I understand that house prices are overvalued, but wishing them away and hoping for the best shows a cavalier attitude I haven't experienced since I was in my 20s. It would be a bloody mess, for almost everyone.

This deflation as good idea.....very interesting. Never heard this before. The Japanese might find it funny as well.
 
Do you know that the cost of things that one needs to survive and sustain life has risen exponentially while incomes have gone nowhere?

Incomes haven't done jack all while the cost of everything one needs to survive and thrive has ballooned.

Yep. But executive salaries and government salaries have done quite well.

The unwashed masses are taking on more and more consumer and mortgage debt and/or being forced to rent at escalating rates, all while their salaries, savings, and benefits are being chipped at and eroded. The truly rich are accumulating massive salaries, bloated bonuses (even for incompetence and failure), gold-plated pension plans, and all the valuable land. Governments feign "concern" while collecting their considerable share of the loot.

It's the Great Canadian Wealth Swindle. When the music finally stops, guess who won't have a seat (and will foot most of the bill)? Millions of middle and lower--class Canucks, that's who.
 
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Do you know what would happen to supply if prices drop by even 25%? How many people will sell a house for less than they paid for it? What will this do to the rental market?

I'm only speculating, but I suspect it would dramatically increase supply. Right now there's almost no supply. I believe a big part of that is because stuff is so damn expensive, people can't afford to move so nobody is moving. Throw in there all the taxes and costs involved with buying/selling a new place. If prices started to plummet then a not insignificant number of people who would be underwater and quite possibly not able to refinance their mortgages. They would have no choice to sell. Plus there's others who were "holding out for the peak" who would rush to sell once they see prices starting to decline to try to maximize their sale price. Haven't listings spiked in Vancouver now that prices have been declining?

I'm not commenting on the deflation/inflation idea, just giving my 2 cents worth on your specific question.
 
There is a large supply of condos sitting empty. Owners of these units could be nudged to rent them out. The analysis in the link below suggests it is around 100,000 units, and this estimate does not include the many foreign owned never used condos because it is only based on census respondents. With rental rates rising, I predict rising outrage among renters that 1 in 3 homes in the city are being sold as never lived in. Will our elected leaders opt to do anything about it?

https://betterdwelling.com/city/tor...ied-homes-heres-where-they-are-interactive/#_

"Why Are They Empty?
I know what you’re thinking, foreign buyers! Well, foreign buyers aren’t usually census respondents so these are most likely domestic residents. AirBnB, pied-à-terre, or short-term renting are all uses I’ve heard from owners of multiple Toronto homes. The most popular reason however, is likely plain ole’ speculation. One of the consequences of living in a city with a red hot real estate market is flippers will hang on to inventory until they believe they’ve hit peak. In fact, a few months ago we observed that 1 in 3 homes in the city were being sold as never been lived in, despite many having been built a few years ago.
"
If we add in foreign buyer empty units to the empty estimates from Census respondents, then the percentage is even higher.
 
Why would an investor, foreign or otherwise, allow a condo to sit empty rather than collecting rent? I've never understood this line of logic.
 
Condos sitting empty? Bloody hell, no wonder there's a dearth of listings for April occupancy. Literally not a single one currently available that fits my parameters. I'm talking Queen-Queens way to lake, Don to Park Lawn.
 
Do you know that inflation erodes the purchasing power of the middle class and anyone who has the sense to save (yeah a forgotten concept in this debt binge house of cards economic we have nowadays).

Do you know that the cost of things that one needs to survive and sustain life has risen exponentially while incomes have gone nowhere?

When I graduated university in 1999, the starting salary of an Engineer was roughly 50K (mine was 55K). Today, its maybe 55-60 (undergrad degree).

Food costs have risen exponentially? Speaking of things one needs to survive and sustain life. Seeing as neither tuition nor owning a home is necessary to survive and sustain life.

