http://www.vancouversun.com/Business/Canadian+housing+starts+tumble+February/1369898/story.html
Summary
The Canadian real estate market is weakening alongside the economic downturn and the high unemployment. In our province of BC, real estates have been down 75% compared to just one year ago. According to Canada Mortgage and Housing Corporation, in January there were 153,500 housing starts whereas in February there were only 134,600 units, which is a decrease of 12.8%. There are a lot of economists that expected the housing starts in February to be 145,000, but that was not the case. “Increase listings and reduced sales in the existing home market continue to impact the new home market,” CMHC chief economist Bob Dugan comments. Constructions in urban areas fell 14.9% from January to February, while the numbers remained constant in rural areas. Dugan says, “Home construction is slowing to more sustainable levels”.
Connection
As we learned in Chapter 6, the paradox of thrift exists when people attempt to save but they end up saving less. We can relate this article to that theory. Even though people are trying their best to save right now due to the economic downturn we’re experiencing, it may not be the best way of reacting to this situation. Right now it may sound good to spend less and save up so the individuals would be better off in the future. But thinking with an economic mind, it is a very bad decision to hold onto your money. To improve our economy that isn’t doing too well, it is beneficial to have cash flowing through the economy. Spending money though it is good for the economy, individuals do not like the idea. I guess this is because they like to know they have money saved up which can be put into use when the time comes.
Reflection
Due to the economic downturn, it makes sense for individuals to hold back on purchasing houses. This recession has a lot of citizens worrying about whether or not they can survive these hard times. But everyone is aware of the 2010 Winter Olympics will be taking place all throughout the Lower Mainland. I read an article somewhere about the estimated cost for living a night in the Lower Mainland during the Olympics. Prices ranged from $300 - $500 / room for one night in Vancouver. As for whistler, hotel rooms could cost up to $900 a night. Once tenants are aware of this situation which will be happening as soon as next year, I believe housing sales will start rising again. Even if a citizen were to try to save money right now by only renting instead of owning a house, they are only saving a small amount of money. When it comes to winter 2010, the cost of renting would increase dramatically. So by attempting to save right now, the citizens are actually not saving. This situation would be an example of paradox of thrift.
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2 comments:
Many articles out there right now talk about spending decreasing - whether it's on houses, investments or smaller items such as household consumer goods. People want to save more, but they end up saving less (paradox of thrift). Economists are trying to get the message across to consumers that spending is the only way to keep the economy growing, because there will be more cash flow in the economy, thus allowing growth in GDP.
It's understandable that most people think that saving will help them in the future, especially if they have expectations of what their future income will be like in our current state of recession. However, it’s frustrating to know that we can’t convince all consumers that spending will change the economy – for the better. Ultimately, consumers are the ones that can help turn the economy around, because I read in my article that consumers make up 70% of the economy. Hopefully the government and consumers will find ways to increase spending soon, or we may stay in this recession for a long while.
S. Poon
Blk F
I used to think that Canada would get into the recession but not as bad as the current situation since the 2010 Winter Olympics would bring Canada more employments. Well, I guess the Olympics aren’t that effective as I expected. I think the housing sales will start raising during the Olympics yet the growth of the sales and prices won’t be stable since the global economy hasn’t fully recover from the recession by that time yet. On the other hand, people who are renting a house instead of owning a house to save up their money are actually not saving up their money as talking in a long-term situation. Due to inflation, the value of the money that they are saving up now will drop as time passes by and the rent that they are paying for their house now will be a huge expense if they are paying it continuously for years. People should have started to save up their money while the economy is booming and spend their money during the recession to protect them from being laid off.
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