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Most people involved in discussions of housing policy think its good when housing becomes more affordable. The Washington Post apparently believes that it is good when housing becomes less affordable. At least that is what readers of an article discussing Canada's housing market would have to assume.
The piece touts the fact that, in contrast to the United States, the Canadian market has "already has rebounded beyond pre-crisis levels." According to the Teranet-National Bank House Price Index, nominal house prices in Canada have almost doubled over the last decade. Since overall inflation has been roughly 30 percent over this period, this means that housing has now risen by more than 50 percent relative to the other prices and more than 40 percent relative to wages. As a result, it is far more difficult for Canadians who do not own homes to buy them today than was true a decade ago.
It is not clear why anyone would view this as a desirable outcome. It involves a massive transfer from the young people who do not own homes to those who already do.
It is also not clear that this situation is sustainable. It is likely that current house prices are supported in part by an expectation of future price increases. If prices continue to increase in excess of inflation, then housing will get even more unaffordable. The result is likely to be at some point that there is a glut of supply and inadequate demand leading to house price declines. The experience of declining house prices will reverse the expectation that house prices will continue to rise, thereby leading a much greater fall in demand and further declines in prices. The end result is likely to be much lower house prices and a painful process of adjustment for Canada.
It is striking that the Post either views this situation as good or somehow cannot recognize the problem of a housing bubble even after the collapse of one just devastated the U.S. economy.
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The IMF has decided to respond to the US for financial aid and permission to default on its staggering debt, permitted under the following austerity program:
Given the massive intergenerational transfer of wealth in the US from the old to the young per the busted housing bubble, and given the ongoing massive intergenerational transfer of wealth in Canada in the opposite direction from the young to the old, the entire population in each nation is directed to trade places with each other per respective housing arrangements to correct the corresponding wealth surplus and deficit.
Since Social Security and Medicare will no longer be necessary after this correction given the added net wealth and single payer health care, the US will bounce back in no time from the deep recession with enough output to reimburse the newly nationalized Canadians for their losses in a win-win outcome.