Cancelling Dr. Seuss

[Kron3007]

Ah yes, those horrible days when you didn't try to hop onto the labour market during the worst recession since the Great Depression, and when my mother bought a house for one year's income (the same house today would have cost her nine years' income, and that's the cheap part of the country; here, today, a house is at least 42 times what her income was). It sure was tough back then! Especially considering inflation fell to 5.86% in 1983, then kept falling for the next ten years, at which point it remained more or less steady until last year and this year, when it's peaked again.

The one thing that has steadily increased is expectations. In 1982 I had a small black and white TV, basic cable, and a single landline phone (and of course, no computer of any sort). I never had a cell phone until a couple of years ago. A 20 year old living in their parents' basement today has way more creature comforts (smart phone, computer, internet, streaming services,  etc.) than his/her parents ever dreamed of.  So the lifestyle a young person expects to have on their own was unthinkable to those previous generations at that stage of life.
Professionally, many young people expect to have jobs which will give great work-life balance and promotions within 6 months. Many in tech do a lot of monkey-branching from job to job expecting to get higher pay and status. Ask Boomers how many figured they'd be in management by age 25, or even 30.

Every generation has had challenges; it's just self-absorbed to believe nobody had it worse than you. (And since my parents grew up in the Depression, and went through WWII, I wouldn't pretend to have had a a life even remotely as difficult as theirs.)

More from the article:

Millennials' homeownership rates in 2020 were only slightly behind Boomers' and Gen Xers' at the same age: 50 percent of Boomers owned their own home as 25-to-39-year-olds, compared with 48 percent of Millennials

Yes, they have cell phones and creature comforts, just can't afford a house. 

I don't think anyone has ever said no one has ever had it this tough, but the previous couple generations had it easier in  many ways.   Not in all ways, but many.

It is simply unimaginable to support a family on a single blue collared job now.  This was the norm in my grandparents era.  Cutting your cell phone and Netflix plans will not change this math.

When I was a child, we literally lost the farm in the 80s crisis.  Through gard work, my parents were able to recover and buy a new house several years later.  The difference is I cannot afford the first hone to lose, let alone recover to purchase a second, and I make much more than my parents did at that point. 

[marshwiggle]

Ah yes, those horrible days when you didn't try to hop onto the labour market during the worst recession since the Great Depression, and when my mother bought a house for one year's income (the same house today would have cost her nine years' income, and that's the cheap part of the country; here, today, a house is at least 42 times what her income was). It sure was tough back then! Especially considering inflation fell to 5.86% in 1983, then kept falling for the next ten years, at which point it remained more or less steady until last year and this year, when it's peaked again.

The one thing that has steadily increased is expectations. In 1982 I had a small black and white TV, basic cable, and a single landline phone (and of course, no computer of any sort). I never had a cell phone until a couple of years ago. A 20 year old living in their parents' basement today has way more creature comforts (smart phone, computer, internet, streaming services,  etc.) than his/her parents ever dreamed of.  So the lifestyle a young person expects to have on their own was unthinkable to those previous generations at that stage of life.
Professionally, many young people expect to have jobs which will give great work-life balance and promotions within 6 months. Many in tech do a lot of monkey-branching from job to job expecting to get higher pay and status. Ask Boomers how many figured they'd be in management by age 25, or even 30.

Every generation has had challenges; it's just self-absorbed to believe nobody had it worse than you. (And since my parents grew up in the Depression, and went through WWII, I wouldn't pretend to have had a a life even remotely as difficult as theirs.)

More from the article:

Millennials' homeownership rates in 2020 were only slightly behind Boomers' and Gen Xers' at the same age: 50 percent of Boomers owned their own home as 25-to-39-year-olds, compared with 48 percent of Millennials

Yes, they have cell phones and creature comforts, just can't afford a house. 

I don't think anyone has ever said no one has ever had it this tough, but the previous couple generations had it easier in  many ways.   Not in all ways, but many.

One of the things that does make it tougher now is the benchmarks. For Boomers, and probably Gen X, our bosses when we started work were all in their 40's and 50's. Newscasters, company founders, etc. as well. Now we have all of these stupid "Top 40 under 40" lists and things of that nature. Most of the anchors and broadcasters on the news are in their 30's, if not 20's, so the idea of how soon you should be "successful" has been ratcheted up incredibly.
That makes all of the challenges of the moment seem more serious.

It is simply unimaginable to support a family on a single blue collared job now.  This was the norm in my grandparents era.  Cutting your cell phone and Netflix plans will not change this math.

That's true, but also the proportion of jobs that are blue collar is much lower now. And, not many couples "aspire" to a single income household with a full-time stay-at-home spouse.

