Awash in a sea of debt
Room 32 of the B.C. Supreme Court in Vancouver is where dreams of owning a home go to die. It’s the main foreclosure court in the Lower Mainland, where banks and other lenders ultimately turn when homeowners can’t keep up with their mortgage payments. The homes get seized, then sold off. “There are many tears on that carpet,” says Andrew Bury, a partner at Gowlings and the top foreclosure lawyer in the city. But lately the cramped courtroom has come to represent something else entirely—the utter insanity of Canada’s red hot housing market.
Last week Bury was in court to seek approval for the sale of a one-storey foreclosed home in central Richmond for $670,000. That was already $40,000 more than the house had been valued at two months earlier. Then, as he always does, Bury asked whether any other bidders were interested in the 2,000-sq.-foot home. Ten hands shot up. What happened next left him stunned. After a secret auction, the winning couple offered a whopping $852,500. “That’s an extreme case, but it’s the kind of thing we’re seeing all the time now,” says Bury. “It’s a feeding frenzy out there.”
Forget all the talk about a double-dip recession. In Canada, most signs point to a double-peak housing bubble. After barely pausing to acknowledge the financial crisis, Canada’s residential real estate market has roared back to life, reaching record highs in recent months. The rebound has once again touched off a furious debate about whether we’re now in a housing bubble. But it’s quickly becoming clear this is about a lot more than just people paying too much for homes. In the same way house prices have defied the moribund economy, Canadian families, already saddled with record levels of debt, have continued to pile on mortgage and consumer loans at a blistering pace. In the last 10 years the amount of consumer and mortgage debt hanging over our heads more than doubled to $1.4 trillion, with $100 billion of that taken on in the last year alone.
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Jack Says:
I don’t understand this but real estate prices here in “Tinselburg” are in line with the story.
I’m not complaining at the moment.
Posted on February 4th, 2010 at 4:42 pm
Cy Says:
It means you’re in a great position because you bought your house at a point of high interest. Thus as time went along and interest rates dropped -
1) The value of your house increased, as the cheap interest rates (ie cheap money) attracted more new and second time buyers to the market
2) Your monthly mortgage payments either decreased or went in greater amounts towards the principal. You saved $1000′s in interest payments
What Canadians are doing right now is listening to their real estate agents, who are telling them that since we are at a point of low interest, it is “cheaper than ever” to buy a house. People who fall for that will experience the opposite of what you enjoyed since interest rates have nowhere to go but up and our oil-driven dollar can’t be held down for much longer. I’ll stay in my apartment for now, thanks.
Posted on February 4th, 2010 at 5:00 pm