Originally published at: https://boingboing.net/2019/01/08/173-8pct-debt-to-income-ratio.html
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Promises, promises.
It sounds like as in the US, the real problem isn’t that prices are falling, it is that they had gotten to high.
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Canadians wouldn’t be willing to go into debt to own a house if renting one wasn’t such an unpleasant experience.
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It’s that, but it’s also the deeper problem of the consumer debt these house-poor people have saddled themselves with (on the assumption that home prices would keep going up-up-up).
When the bubble bursts, their only real asset (the equity in their house) will suddenly be greatly devalued – they might be paying off a $500k mortgage on a house that now can’t be unloaded for $450k.
And they’re in real trouble if they have the Canadian equivalent of an ARM or have to re-finance, because those interest rates are going up on both the mortgage and the credit card balances they use to maintain their lifestyle.
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Good news for actual people trying to buy their first house to live in, assuming they can get a Mortgage after the market goes kaplooey.
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As someone who has been renting for far too long, and whose nightly view is condo towers that are maybe 2/3rds empty:
Even if housing prices dropped by half, they’d STILL be vastly overpriced in my area.
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Well, I have a fair amount of housing debt and would face some challenges if rates go too high over the next short period, so I can’t say I’m in favour of a crash. We would manage, many would not.
That said, I’d love for my kids to at least have some chance of living in the same time zone as me without me dying, so I’d like to see the absurd housing prices settle the fuck down for a few decades.
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A report from the trenches:
We bought our Toronto bungalow in 2008 for 270k. 800sq ft plus finished basement on a 23x125 ft lot. The Great Recession started just a month after we closed. Our property tax value is now over $500k, and smaller bungalows than ours in this neighbourhood have gone on sale for over 700k. Trying not to think about how much the property tax will be on the next reassessment.
We won’t be moving until one of us dies, but that doesn’t seem to be an approach that anyone else believes in any more. Every week during the spring and summer, we get at least one or two flyers for real estate agents in our mailbox, all about how high the sale prices of homes they handle is. Last year we got I think two real estate agents ringing our doorbell out of the blue to ask if we were interested in selling the place.
Just a little further east of us, closer to the subway station and adjacent to more posh neighbourhoods where the lots are more like 30-40 ft instead of 20-30 ft wide, the insanity is in full swing - people buy 800 sq ft bungalows and 1600 sq ft houses (on 25x150 ft lots), for 750k- 1m, tear them down, build 2000+ sq ft mcmansions in their place, then sell those for 1.5 million or more.
We’re far from the downtown core, but there are still 2 or 3 condos just finished or now started within a mile of our house. More will probably start going up soon - we’re next to Eglinton, which will be getting a new underground LRT in a couple years.
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I’m about 6 weeks from moving from SF to Vancouver… We will be renting for a year at least (haven’t owned anything yet)… Not sure if I should be excited of worried about a bubble deflation. Knowing myself, it will be the latter.
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The crash doesn’t tend to help that much. The available capital for people in the area tends to be wiped out in the crash, leaving only those who already have capital to be able to move in and buy at the depressed prices.
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I’ve been traveling to Toronto regularly since 2008 and every trip I see more and more huge empty condo buildings going up along the lakefront and entertainment districts. Anyone with 2 eyes can see the bubble just waiting to burst.
I’m reminded of a conversation I had with a business colleague who, at the time bragged that Canada didn’t get caught up in the banking shenanigans like the US did back in 2008/2009 and therefore avoided most of the impacts of the great recession. And for a while this was true. I remember the looney being equal with the US dollar for the first time in my memory around 2012 or so.
I suppose the rent is now due…a decade later.
If I were you, I’d cash out now, take the profit and rent for a couple of years while the market goes to shit then buy back in when prices have bottomed out.
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Our house is customized to accommodate the needs of a disabled person. Can’t do that in a rental. Also, thanks to an inheritance, we owe less than 100k on the house. We’re not moving.
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Fair enough. Sounds like you’ll be sitting pretty once the bubble bursts.
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This will be a good thing for Canada in the long run, but in the short term many, many over leveraged home owners will suffer and maybe lose their house. Their only failing was being too young to have bought 20 years ago when prices were reasonable.
We just got our property assessment yesterday and our assessed value is down 13% from last year. It doesn’t really matter to us since we’re not planning on selling for another 10-15 years no matter what. But, this is the first time that I can remember that prices have gone down.
That’s what he gets for treating his house like a home first and a speculative asset afterward.
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A friend failed to convince his son. It’s bad.
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