[Kron3007]

Ah yes, those horrible days when you didn't try to hop onto the labour market during the worst recession since the Great Depression, and when my mother bought a house for one year's income (the same house today would have cost her nine years' income, and that's the cheap part of the country; here, today, a house is at least 42 times what her income was). It sure was tough back then! Especially considering inflation fell to 5.86% in 1983, then kept falling for the next ten years, at which point it remained more or less steady until last year and this year, when it's peaked again.

The one thing that has steadily increased is expectations. In 1982 I had a small black and white TV, basic cable, and a single landline phone (and of course, no computer of any sort). I never had a cell phone until a couple of years ago. A 20 year old living in their parents' basement today has way more creature comforts (smart phone, computer, internet, streaming services,  etc.) than his/her parents ever dreamed of.  So the lifestyle a young person expects to have on their own was unthinkable to those previous generations at that stage of life.
Professionally, many young people expect to have jobs which will give great work-life balance and promotions within 6 months. Many in tech do a lot of monkey-branching from job to job expecting to get higher pay and status. Ask Boomers how many figured they'd be in management by age 25, or even 30.

Every generation has had challenges; it's just self-absorbed to believe nobody had it worse than you. (And since my parents grew up in the Depression, and went through WWII, I wouldn't pretend to have had a a life even remotely as difficult as theirs.)

More from the article:

Millennials' homeownership rates in 2020 were only slightly behind Boomers' and Gen Xers' at the same age: 50 percent of Boomers owned their own home as 25-to-39-year-olds, compared with 48 percent of Millennials

Yes, they have cell phones and creature comforts, just can't afford a house. 

I don't think anyone has ever said no one has ever had it this tough, but the previous couple generations had it easier in  many ways.   Not in all ways, but many.

One of the things that does make it tougher now is the benchmarks. For Boomers, and probably Gen X, our bosses when we started work were all in their 40's and 50's. Newscasters, company founders, etc. as well. Now we have all of these stupid "Top 40 under 40" lists and things of that nature. Most of the anchors and broadcasters on the news are in their 30's, if not 20's, so the idea of how soon you should be "successful" has been ratcheted up incredibly.
That makes all of the challenges of the moment seem more serious.

It is simply unimaginable to support a family on a single blue collared job now.  This was the norm in my grandparents era.  Cutting your cell phone and Netflix plans will not change this math.

That's true, but also the proportion of jobs that are blue collar is much lower now. And, not many couples "aspire" to a single income household with a full-time stay-at-home spouse.

It's not about whether they aspire to do it, it is about if they would be able if they wanted.  It has a lot of implications for earning power more broadly etc.  It should also be noted that you are pretty unlikely to be able to do this with 90% of current jobs, not just blue collar ones.  The reference to blue collar jobs was just to emphasize the point.

Regarding home ownership rates, the real pain will be in the next generation.  Millennials were about 30 or so when housing exploded....

[secundem_artem]

My father sold the family home about 20 odd years ago for $135,000.  I saw it listed today on a real estate site.  Asking price is $1 million.  It's nice to have Netflix and a smart phone - they are pretty much universally affordable.  But finding a place to live - that's a much harder problem and I have no idea how some new college graduate can afford a house - at least not without the Bank of Dad chipping in a hundred thou for the down payment.

[Parasaurolophus]

I tried to get a mortgage a couple years ago and was denied. The monthly payments would have been significantly less than my rent.

[Kron3007]

I tried to get a mortgage a couple years ago and was denied. The monthly payments would have been significantly less than my rent.

Yeah, I contacted a bank a while ago to get assessed for a mortgage.  They told me they would approve a 400k mortgage.  Great, except that you can't by a house here for 400k and I don't happen to have hundreds of thousands in down payment to offset the payments.  That being said, I think their assessment was about right as I don't think I really could carry higher payments. The problem isn't that they wouldn't give me more money, it is that houses are just out of reach for me.

The real point here is t to whine about it, just to use this example to point out that it has gotten out of control.  I say this because I make good money, much more than the median Canadian family income, but can't afford a house (not even a condo anymore).  So, it is pretty clear that most young families can no longer afford to own a home. If you happened to enter the workforce now, you are basically screwed.

To make matters worse, rent is not far behind, so average families can barely afford reasonable shelter.  This is a major problem that having a cell and Netflix plan doesn't resolve.  Even cutting out my avocado toast wouldn't resolve this problem.

Lately, they have been going on about how our farmers are aging and don't have succession plans, so we need young farmers.  It is laughable to think people can consider becoming a farmer around here (plenty of people would like to).  A small hobby farm with a Dilapidated home would costs you at least a million, a real farm would be many million.   Pretty hard to carry these costs farming, if you could even get financing.  I feel we are on a path to corporate homes, corporate farms, and a corporate world.