I'm a working class loser so I understand some of these frustrations. However, since 1999, my salary has more than tripled. Same employer, same job, though, I guess I've gotten a promotion in terms of scope of responsibilities in the last five years, but the trajectory of my wage gains has been steady.
Still can't afford to buy a home in Toronto, but I sure as hell can afford to finance my retirement savings, eat good and healthy food, go out once a week, go on holidays, buy clothing as I need it. You know, the important, necessary things to a healthy life.
Homes are overvalued and it has nothing to do with general inflationary trends because the rate of increase of home prices has been hugely superior to that of general inflation. I agree, we need a price correction, but precipitous price drops wouldn't help most people. Wishing for them in the range of 50% as has been mentioned above is a sort sick and selfish beggar-thy-neighbour mentality. I'm not upset that I can't afford to buy a home. It just simply is not by any means a necessity. It isn't now, hasn't been, and will never be.

We don't have the sort of inflation in this country that erodes purchasing power and savings. If anything, saving is currently disadvantaged because of the same low interest rates that have helped cause exponential home price increases, not because of our rather healthy 1.5-2% inflation.

Seriously, go ask the Japanese about deflation.
 
The numbers being quoted in the article are for "unoccupied by usual resident" not just unoccupied. Likely a huge portion of those units are occupied by students, where their usual residence is their parents address. If you look at the Metro areas with the highest percentage of these units, they are Kingston, London and Guelph, areas dominated by Universities.

On a percentage basis the share is lower in the Toronto CMA today than 10 years ago.
 
Food costs have risen exponentially? Speaking of things one needs to survive and sustain life. Seeing as neither tuition nor owning a home is necessary to survive and sustain life.

I'm a working class loser so I understand some of these frustrations. However, since 1999, my salary has more than tripled. Same employer, same job, though, I guess I've gotten a promotion in terms of scope of responsibilities in the last five years, but the trajectory of my wage gains has been steady.
Still can't afford to buy a home in Toronto, but I sure as hell can afford to finance my retirement savings, eat good and healthy food, go out once a week, go on holidays, buy clothing as I need it. You know, the important, necessary things to a healthy life.
Homes are overvalued and it has nothing to do with general inflationary trends because the rate of increase of home prices has been hugely superior to that of general inflation. I agree, we need a price correction, but precipitous price drops wouldn't help most people. Wishing for them in the range of 50% as has been mentioned above is a sort sick and selfish beggar-thy-neighbour mentality. I'm not upset that I can't afford to buy a home. It just simply is not by any means a necessity. It isn't now, hasn't been, and will never be.

We don't have the sort of inflation in this country that erodes purchasing power and savings. If anything, saving is currently disadvantaged because of the same low interest rates that have helped cause exponential home price increases, not because of our rather healthy 1.5-2% inflation.

Seriously, go ask the Japanese about deflation.

You sound like you have spent too much time with Paul Kugman.

You want to talk about food costs? While they have not risen as exponentially as housing, education, books, health care and energy, the cost of food has risen substantially in the past 10 years. Go read the following for starters: http://www.economicpolicyjournal.com/2017/02/the-20-grocery-items-driving-up-your.html. Secondly, have you heard of inflation by shrinking packaging? I suggest you have a study of that.

I love your quote: '...rather healthy 1.5-2% inflation'...

What items are you cherry picking into your basket to arrive at the 1.5-2% inflation? Ah, I forgot, you are probably using the statistics used by the Central Banks. Right - as if they are the authority on trustworthy data.

You've eliminated food, energy, housing, education, healthcare in your basket for convenience.

I challenge you to go to a parking lot of every factory in Ontario and take a survey on whether they feel that inflation has been a healthy 1.5-2%.

Ask the Japanese about deflation? Well, the last I checked, the Japanese unemployment rate is sitting at 3%, which is substantially lower than the US and Canada and they have magnetic levitating high speed rail connecting the country while we have none. Your argument also does not factor in the fact that this deflation in Japan is coming after a multi-decade boom in economic activity. So is that deflation warranted? Perhaps, if that boom resulted in mal-investment which every boom usually results in towards the end. The Japanese have their own problems and while deflation has been spoken to be a boogyman (usually by keynesians) it has not been as decimating as people describe it to be. The Japanese investor/saver actually earned a positive real rate of return on Japanese government bonds for the past 3 decades. A positive real rate of return on bonds... unheard of in the west.

