The Canadian Housing/Debt Bubble
By Cam Mather
What’s going on with the leadership of this country? Why can’t they make hard decisions and encourage Canadians to do the same? The government is just sitting back and watching as a huge housing bubble inflates and they pay lip service to deal with it by discouraging speculation on investment properties. What they need to do is make it harder to buy a home. They need to stop leading the lambs to the slaughter of the impending housing market collapse. It’s a bubble. Bubble’s burst. One would hope that Canadians would not follow the most famous bubble denier, Allan Greenspan, who secured his place in history by creating the biggest financial mess in recent history with his hands off approach to the U.S. housing bubble.
You can’t blame people for overextending themselves in the housing market because that’s what our leaders in Ottawa have done. We vote for Conservatives expecting fiscal restraint and get the biggest deficit in history. Raise taxes to pay for it? No way. See how it works? Spend money you don’t have and hope you can figure out how to pay for it later. We’re all just following the leader as delusional as he may be.
Meanwhile Laurie Campbell, executive director of Credit Canada, calls Canadian debt levels “astronomical.” Canadians trudge forward with record debt, over priced houses and tenuous employment as the reality of resource depletion in oil and natural gas ensure our living and commuting expenses have no where to go but up.
What’s the solution? The solution is for Canadians to NOT follow the lead of those in Ottawa who do not know how to show restraint, and start living within their means. The February 2010 Report on Business Magazine in the article “Paper Houses” reported on incomprehensible mortgages for astronomically priced homes. Did these people ever ask themselves what happens if you have a $1.2 million mortgage on a $1.2 million house, when the value of the house drops? They should. It’s what’s been happening in the U.S. for the last 3 years. We seem to have lost our collective marbles.
Wake up Canada. While the rest of the world saves we are getting deeper in debt. This is not responsible behaviour. It can only end in tears…yours.
So it’s time to develop a strategy to deal with converging challenges of a bursting housing bubble, moribund economic recovery and assorted wild cards like peak oil and climate change.
Step one is “get out of debt.” Now there’s a concept. Live within your means. You know, only buy stuff you can pay for. Our parents did it. It’s really retro. Give it a try. Then start paying down debt.
The commercial for the credit card that used the Queen song “I Want It All” didn’t say “I NEED it all.” There is a difference between “want” and “need” and you need to stop responding to the “want” impulse. And just because a financial institution deems you worthy and gives you credit, doesn’t mean you have to accept it. You can say no or just not use it.
Do you ever wake up at night sweating when you think about your debt level and wonder what would happen if you lost your job, or interest rates go up, or the value of your house goes down, or you get sick? Good. It means you’re alive, but it’s unnecessary. Stop trying to kid yourself that your finances are sustainable. Just because some financial expert has told you that based on some ratio of your income to your debt that you are ok doesn’t mean it makes any sense in the real world.
You can avoid those nighttime sweats by living responsibly. Spend less than you earn. Start and continue to add to a savings account. If your house is too expensive or your mortgage is too big, sell now before the market drops and rent until you afford to own a home responsibly. Don’t look to the leaders in business or Ottawa to help you. They set bad examples and you’ll be on your own if the market goes south.