Latest stories
In chronological order
By Erik Fertsman
•
November 9, 2023
Governments are now starting to realize that solving the housing affordability crisis will require building more homes, and faster than ever before. But how can Canada build lots of homes when the increased levels of investments - particularly bank mortgages - that are needed to build more housing have consistently led to higher housing costs? We've prepared a report that tackles these important questions, and it's available for download at the link below.
By Erik Fertsman
•
September 15, 2020
Mainstream analysts usually say that interest rates on mortgages and home prices are inversely correlated. When interest rates fall, home prices rise. This relationship has little evidence behind it, unfortunately. So, we took a hard look at how things actually work and found that interest rates on mortgages actually lag mortgage credit growth (and, by extension, home price growth) by about 12 months. Causality is reversed in the sense that credit growth drives credit costs (interest rates). This makes much more sense and allows us to forecast rates on mortgages.
By Erik Fertsman
•
February 5, 2020
Experts have attempted to explain the cause of Canada's real estate bubble. Several theories have been put forward in an attempt to understand what is fuelling the intense home price growth. However, many of them -- especially those considering interest rates -- fall short. I propose an explanation of home prices that is linked to mortgage credit issued by commercial banks. This approach not only helps us better understand Canada's real estate bubble, but most importantly, offers insight on how to solve it.
By Erik Fertsman
•
August 13, 2019
Money is cheap these days in advanced economies, and I mean really cheap. Unlike 20 or 30 years ago, you can now get a real interest rate of 2 to 4 percent on pretty much any big ticket item. Homes are being financed for these kinds of rates, businesses are tapping into loans at these prices, and consumers are often able to finance a brand new car purchase at zero percent, that's even lower! Unsecured personal lines of credit can hover around 5 percent. Even though interest rates for companies and consumers are basically hovering closer to zero than at any previous moment in time, there's confused as to why our economies are experiencing weak growth. Lowering interest rates is supposed "spur" economic growth, according to economists, pundits, and economic textbooks. Current logic dictates that cheaper money encourages people to spend more on goods and services, invest in productive business (because you're not going to get much of a return holding your money in a bank account), and help those with high debt-to-income ratios with their spending. The gap between the logic and reality is big. Borrowing money for a car costs nothing these days, but car sales have been declining since 2013. Gross domestic product (GDP) in all advanced economies is coming in quite shy of historical performance, when double digit economic growth coincided with double digit interest rates. In Europe, rates have gone negative, but European economic growth continues to contract. Folks are now saying that the latest round of interest rate cuts in the US are not spurring growth in the US housing market.
By Erik Fertsman
•
November 9, 2023
Governments are now starting to realize that solving the housing affordability crisis will require building more homes, and faster than ever before. But how can Canada build lots of homes when the increased levels of investments - particularly bank mortgages - that are needed to build more housing have consistently led to higher housing costs? We've prepared a report that tackles these important questions, and it's available for download at the link below.
By Erik Fertsman
•
September 15, 2020
Mainstream analysts usually say that interest rates on mortgages and home prices are inversely correlated. When interest rates fall, home prices rise. This relationship has little evidence behind it, unfortunately. So, we took a hard look at how things actually work and found that interest rates on mortgages actually lag mortgage credit growth (and, by extension, home price growth) by about 12 months. Causality is reversed in the sense that credit growth drives credit costs (interest rates). This makes much more sense and allows us to forecast rates on mortgages.
By Erik Fertsman
•
February 5, 2020
Experts have attempted to explain the cause of Canada's real estate bubble. Several theories have been put forward in an attempt to understand what is fuelling the intense home price growth. However, many of them -- especially those considering interest rates -- fall short. I propose an explanation of home prices that is linked to mortgage credit issued by commercial banks. This approach not only helps us better understand Canada's real estate bubble, but most importantly, offers insight on how to solve it.
By Erik Fertsman
•
August 13, 2019
Money is cheap these days in advanced economies, and I mean really cheap. Unlike 20 or 30 years ago, you can now get a real interest rate of 2 to 4 percent on pretty much any big ticket item. Homes are being financed for these kinds of rates, businesses are tapping into loans at these prices, and consumers are often able to finance a brand new car purchase at zero percent, that's even lower! Unsecured personal lines of credit can hover around 5 percent. Even though interest rates for companies and consumers are basically hovering closer to zero than at any previous moment in time, there's confused as to why our economies are experiencing weak growth. Lowering interest rates is supposed "spur" economic growth, according to economists, pundits, and economic textbooks. Current logic dictates that cheaper money encourages people to spend more on goods and services, invest in productive business (because you're not going to get much of a return holding your money in a bank account), and help those with high debt-to-income ratios with their spending. The gap between the logic and reality is big. Borrowing money for a car costs nothing these days, but car sales have been declining since 2013. Gross domestic product (GDP) in all advanced economies is coming in quite shy of historical performance, when double digit economic growth coincided with double digit interest rates. In Europe, rates have gone negative, but European economic growth continues to contract. Folks are now saying that the latest round of interest rate cuts in the US are not spurring growth in the US housing market.