[marshwiggle]

Lately, they have been going on about how our farmers are aging and don't have succession plans, so we need young farmers.  It is laughable to think people can consider becoming a farmer around here (plenty of people would like to).  A small hobby farm with a Dilapidated home would costs you at least a million, a real farm would be many million.   Pretty hard to carry these costs farming, if you could even get financing.  I feel we are on a path to corporate homes, corporate farms, and a corporate world.

The thing that I have yet to see anyone explain is how this is supposed to be sustainable. There have been lots of articles about housing being bought up by investors who raise prices and rents. But, unless there are people who can buy or rent at those rates, the prices will eventually collapse. By definition, the more people who can't afford them, the closer the system is to a "correction".

I've never seen any article address this. All I've seen is that immigration (and region--to-region migration) means that places with growing populations have rising prices, but that doesn't really cover places with stable (or declining) populations, and there's still a ceiling to how many skilled immigrants making big bucks are going to be able to fuel prices rising faster than inflation.

[Parasaurolophus]

Lately, they have been going on about how our farmers are aging and don't have succession plans, so we need young farmers.  It is laughable to think people can consider becoming a farmer around here (plenty of people would like to).  A small hobby farm with a Dilapidated home would costs you at least a million, a real farm would be many million.   Pretty hard to carry these costs farming, if you could even get financing.  I feel we are on a path to corporate homes, corporate farms, and a corporate world.

The thing that I have yet to see anyone explain is how this is supposed to be sustainable. There have been lots of articles about housing being bought up by investors who raise prices and rents. But, unless there are people who can buy or rent at those rates, the prices will eventually collapse. By definition, the more people who can't afford them, the closer the system is to a "correction".

You would think so, but housing prices in Canada have increased something like 16-20% every year for something like 20+ years--far and away the highest rate in the OECD. Rental increases have been about the same or worse, if memory serves.

I recently saw an apartment I nearly rented go back up for rent. Four years ago, it was advertised for $1800. Now it's $2800. And as soon as I moved here six years ago, my grocery bill more than doubled.

Like Kron, my salary is not bad (it's even high compared to the local average). But it's not good enough. I just don't get it, or see our way out; another twenty years and things will be pretty brutal.

[marshwiggle]

Lately, they have been going on about how our farmers are aging and don't have succession plans, so we need young farmers.  It is laughable to think people can consider becoming a farmer around here (plenty of people would like to).  A small hobby farm with a Dilapidated home would costs you at least a million, a real farm would be many million.   Pretty hard to carry these costs farming, if you could even get financing.  I feel we are on a path to corporate homes, corporate farms, and a corporate world.

The thing that I have yet to see anyone explain is how this is supposed to be sustainable. There have been lots of articles about housing being bought up by investors who raise prices and rents. But, unless there are people who can buy or rent at those rates, the prices will eventually collapse. By definition, the more people who can't afford them, the closer the system is to a "correction".

You would think so, but housing prices in Canada have increased something like 16-20% every year for something like 20+ years--far and away the highest rate in the OECD. Rental increases have been about the same or worse, if memory serves.

That's impossible. A 16 % annual increase for 20 years would mean an increase of 19x over that period. That would mean a million dollar home now would have cost $51K  in 2003. That's not REMOTELY close. There are lots of million dollar homes now, but none of there were under $100K just 20 years ago. That sort of rise happened during covid, but it was way above normal when it happened, and the prices dropped off last spring.

See the graph:

From 2000 to 2022, unadjusted for inflation they've gone from 71 to 298, an increase of 4.1x, which amounts to an annual increase of 7%.
Adjusted for inflation, it goes from 71 to 185, an increase of 2.6x, which amounts to an annual increase of 4.9%.

5% above inflation is significant, but it's nowhere near 16%.

[Parasaurolophus]

Lately, they have been going on about how our farmers are aging and don't have succession plans, so we need young farmers.  It is laughable to think people can consider becoming a farmer around here (plenty of people would like to).  A small hobby farm with a Dilapidated home would costs you at least a million, a real farm would be many million.   Pretty hard to carry these costs farming, if you could even get financing.  I feel we are on a path to corporate homes, corporate farms, and a corporate world.

The thing that I have yet to see anyone explain is how this is supposed to be sustainable. There have been lots of articles about housing being bought up by investors who raise prices and rents. But, unless there are people who can buy or rent at those rates, the prices will eventually collapse. By definition, the more people who can't afford them, the closer the system is to a "correction".

