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Baby, we got a bubble!?

Ex-Montreal Girl

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Ex-Montreal Girl,

I wasn't trying to single you out, but your anecdotal personal story is not enough to convince me. This day in age, it's almost required to hold more than a post secondary education to get a decent paying job. Arts degrees are worthless unless you're willing to work for next to nothing to pay your dues in order to get that 'decent paying' job. Without a technical degree in engineering, computer science, chemistry, etc. it's more difficult than ever to find a job in your studied field. https://www.theglobeandmail.com/news/national/time-to-lead/when-a-university-degree-just-isnt-enough/article579230/

That's a big contrast from generations past, when a BA could get you a decent job with a large firm, and high school could get you into a high paying unionized government job at the TTC, or a similar government run organization. You didn't need more than high school back then to be a police officer, a fireman, a social worker, etc. etc. etc. These days, I know countless people looking to find work in those fields but are being overlooked due to nepotism, education requirements, and boomers refusing to retire. Me saying I know countless people is anecdotal yes, but here's a source in one industry that is suffering from boomer delayed retirement: http://www.macleans.ca/work/jobs/two-thirds-of-new-teachers-cant-find-full-time-work/
Are teachers, who not only have post secondary but specialized graduate degrees, entitled for wanting jobs in their field?

"It's all our fault that lemmings are now rushing into the housing market and bidding up houses into the stratosphere."
Partly. Lobbyists for the real estate industry, homeowners associations, etc. have a huge amount of political sway and have been suppressing any measures that could have tamed the market, creating a market that is favourable to rampant speculation.

"It's all our fault that government after government in the 40s, 50s, and 60s went for sprawl rather than density."
Did the boomers really need big yards for oversized bbq's and giant lush green lawns that serve no other purpose than vanity for impressing their neighbours? Governments played into the demand of the generation, and the demand of the generation played the government policy. Suburban sprawl was driven by the boomer want and need for bigger and more.

BTW: the only time a highschool education could land you a great job was before 1965.
When the TTC and Government Services ramped up their hiring blitz, you didn't need more than high school. One could make a good living from 1965-1990 on college/vocational school credentials or a liberal arts degree. Those days are LONG gone.

By the early 80s, unemployment was hitting double digits.
As bad as that was, and not to discredit that hard time, that (the lower unemployment rate) seems to be only thing we got going for us (millennials) comparing the 80's to Today https://www.theglobeandmail.com/globe-investor/personal-finance/2012-vs-1984-young-adults-really-do-have-it-harder-today/article4105604/
PS. That article was written in 2012. Things got worse for millennials since then (housing prices are WAY higher, and many of the jobs out west that Ontarians were taking are no longer there)

You can talk about how you bought an old house and fixed it up, but many of us can't even afford crack houses to fix up these days. You can talk about high interest rates on loans, but the savings interest rates were really high back then too (rewarding those that were responsible). Todays low rates are completely offset by todays high prices, and those with money to save are lucky to get 2.6%, barely beating inflation.

The Globe article above comparing 1984 to 2012 should say enough that millennials don't have it easy. So it's hard for us to just turn over and take it. The biggest opponents of real estate protectionist measures are the homeowners who are reaping the most benefit of the big real estate gains that are hurting us millennials, and the response from these boomers tends to be "Suck it up and make some sacrifices". Many of us have and it's still no better for us. We're going to inherit an aging population that is going to put an incredible strain on the countries resources that our generation will have to pay for. It's scary to read the stats on just how unprepared many boomers are for retirement. We're gonna end up with economic stagnation, much like the situation that kept Japan standing still through the 90's and 2000's.

I'm not anti-union. In fact, I'm very far left on the political spectrum, and think unions have done a great deal to build this country. It's a fact though that a HUGE portion of the boomer population benefited from unions and government protection. Whether it be directly through their government jobs, or from the industry protecting measures the governments put in place. But the old saying goes, you're born left, you die right. As these boomers age, many tend to speak against the 'welfare' and protectionist policies that they benefited from. And I find it extremely hypocritical. With 25% of Canada to be over the age of 65 by 2035, the progressively right leaning boomer voice will only get louder, leaving us millennials without the favourable market to grow and flourish in that the boomers had. So convince yourself that boomers had it harder and that we should suck it up. It looks like our lives are shaping out to be more of an up hill battle, even though many of us may not realize or act like it yet.
We all faced -- and face -- our own problems. An MBA might be needed today whereas a BA would have sufficed in the 60s-70s and a high school diploma in the 40s and 50s. Things change. But nepotism was always there. Always.