Your arguments are akin to the following bail me out idea:

Person A followed the herd in an asset price boom and bought an investment portfolio at $100 when it was actually worth $50 or less.
Now Person A (and the herd) make arguments to reason why that portfolio should remain valued near $100 and support government policies to keep that portfolio valued near there because a decline would be a bad idea for most people.

Well, who told that person and the herd to go and buy that portfolio at $100 when it was actually worth 50% less? Get over it. No one wants to take responsibility for their decisions and actions. Everyone feels entitled to keeping their gains.

The vast majority of Canadian GDP growth in the past 10 years was due to the mal-investment in Housing. So I get it why people are so sensitive to a price drop. But honestly, get over it. Canadians aren't entitlement to a upward sloping home price environment forever.
 
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Putting individual experiences aside. There is enough research in this area, and it clearly shows that over the past 30-40 years there has been unprecedented growth and record levels of profits have been made, but this wealth has been concentrated at the top. This is because the real wages have either stagnated or stayed the same. This is especially true in the US but also in Canada. Adjusting the interest rate or adjusting mortgage lending rules have all been band-aid solutions. It will not resolve the core issue of income inequality and severe concentration of capital.

I really hope things improve because the majority of hard working contributing Canadians are just priced out of their home markets. It isn't just about that it, it is also about how such concentration of wealth serves as a detriment to our democracy and values.
 
Further to the discussion above about Toronto's serious problem of empty houses and condos --

B.C.’s empty home problem moving beyond just Vancouver
http://www.theglobeandmail.com/real...moving-beyond-just-vancouver/article34130746/

This informative article focuses on Vancouver area issues, but the same issues apply to our housing market. Rhetoric that limited supply is the problem ignore that many housing units are actually unoccupied. When are people in Toronto going to get pissed about 100,000 or more empty condos and houses? I know that the CBC has run several pieces on increasing rental costs, and a restricted supply due to empty units is likely a key factor.

three relevant quotes from the Globe piece--

"A “non resident” home is defined as either empty or occupied by a foreign or temporary resident. But most often, the units are empty. Of all the homes in the region that fall into the category, 87 per cent are unoccupied, according to an Urban Futures report."

"For many, empty or under-used homes are tangible proof of the commodification, or financialization, of housing. There are those who will argue that an increased supply is necessary to subdue the market, to remove the pressure of scarcity. However, housing markets in what Mr. Yan calls “hedge cities,” such as Vancouver, are fuelled by an unprecedented wealth coming from outside. Without addressing the speculative nature of the market, how much effect will supply have?"

"What I find concerning is that investment in existing housing does not flow to the community, especially when that investment is a vacant owner. They don’t live there. So how does that exactly trickle down to the local community? It doesn’t. The person isn’t even there to go to the local grocery store to buy anything. They aren’t using services. The unit is empty. So in those cases, how is that affecting or benefiting the local community?”"
 
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It's not just homes. Word on the street is that several condo-office/retail suites are also sitting unoccupied, with no (apparent) owner intent to use the space or lease it out. I'll let others speculate as to why someone would do this.
 
As a shareholder of several of the Canadian big banks I've found that their annual reports are an interesting source of info. on the state of the housing market as they publish data on their loan portfolios.

For example over 70 % of TD's residential mortgages held have amortization periods exceeding 20 years. In the US over 60% are over 25 years.

The HELOC market is also massive, still smaller than the mortgage market but big enough now that they need to be addressed in the same conversation.

RBC shows a high concentration of insured mortgages, Long amortization periods and HELOCs in the prairie provinces which does indicates they are sensitive to downside risk.
 

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