Several people wrote in and posted a link to this article in Macleans about the Canadian housing bubble. It’s an interesting read and a good introduction to anyone who wonders what all this bubble talk is about.
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.”
The article points out that we have many scary similarities to the US housing bubble and excessive household debt levels that have raised alarm from many corners. All the same arguments have been made for why ‘it’s different this time’ from ‘wealthy foreigners’ to ‘drug money’ to that old ‘running out of land’ gem. Meanwhile the elephant in room keeps getting bigger and bigger. Interest rates going up just a few percentage points ( a near certainty ) will push many people into deep financial trouble. Unfortunately as the situation down south showed us, it’s not just first time home buyers and recent purchasers that get hurt when speculative housing bubbles collapse.