# Real estate will needs to crash to strengthen Canadian dollar?



## lonewolf (Jun 12, 2012)

A crash in Canadian real estate might be needed to balance out inflation with deflation. A shortage of Canadian dollars from a real estate crash would help strengthen the Canadian dollar. A default by the Canadian government to pay back bond holders would also help create a shortage of Canadian dollars. Real estate prices are headed for the demographic cliff when baby boomers start selling their homes to move into old age care homes.


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## sags (May 15, 2010)

I think government would lengthen amortizations to lower the monthly cost of home ownership if necessary.

Mulit-generational mortgages may become popular again. It is already common for people in large US cities to pass on their homes to their kids.

Canada built a housing industry on cheap homes, relative to incomes. That has changed, and we will have to adopt a different attitude towards normal housing expectations.


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## lonewolf (Jun 12, 2012)

Multi generational mortgages became popular @ the height of the Japanese real estate boom back in the late 80s. Real estate Prices soon after hit critical mass & have not recovered since.


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## Rusty O'Toole (Feb 1, 2012)

I would love to see RE values drop to more affordable levels. Have been waiting with anticipation since 2007. I'm beginning to think it's not going to happen. At least not enough of a drop to put good houses on the bargain counter.


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## My Own Advisor (Sep 24, 2012)

I think some RE prices coming down in TO, Van, would be excellent for our economy but I'm not holding my breath.


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## Rusty O'Toole (Feb 1, 2012)

Bar the borders to foreign investment and immigration and watch house prices drop in the cities you mention.


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## Just a Guy (Mar 27, 2012)

Not sure I see how foreclosures and bankruptcies will strengthen our dollar. It certainly didn't help the USA in 2007. That being said, I think a price crash is inevitable...


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## Pluto (Sep 12, 2013)

I'm not holding my breath for a price crash in Van or To at least. It depends on what one means, in % terms, what a crash is. If crash is defined as a 50% drop, it is very very unlikely. Too many people want to own, rates are super low and are not going up, double income families, and basement rental income makes them affordable for people with average income.


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## Berubeland (Sep 6, 2009)

I believe the canadian peso will lose more value before stabilizing. I personally told my own parents to sell Canadian Banks and buy American banks. This is going to get very shitty around here when housing prices readjust. Don't know when that is going to be but it will happen.


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## sags (May 15, 2010)

Problem is we aren't talking about a 20% or 30% drop in a $150,000 home anymore.

A loss of $30,000 is unpleasant but survivable. A loss of 20% on a $800,000 home is $160,000. A 30% loss...........people wouldn't want to know.

That would be a life changing situation for most people.


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## AlMansur (Jan 25, 2016)

The doom and gloom on house prices falling have been around for the last 15 years. I don't think RE prices will crash anytime soon, although a small price adjustment is always possible. 
The interest rates are now so LOW, that it makes sense to buy and build Equity, which is what most buyers are doing, and with low supply of houses, that only has pushed up the prices even more. The investment in shares/equities is almost negligible, even the last decade, that the only viable avenue is to invest in RE, rising by about 10% YoY!!


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## vi123 (Oct 29, 2015)

lonewolf said:


> A crash in Canadian real estate might be needed to balance out inflation with deflation. A shortage of Canadian dollars from a real estate crash would help strengthen the Canadian dollar. A default by the Canadian government to pay back bond holders would also help create a shortage of Canadian dollars. Real estate prices are headed for the demographic cliff when baby boomers start selling their homes to move into old age care homes.


You have this completely wrong. Here's what would happen in practice:

Real estate crash => BOC drops interest rates, increases money supply => CAD falls

Also, the Canadian government is extremely unlikely ever to default on its debt. It can simply print money to pay it off. Canadian government debt is almost exclusively CAD-denominated, and no sovereign nation ever needs to default on debt issued in its own currency.


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## Rusty O'Toole (Feb 1, 2012)

One problem is the Bank of Canada wants the loony to dive. They have been doing all they can to make it drop for several years.


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## Just a Guy (Mar 27, 2012)

Another problem is, how do you lower interest rates to stimulate the economy if your interest rate is already at zero?


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## vi123 (Oct 29, 2015)

Just a Guy said:


> Another problem is, how do you lower interest rates to stimulate the economy if your interest rate is already at zero?


Increasing the money supply (i.e. QE) has the same effect. And interest rates can always go slightly negative too.


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## Just a Guy (Mar 27, 2012)

I believe Germany tried something like this after WWI...affrican nations do it all the time too...

Works wonders.


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## Tourist9394 (Jun 11, 2015)

More like they need CAD to be low so there is foreign money to support the domestic economy, and pay for taxes. Since Canada has a failing manufacturing economy, foreign in flow can drive consumption.


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## andrewf (Mar 1, 2010)

Just a Guy said:


> I believe Germany tried something like this after WWI...affrican nations do it all the time too...
> 
> Works wonders.


We can worry about hyperinflation after we finish worrying about deflation.


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