Happy Monday Morning! The federal government has extended the foreign buyer ban another two years, meaning foreign nationals will be banned from buying residential properties in Canada until 2027. “By extending the foreign buyer ban, we will ensure houses are used as homes for Canadian families to live in and do not become a speculative financial asset class,” Finance minister Freeland said in the statement.
A butterfly flapping its wings is used as a metaphor in non-linear systems theory to illustrate how a small event can lead to large effects. It was classically used to describe how through various feedback loops of temperature, humidity, wind, sunlight, and other weather changes the flapping of a butterfly’s wings can lead to the development of a hurricane. As used here it seems to be a linear unclear metaphor. A few speculators have clearly not lead to a major problem in the housing market. But as usual the banking industry is operating in bad faith with respect to approving mortgages.
And that leads to some other reasons as to why there is a housing crunch and the role of the butterfly effect in that market. It begins with the neoliberal notions or bad beliefs that markets should determine pricing and availability of goods and services. Housing was changed from the concept of a home to a market asset. And the butterfly got airborne morphing exponentially into a housing bonanza for some and lack of affordable housing for others.
When I purchased the new home in which I now live, the builder contracted with the different trades to mark up their work and he then marked it up further. The price of the home did not reflect that actual cost of its construction. It then allowed the insurance companies to mark up their premiums and the banksters to provide exorbitant mortgages. Each time a home was sold that determined the price of the next home sold and its mortgage.
A simple example was insulating the ceiling of my attached garage. I was able to persuade the builder to allow me to bring in my own contractor who charged me $300. The builder wanted $600 for the same contractor. Since the contractor was a friend, I asked him about the discrepancy and he said that when he was asked to bid on insulating the homes in this subdivision, the builder told him to mark up the price he charged the contractor by 30%.
I ran into the same problem with the flooring. I wanted a certain laminate floor and the builder asked for a $14,000 up-charge for it. The credit for the supplied carpet was negligible. I went to a flooring company and he estimated and eventually installed it for $7000.
Factor those into the eventual price and the impact on the mortgage costs across an entire industry.
The price for building a new home in Canada ranged on average last year from $200-300 per square foot factoring in the profit to the builder. That means the 1500 square foot home in which I live would cost $450k. Comparable homes to mine are selling now for close to $1 million.
What if those providing mortgages were restricted to an amount comparable to a percentage of the actual building costs and not the bloated up-charged costs? Insurance rates would be lower and real estate fees would be lower.
On a balance sheet we look at assets minus liabilities equal equity. Play with that formula and set policy accordingly.
A butterfly flapping its wings is used as a metaphor in non-linear systems theory to illustrate how a small event can lead to large effects. It was classically used to describe how through various feedback loops of temperature, humidity, wind, sunlight, and other weather changes the flapping of a butterfly’s wings can lead to the development of a hurricane. As used here it seems to be a linear unclear metaphor. A few speculators have clearly not lead to a major problem in the housing market. But as usual the banking industry is operating in bad faith with respect to approving mortgages.
And that leads to some other reasons as to why there is a housing crunch and the role of the butterfly effect in that market. It begins with the neoliberal notions or bad beliefs that markets should determine pricing and availability of goods and services. Housing was changed from the concept of a home to a market asset. And the butterfly got airborne morphing exponentially into a housing bonanza for some and lack of affordable housing for others.
When I purchased the new home in which I now live, the builder contracted with the different trades to mark up their work and he then marked it up further. The price of the home did not reflect that actual cost of its construction. It then allowed the insurance companies to mark up their premiums and the banksters to provide exorbitant mortgages. Each time a home was sold that determined the price of the next home sold and its mortgage.
A simple example was insulating the ceiling of my attached garage. I was able to persuade the builder to allow me to bring in my own contractor who charged me $300. The builder wanted $600 for the same contractor. Since the contractor was a friend, I asked him about the discrepancy and he said that when he was asked to bid on insulating the homes in this subdivision, the builder told him to mark up the price he charged the contractor by 30%.
I ran into the same problem with the flooring. I wanted a certain laminate floor and the builder asked for a $14,000 up-charge for it. The credit for the supplied carpet was negligible. I went to a flooring company and he estimated and eventually installed it for $7000.
Factor those into the eventual price and the impact on the mortgage costs across an entire industry.
The price for building a new home in Canada ranged on average last year from $200-300 per square foot factoring in the profit to the builder. That means the 1500 square foot home in which I live would cost $450k. Comparable homes to mine are selling now for close to $1 million.
What if those providing mortgages were restricted to an amount comparable to a percentage of the actual building costs and not the bloated up-charged costs? Insurance rates would be lower and real estate fees would be lower.
On a balance sheet we look at assets minus liabilities equal equity. Play with that formula and set policy accordingly.
Great report Steve. Underscores a lot of what we realtors believe to be the case. Thank you.