[andrekandre]

  > stimulus spending during the pandemic fueled the housing crisis

not very informed on canadian politics/economy so apologies if it is an obvious question, but what is the connection of stimulus spending and the housing crisis?

[zahlman]

* Putting money directly in pockets tends to cause inflation in everything, but especially durable assets. Their relative worth increases compared to currency by simple supply and demand principle, because the supply of currency has increased.

* This sort of double-counts the same phenomenon, but stimulus is largely implemented via interest rate policy. When interest rates fall, people are more willing to pay higher prices for the big-ticket items that will be financed for many years (since the sticker price is offset by lower amortization costs; what people really care about is what their monthly bill will be after all the math is done).

* The pandemic itself directly motivated some demand for housing in smaller centers, as wealthy people got the idea that they could reduce their COVID risk by living somewhere less densely populated. This was also seen in the US e.g. https://www.nytimes.com/2021/04/15/style/rich-people-fled-ne... . Even if they put up their city residences for sale at the same time, they'd have to find buyers. (Housing, as an asset, is not particularly liquid or fungible. While economists strongly agree that rent controls don't work and the way to solve the problem is to build more housing, it also needs to be housing in places where it actually helps. Which is realistically going to require major zoning reform - the simple existence of millions of square kilometers of undeveloped land isn't really relevant.)

[andrekandre]

interesting, so if understand correctly; basically put, a side effect of the stimulus was that more people took out loans for homes, its that right?