There’s a widely held belief that real estate prices will, inevitably, only rise higher and higher. There are, however, long periods when that maxim is decidedly not the case.
Toronto is a prime example. After a surge in the 1980s, the Toronto market peaked in 1989 and didn’t regain that high until 2002 – more than a decade later. A 1995 peak in Vancouver was the high-water mark until eight years later. In the United States, it took a decade after the 2006 peak before that level was seen again.
Each example is different yet each shares central elements, from burst bubbles after manias to the gyration of interest rates and economic woes. What’s clear is real estate can go sideways for a long time, even if everyone believes the natural direction is up.
As Canada works to build a path to housing affordability, the most important thing is new supply – a lot of new homes. But just as important is changing the culture, the mindset that prices are destined to escalate.
Housing has long been expensive but the situation is now extreme. Five years ago, about 60 per cent of households could afford a condo. Last year, it was less than half. And that’s for a condo.
After many years of dizzying gains in the price to buy or rent a home, it’s become widely clear that higher and higher isn’t ideal and comes with many costs.
How to restore some semblance of affordability has shot to the centre of the political debate. This week, Canada Mortgage and Housing Corp., which has called for millions of new homes, held a conference on the question in Ottawa. The Globe on Wednesday illuminated how we got here in a series of charts, from record-low rental vacancies to the way-too-long time it takes to get new housing approved and built.
Many new homes are needed, yes. As this space showed last week, a burst of construction in booming Austin, Tex., has helped reduce the price to rent.
The shift in entrenched philosophy is also necessary. We need to rein in the housing market mindset that up is good, so pervasive in North America.
The mentality leads to speculation, starting with many families betting on the ever-rising value of their home as a pot of retirement savings. Generation Squeeze, an advocacy group for younger Canadians, puts it this way: “break the addiction to high home values.”
The celebration of higher home prices is deeply ingrained. Ownership in Canada peaked in 2011 at almost seven out of 10 households. Almost all political leaders own their homes and many are landlords. That’s the reason that as things started spinning out of control in the 2010s, blame was first cast on factors such as foreigners or investor speculation without grappling with the real problem: not enough housing.
In each example of real estate markets going sideways for a long time, Toronto, Vancouver, the U.S., it was always considered bad news. The Wall Street Journal lamented Austin’s shift from “America’s hottest housing market” to “running in reverse.”
The bigger goal is to rein in prices, bring them closer to people’s incomes.
The Teranet-National Bank house price index shows the price of housing rose 4.2 per cent annually from 2000 to this year, excluding inflation. Household incomes, according to Statistics Canada, rose by far less, about 1.2 per cent a year from 2000 through 2021.
The goal of a steady surge of new supply would be to establish a lasting buyer’s market. Critics of new supply will often say it won’t ease prices but big housing investors specifically warn shareholders that “competition for residents” and an “oversupply” of homes will affect the prices they charge.
Instead of hoping and cheering prices will someday soon recoup and exceed previous highs, the target has to shift to an extended, and welcome, period of nominal gains. If home prices this century had risen at only the rate of inflation, they would be less than half of what they are – and at levels last seen in 2006. Beyond a return to affordability, a market that offered such nominal returns is what would undercut and eventually end housing speculation.
Decades of culture and policy got us here. It will take time to restore affordability. It will take time to change the culture. But as Canada sets the initial foundations to allow for many more new homes, it is starting on the path to affordability.
NAVASOTA, Texas (KBTX) – On Monday, the city of Navasota finalized the purchase of land that will serve as the new home for the Navasota Fire Department.
Along Spur 515 behind the Circle T Truck Stop, is the new location for Navasota Fire Department’s fire station. The land may not look like much right now, but the city says this will be an ideal spot for the fire department to serve the growing community.
Jason Weeks, Navasota’s city manager, says the Navasota Fire Department has been in their current fire station for 30 years. He says an upgrade has been on the city’s radar for a while and a larger space was a top priority.
“The current location is not a bad location. Ideally, we’d find a new location that’s not too far from the location that will also serve our growth,” said Weeks. “Four acres is a lot more than what we currently have so we’re gonna have the opportunity to make the station what it really needs to be.”
The new fire station is a much-needed upgrade. Since Highway 249 was constructed, the City of Navasota says they’ve seen exponential growth, increasing the number of residents the fire department serves.
The Navasota Fire Chief, Jason Katkoski, says the fire department used to respond to about 300 calls per year 30 years ago. Now, that number is 2,000 per year.
“With the growth we’re seeing and the future growth we are projecting, and how the city is sprawling, we felt like that was a good location we could get to all of it quicker,” said Katkoski. “We’ve outgrown the current location and station. It was originally built as primarily a volunteer fire department and as we started expanding into more of a career department, the station just wasn’t conducive to house people there on a 24 hour basis.”
Katkoski says it has been fun to watch the growth over the last 30 years.
“Right now, here in the City of Navasota, we have a lot of growth happening, and it’s fun to see all this activity going on, it’s exciting as a resident and as a staff member,” said Katkoski.
As the population grows, more calls come in.
“Our fire department does not only serve our residents of Navasota, but also we go out into the county. We have an agreement with Grimes County to service Grimes County, so right now, if you look at the big picture, we service over 30,000 residents,” said Weeks.
The city manager says they’re expecting the city’s population to double in the next 10 to 15 years.
“We have a lot of growth, we have a lot of new housing coming along on the west side of town and now it’s spurring on the east side of town,” said Weeks.
Weeks says building this new station is the first step in the right direction because it will equip the fire department to better serve the community.
“We’re just excited for the fire department, our fire department needed a new home location,” said Weeks.
The city says the next step is to finalize the design for the new station. They’re expecting that to take around six months to a year. After the design is finalized, the city will look over what construction will look like.
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