Consider also the size of houses. Look at the typical East York bungalow, for example. Baby boomers grew up in those, three to four to a family. And what are they? 900-1000 sf? Now people want houses of 2000 sf....or more.... on large lot sizes. (The typical Riverdale semi is likely no more than 1600 s.f. with maybe 15 feet of frontage.) So builders are sprawling everywhere with "mini- or micro-mansions." What I'm saying is, it seems like younger families generally want larger properties. What might have been second homes for my generation and third homes for my parents are desired first homes for millennials.

It's not Baby Boomers who are driving demand. Most of them are downsizing. Sure, many are holding out for high prices. Wouldn't you? Come on be honest.

And I don't think there's rampant speculation, as you put it. People aren't buying low and selling high, or trying to. That's what speculation is. They're charging into a market for fear that it will only get harder to get in.

I do think foreign investors have something to do with it. And I don't like that people are buying condos to run hotels, i.e. airbnbs. These are killers for sure and I am all for government involvement on that score.

But I think you're wrong about sprawl. That wasn't us. That was politicians and city planners older than Boomers. The QEW was built in my mother's time, i.e. in her teens - 30s. The Gardiner was built in the 50s, as the Boomers were being born. The DVP opened in 1961. The Allen was built in the 60s, when Boomers were getting their learner's permits. And so on. So, if you build highways (and not transit), you encourage sprawl, making it easier for developers to create a city like Mississauga out of (what?) five? towns. Throw in a beefed up airport and 401 and you get the 427 and more.

The planners, pols and developers were definitely not looking at extending transit or building denser housing in highrises downtown-ish. Our condo is a rarity, finished in 1973. I can walk to Holt Renfrew (on a good day) and we have three bedrooms and an eat-in kitchen. There should have been way more like this back then. Eglinton, St. Clair etc. were ripe for the pickings. Instead, you see many of the 60s-70s towers along the DVP or on long wide lonely stretches like Don Mills Road, handy dandy for cars.

Oh, and on the subject of transit, Montreal's Metro opened in 1967, in time for Expo. Look at a map of it and how HUGE is has become in such a short time. Then add in the LRTs etc. Meanwhile, Toronto's TTC has stagnated. The Sheppard line is all but useless. And I shake my head when I see what they're talking about when they talk about a Scarborough subway. Sorry but that ain't no way to run a railroad.

But I digress.

I was born left BTW and I will likely die lefter. I am not what you describe. So thanks for the generalization. Many Boomers, women especially, are barely scraping buy on CPP and OAS. And then there are those whose kids have moved in with them or who have "lent" their kids $100K and remortgaged their future well-being to help their kids buy.

I highly doubt that that the "progressively right leaning boomer voice will only get louder." It's been loud for decades -- during which we fought for women's rights, LGBT rights, reproductive rights, equal opportunity, maternity leaves ... I can assure you that those who fought for these things aren't going to pack it in and go all Trump. It's older women mostly who are leading the resistance south of the border. You can bet that we still have life in us yet.
 

krispyk84

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We all faced -- and face -- our own problems. An MBA might be needed today whereas a BA would have sufficed in the 60s-70s and a high school diploma in the 40s and 50s. Things change. But nepotism was always there. Always.
Where you getting this stat from? Around 31% of boomers have bachelor degrees or higher, meaning the majority do not. But yet so many have high paying jobs with just a bachelors degree. Prolly got them well past the 60's & 70's.

Consider also the size of houses. Look at the typical East York bungalow, for example. Baby boomers grew up in those, three to four to a family. And what are they? 900-1000 sf? Now people want houses of 2000 sf....or more.... on large lot sizes. (The typical Riverdale semi is likely no more than 1600 s.f. with maybe 15 feet of frontage.) So builders are sprawling everywhere with "mini- or micro-mansions." What I'm saying is, it seems like younger families generally want larger properties. What might have been second homes for my generation and third homes for my parents are desired first homes for millennials.
You're generalizing here. If so many millennials want mini mansions, why are they clamouring to move to the core where properties are smaller?

It's not Baby Boomers who are driving demand. Most of them are downsizing. Sure, many are holding out for high prices. Wouldn't you? Come on be honest.
How do you figure 'most' are downsizing?
http://business.financialpost.com/personal-finance/mortgages-real-estate/almost-half-of-boomers-say-they-are-not-interested-in-downsizing-homes-survey
http://www.ctvnews.ca/business/baby-boomers-not-yet-rushing-to-downsize-homes-1.1449691#
For those holding out, looks like they're taking advantage of an inflated and false market and exasperating the problem. How do those holding out feel that they're entitled to more than the gains they've already seen? Yeah, it'd be tough not to hold out, but it's a kin to short sellers playing an economic crash. They're exasperating the crash for their own personal gain. It's selfish behaviour if you ask me...