You would think so, but housing prices in Canada have increased something like 16-20% every year for something like 20+ years--far and away the highest rate in the OECD. Rental increases have been about the same or worse, if memory serves.

That's impossible. A 16 % annual increase for 20 years would mean an increase of 19x over that period. That would mean a million dollar home now would have cost $51K  in 2003. That's not REMOTELY close. There are lots of million dollar homes now, but none of there were under $100K just 20 years ago. That sort of rise happened during covid, but it was way above normal when it happened, and the prices dropped off last spring.

See the graph:

From 2000 to 2022, unadjusted for inflation they've gone from 71 to 298, an increase of 4.1x, which amounts to an annual increase of 7%.
Adjusted for inflation, it goes from 71 to 185, an increase of 2.6x, which amounts to an annual increase of 4.9%.

5% above inflation is significant, but it's nowhere near 16%.

Yes, I must have been misremembering something. 16% every year for ten years works, though, and is consistent with the market taking off after the Great Recession.

[marshwiggle]

Lately, they have been going on about how our farmers are aging and don't have succession plans, so we need young farmers.  It is laughable to think people can consider becoming a farmer around here (plenty of people would like to).  A small hobby farm with a Dilapidated home would costs you at least a million, a real farm would be many million.   Pretty hard to carry these costs farming, if you could even get financing.  I feel we are on a path to corporate homes, corporate farms, and a corporate world.

The thing that I have yet to see anyone explain is how this is supposed to be sustainable. There have been lots of articles about housing being bought up by investors who raise prices and rents. But, unless there are people who can buy or rent at those rates, the prices will eventually collapse. By definition, the more people who can't afford them, the closer the system is to a "correction".

You would think so, but housing prices in Canada have increased something like 16-20% every year for something like 20+ years--far and away the highest rate in the OECD. Rental increases have been about the same or worse, if memory serves.

That's impossible. A 16 % annual increase for 20 years would mean an increase of 19x over that period. That would mean a million dollar home now would have cost $51K  in 2003. That's not REMOTELY close. There are lots of million dollar homes now, but none of there were under $100K just 20 years ago. That sort of rise happened during covid, but it was way above normal when it happened, and the prices dropped off last spring.

See the graph:

From 2000 to 2022, unadjusted for inflation they've gone from 71 to 298, an increase of 4.1x, which amounts to an annual increase of 7%.
Adjusted for inflation, it goes from 71 to 185, an increase of 2.6x, which amounts to an annual increase of 4.9%.

5% above inflation is significant, but it's nowhere near 16%.

Yes, I must have been misremembering something. 16% every year for ten years works, though, and is consistent with the market taking off after the Great Recession.

If we start at the dip in 2009, the unadjusted figure goes from 122 to a peak of 322 in 2022, for an increase of 2.6x. That still works out to an annualized rate of 8.4%. Still not close to 16%, and that's taking the maximum range, and ignoring inflation.

[dismalist]

Inflation adjusted house prices in Canada started taking off after the year 2000. They increased about fourfold, with a recent decline.

https://fred.stlouisfed.org/series/QCAR628BIS

The question is why. If we see a relative price rise this must be due to increased demand, reduced supply or both.

Bubbles, which burst, aside, the cause of the price rise is a growing population that is getting richer, with no growth, even declines, of new housing construction.

See Table five, page six: https://www.fraserinstitute.org/sites/default/files/canadas-housing-mismatch.pdf

Restrictive zoning laws, more generally nimbyism, prevent or make new construction too costly. As I've said before, this is a political problem.

[Parasaurolophus]

Lately, they have been going on about how our farmers are aging and don't have succession plans, so we need young farmers.  It is laughable to think people can consider becoming a farmer around here (plenty of people would like to).  A small hobby farm with a Dilapidated home would costs you at least a million, a real farm would be many million.   Pretty hard to carry these costs farming, if you could even get financing.  I feel we are on a path to corporate homes, corporate farms, and a corporate world.

The thing that I have yet to see anyone explain is how this is supposed to be sustainable. There have been lots of articles about housing being bought up by investors who raise prices and rents. But, unless there are people who can buy or rent at those rates, the prices will eventually collapse. By definition, the more people who can't afford them, the closer the system is to a "correction".

You would think so, but housing prices in Canada have increased something like 16-20% every year for something like 20+ years--far and away the highest rate in the OECD. Rental increases have been about the same or worse, if memory serves.

That's impossible. A 16 % annual increase for 20 years would mean an increase of 19x over that period. That would mean a million dollar home now would have cost $51K  in 2003. That's not REMOTELY close. There are lots of million dollar homes now, but none of there were under $100K just 20 years ago. That sort of rise happened during covid, but it was way above normal when it happened, and the prices dropped off last spring.

