Category Housing
Why can’t Canadians get 30 year mortgages (but Americans can)?
The typical Canadian mortgage matures in 5 years or less. Why can't Canadians get (say) 30 year mortgages? I used to think that the answer was "inflation", or "inflation uncertainty". Now I don't. Now I think the answer is "Section 10 of the Canada Interest Act". Which we should abolish. Why can Americans get 30 […]
US fixed rate mortgages aren’t fixed rate mortgages; they are weird, stupid, and dangerous
Americans aren't really insular, like the English. But they live in a very big country, and that can have the same effect. If there's something peculiar about the US, Americans sometimes won't realise how peculiar it is. US mortgages are peculiar. "Weird" is a better term. Patrick Lawler, as described by James Hagerty, has tried […]
A public finance vignette
Here's a short story, simple but true, that illustrates a lot of public finance: from public choice to Ricardian Equivalence. I live on a cul de sac. Many of my neighbours wanted our gravel road paved, and were prepared to pay for it. The municipality held a neighbourhood referendum, and the motion passed by more […]
A question for Canadian housing bubble theorists
I suppose that this really should be entitled "A question for Vancouver housing bubble theorists", because pretty much every 'Canadian housing bubble' story I've seen uses anecdotes from Vancouver. Here is the question: How do you get from a fall in Vancouver (or Canadian) house prices to a Canada-wide economic crisis? And no, you cannot […]
A buying opportunity for snowbirds?
Casey Mulligan notes that "US houses during the boom did not look so expensive from a European perspective", although he's not sure to what extent it matters. I suspect that it matters a lot to many Canadians. Here's a graph of the Case-Shiller Phoenix house price index in USD and in CAD, along with the […]
The tennis ball theory of the Canadian housing market
From Nick's absolutely wonderful post: Real bubbles are unstable; they burst when you prick them. They don't spontaneously revert to their original size. Soap bubbles aren't like tennis balls. If the bubble metaphor means anything, it has to mean that. If asset price bubbles aren't unstable, and don't burst when you prick them, or re-inflate […]
Don’t bubbles burst when pricked?
This is an inchoate post. That's not really an apology. Economists' ideas about bubbles aren't very clear. We can define a bubble theoretically, but we can't explain why they sometimes exist, sometimes don't exist, or why they sometimes start and stop existing. And we are not very good at identifying bubbles, even perhaps in hindsight. […]
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