And I don't think there's rampant speculation, as you put it. People aren't buying low and selling high, or trying to. That's what speculation is. They're charging into a market for fear that it will only get harder to get in.
Their are enough houses to satisfy the demand of young families looking for homes. It's market speculation that caused the crazy spike, and yes, the fear of getting priced out is only exasperating the problem. But with anywhere between 65,000-99,000 perfectly good VACANT homes in the city, the supply has been shored up by people who are holding homes as investment assets.

I do think foreign investors have something to do with it. And I don't like that people are buying condos to run hotels, i.e. airbnbs. These are killers for sure and I am all for government involvement on that score.
Foreign investors = speculation, no?

But I think you're wrong about sprawl. That wasn't us. That was politicians and city planners older than Boomers. The QEW was built in my mother's time, i.e. in her teens - 30s. The Gardiner was built in the 50s, as the Boomers were being born. The DVP opened in 1961. The Allen was built in the 60s, when Boomers were getting their learner's permits. And so on. So, if you build highways (and not transit), you encourage sprawl, making it easier for developers to create a city like Mississauga out of (what?) five? towns. Throw in a beefed up airport and 401 and you get the 427 and more.

The planners, pols and developers were definitely not looking at extending transit or building denser housing in highrises downtown-ish. Our condo is a rarity, finished in 1973. I can walk to Holt Renfrew (on a good day) and we have three bedrooms and an eat-in kitchen. There should have been way more like this back then. Eglinton, St. Clair etc. were ripe for the pickings. Instead, you see many of the 60s-70s towers along the DVP or on long wide lonely stretches like Don Mills Road, handy dandy for cars.
Suburban sprawl continued to explode throughout the 80's and 90's. It wasn't until the late 90's, even early 2000's that we saw the city turn around with its condo boom.

I was born left BTW and I will likely die lefter. I am not what you describe. So thanks for the generalization. Many Boomers, women especially, are barely scraping buy on CPP and OAS. And then there are those whose kids have moved in with them or who have "lent" their kids $100K and remortgaged their future well-being to help their kids buy.
I can generalize. You're different, perhaps even an outlier. But right wing political party support has a higher proportion of older voters than any other single party. Right wingers tend to want national free markets and lower taxes. Economic protection measures such as housing regulations are unpopular amongst conservative voters.

I highly doubt that that the "progressively right leaning boomer voice will only get louder." It's been loud for decades -- during which we fought for women's rights, LGBT rights, reproductive rights, equal opportunity, maternity leaves ... I can assure you that those who fought for these things aren't going to pack it in and go all Trump. It's older women mostly who are leading the resistance south of the border. You can bet that we still have life in us yet.
Fiscal conservative and social liberalism exists. Yeah the boomer generation championed those left leaning wins, but, like I mentioned above, the Conservative party in Canada has more boomer voters in it than any other party.
 
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Palma

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"The only entitlement" I see is that the capital gains "earned" on principle residences are not taxed. Why should home owners get a massive tax break? Your logic is flawed. I would allow home owners to deduct the interest paid on mortgages as is done in the States (I think) but not in Canada.
And yes, I agree, real estate is not the same as dairy or booze because shelter is a necessity.
wrong. You are entitled. We need to change the rules now! Why? Its the only tax free thing Canadians have after taking care of their homes. When boomers start to downsize as there are so many of them, more supply of houses will come on the market which will curtail the year after year increase in prices. Market forces will take care of it. What goes up comes down and eventually goes back up again.
 

TheKingEast

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How about instead of generational sniping, we just raise the interest rates. That's the only way prices will come down significantly.
Why exactly are we trying to bring prices down "significantly" exactly? Seriously, you do recognize there's a chain reaction to raising interest rates to a point where house prices drop "significantly". You think you have problems now?
 

Ex-Montreal Girl

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Economics 401. Not my best subject in business school but ...

Expansion-v-contraction.
Recession-v-depression-growth
What goes up must come down.
Boom and bust cycle.
High interest rates usually translate to reduced exports because of a stronger dollar.
High interest rates usually translate to more expensive imports, as in cost of materials, fruit, vegetables and much more.
While it MIGHT result in corporations investing some of those gabillions in cash they're sitting on, plus foreign capital to flow in to buy Canadian assets, high interest rates often cause increased saving, i.e. no spending. But maybe money traders could cash in.
High interest rates usually translate to higher unemployment.
Higher interest rates will cause a lot of current owners to lose their homes and, as the experts say, result in a "a hard landing in the overvalued housing market."
Higher interest rates would mean that the construction sector, which is what is supporting most of Ontario's economy right now, would crater.
Can you say deficit -- not that, as a leftie I am opposed in general -- but this would knock it out of the park and right into the millennial's future.
And higher interest rates do NOTHING to increase the supply of homes...unless you count all those powers of sale which will no doubt follow. Meanwhile, boomers will hang on and NOT cash out until they feel the market can and will recover.

Higher interest rates! Great idea!!