See the graph:

From 2000 to 2022, unadjusted for inflation they've gone from 71 to 298, an increase of 4.1x, which amounts to an annual increase of 7%.
Adjusted for inflation, it goes from 71 to 185, an increase of 2.6x, which amounts to an annual increase of 4.9%.

5% above inflation is significant, but it's nowhere near 16%.

Yes, I must have been misremembering something. 16% every year for ten years works, though, and is consistent with the market taking off after the Great Recession.

If we start at the dip in 2009, the unadjusted figure goes from 122 to a peak of 322 in 2022, for an increase of 2.6x. That still works out to an annualized rate of 8.4%. Still not close to 16%, and that's taking the maximum range, and ignoring inflation.

Am I using the wrong formula?

For ten years, 16% gets us 51 000(1+.16/1)^10 = $224 983.19; compounded over 14 gets us to $407 363.42.

[marshwiggle]

Lately, they have been going on about how our farmers are aging and don't have succession plans, so we need young farmers.  It is laughable to think people can consider becoming a farmer around here (plenty of people would like to).  A small hobby farm with a Dilapidated home would costs you at least a million, a real farm would be many million.   Pretty hard to carry these costs farming, if you could even get financing.  I feel we are on a path to corporate homes, corporate farms, and a corporate world.

The thing that I have yet to see anyone explain is how this is supposed to be sustainable. There have been lots of articles about housing being bought up by investors who raise prices and rents. But, unless there are people who can buy or rent at those rates, the prices will eventually collapse. By definition, the more people who can't afford them, the closer the system is to a "correction".

You would think so, but housing prices in Canada have increased something like 16-20% every year for something like 20+ years--far and away the highest rate in the OECD. Rental increases have been about the same or worse, if memory serves.

That's impossible. A 16 % annual increase for 20 years would mean an increase of 19x over that period. That would mean a million dollar home now would have cost $51K  in 2003. That's not REMOTELY close. There are lots of million dollar homes now, but none of there were under $100K just 20 years ago. That sort of rise happened during covid, but it was way above normal when it happened, and the prices dropped off last spring.

See the graph:

From 2000 to 2022, unadjusted for inflation they've gone from 71 to 298, an increase of 4.1x, which amounts to an annual increase of 7%.
Adjusted for inflation, it goes from 71 to 185, an increase of 2.6x, which amounts to an annual increase of 4.9%.

5% above inflation is significant, but it's nowhere near 16%.

Yes, I must have been misremembering something. 16% every year for ten years works, though, and is consistent with the market taking off after the Great Recession.

If we start at the dip in 2009, the unadjusted figure goes from 122 to a peak of 322 in 2022, for an increase of 2.6x. That still works out to an annualized rate of 8.4%. Still not close to 16%, and that's taking the maximum range, and ignoring inflation.

Am I using the wrong formula?

For ten years, 16% gets us 51 000(1+.16/1)^10 = $224 983.19; compounded over 14 gets us to $407 363.42.

That's the right formula. The point is the prices haven't changed by a factor of 8 in 14 years. From the peak value in 2022 of 322, that would require a starting value of 40, but the lowest value on the graph is 70. There's no interval with an 8x increase.

[Kron3007]

Inflation adjusted house prices in Canada started taking off after the year 2000. They increased about fourfold, with a recent decline.

https://fred.stlouisfed.org/series/QCAR628BIS

The question is why. If we see a relative price rise this must be due to increased demand, reduced supply or both.

Bubbles, which burst, aside, the cause of the price rise is a growing population that is getting richer, with no growth, even declines, of new housing construction.

See Table five, page six: https://www.fraserinstitute.org/sites/default/files/canadas-housing-mismatch.pdf

Restrictive zoning laws, more generally nimbyism, prevent or make new construction too costly. As I've said before, this is a political problem.

I feel we have already discussed this, but the data I have seen shows that new housing construction has kept pace with population growth during this period so is not the primary driving factor.  Sure, it must be related to supply and demand, but not due to population growth alone, or even primarily.  It seems to me that the real change, or driving force, is speculation and using realestate as an investment driving up demand. 

While we agree that this is a political problem, I doubt we agree on the correct path forward.  I would argue the answer is in addressing speculation rather than loosening zoning (taxation on multiple home owners, regulating foreign buyers, evaluating the impacts and rules around air BnB, etc.).  Loosening zoning rules etc. could be part of the solution, but needs to be balanced with preserving agricultural and natural lands.  Otherwise, we will simply (continue to) destroy what we have.