So, let's say, a $800K home drops to $500K. That still means a giant mortgage -- but at much higher rates.

I think it makes way more sense for the feds to force banks and such to tighten the mortgage-insurance qualifying requirements even further.
Sure free money is a big part of the problem but what makes so many people think they can afford it? That is the problem.
 

rbt

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High interest rates usually translate to reduced exports because of a stronger dollar.
High interest rates usually translate to more expensive imports, as in cost of materials, fruit, vegetables and much more.
Not a subject I have any training in, but aren't these 2 essentially opposites to a certain extent? I realize there is borrowing to fund the purchase order and that rate would be higher, but wouldn't a 1% increase (relative to our peers) in interest rate tend to increase the dollar value by significantly more than 1% decreasing the cost of goods? Lower product cost + higher borrowing costs == lower overall import price?

I guess I'm assuming the Canadian side distribution is very direct. Very rural retail, with a multi-stage distribution chain, would be impacted more by the increase in borrowing rates than someplace like a Toronto retailer which would have a very short distribution chain.
 

Ex-Montreal Girl

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If our dollar becomes stronger, as I understand it, then our goods become more expensive. It will be harder to export our manufactured goods -- at least on the face of it.

But you are correct. I should have written "Higher interest rates usually translate to less expensive imports, as in cost of materials, fruit, vegetables and much more while potentially causing less spending on Canadian-made goods." It's like cross-border shopping. If our dollar is strong, we're all shopping in US malls or online via US websites etc.


Like I said, economics was not my best subject. In fact it was my worst. I did better in everything else, including (gah!) statistics.
 

Ex-Montreal Girl

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Incidentally, this was in Maclean's:

Praying for a real estate crash: The have-nots of housing are watching, mad as hell, as homeowners glory in their paper fortunes. And they’re starting to lash out.


<One way for price growth to halt or even fall is for interest rates to rise. But affordability wouldn’t necessarily improve since mortgage carrying costs would also rise. An even less attractive remedy is a recession. A severe economic shock could be devastating for heavily indebted households, curb consumer spending and business investment, and send house prices cratering.

But recessions, of course, are often accompanied by a spike in unemployment. Anyone waiting for a crash could find themselves out of a job when and if it happens—hardly an ideal situation in which to secure a mortgage and buy a house.>
 

TheKingEast

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Incidentally, this was in Maclean's:

Praying for a real estate crash: The have-nots of housing are watching, mad as hell, as homeowners glory in their paper fortunes. And they’re starting to lash out.


<One way for price growth to halt or even fall is for interest rates to rise. But affordability wouldn’t necessarily improve since mortgage carrying costs would also rise. An even less attractive remedy is a recession. A severe economic shock could be devastating for heavily indebted households, curb consumer spending and business investment, and send house prices cratering.

But recessions, of course, are often accompanied by a spike in unemployment. Anyone waiting for a crash could find themselves out of a job when and if it happens—hardly an ideal situation in which to secure a mortgage and buy a house.>
Bingo. Crash means our economy goes in the tank, and plenty of job losses. So good luck buying a discounted house with no job. On top of that, in a crash, since no one know where the bottom is, people continue to hold off buying as they feel prices will go down even further.
 

denfromoakvillemilton

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Why exactly are we trying to bring prices down "significantly" exactly? Seriously, you do recognize there's a chain reaction to raising interest rates to a point where house prices drop "significantly". You think you have problems now?
This is not sustainable and and the bubble will pop, the same damage will happen.
 

TheKingEast

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This is not sustainable and and the bubble will pop, the same damage will happen.
The market has many peaks and valleys. Of course the bubble will pop. There's also no difference. When the bubble pops, it will be bad for everyone, regardless of who's at fault (government, media, speculators, Trump).

Again, drastic drop in prices is not good. Those waiting on the sidelines for that kind of event will be on the sidelines when the bubble pops.
 

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Toronto Star: Here's why you're not going to get that starter house, city planner says

<A recent TRBOT survey, on the housing preferences of would-be home buyers, shows how out-of-step with reality the perceptions of starter homes are, Keesmaat said.

The research showed that 81 per cent of aspiring homeowners don’t want a condo and 69 per cent want a house with at least three bedrooms. But 83 per cent of housing units built between 2011 and 2016 in Toronto were midrise and highrise apartments.>
 

lead82

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Aspiring home owners don't want a condo because condos built now are very small, and the only other product available are houses. There isn't much in between. This is what the survey reveals. Perhaps the new condo building guidelines will help to push for larger and better layouts for units and more 3br units. However, the one problem the city has yet to address is the insane maintenance fees. The larger the unit the greater the fees. With large buildings, the city is going to start dictating how many amenities are required. They all cost money and will make it difficult to make large units affordable.
 

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