They bought their prebuilt homes at the market’s peak. Now they face financial ruin
This is in response to this article written by TESS KALINOWSKI it’s a great read:
https://www.thestar.com/business/2018/04/04/they-bought-their-prebuilt-homes-at-the-markets-peak-now-they-face-financial-ruin.html
Sorry Ontario, THE HOUSING MARKET CAN NOT GO DOWN! I don’t think Ontarians understand what’s going on. I’m trying to warn you, I’m doing my best, but it’s like people don’t get it
In the article there’s a section Canadians should pay attention too and that’s the amount people are paying for these homes with the EXPECTATION that the house will sell for the same amount or more.
The average price of a new-construction detached house in the Toronto region was $1.22 million in February this year. A year earlier, the average was higher — about $1.5 million, according to building industry statistics.
Understand Canada, that a large number of people don’t understand that housing prices can go down or simply not go up! In America as an example there are still tons of Americans who have mortgages larger than their home will sell for. This means no hope for a home equity loan, no hope to borrow against your home and a hope that interest rates won’t go too high. These are the higher ups on the economic ladder expecting a handout from the government.
The buyers want the government, the banks and builders to come together to find a solution for buyers in their “impossible” position. They say they have had no response to emails to Premier Kathleen Wynne, Ontario Progressive Conservative Leader Doug Ford and Housing Minister Peter Milczyn.
Isn’t that interesting… What people forget about when government pokes it’s head into the free market are the types of people they create. Entitled people view the world differently, entitled people don’t calculate their financial decision making differently. Based on what I read the conclusion that I came to is that these families only measured their cash flow and selling costs and never for one moment considered government policy.
Kathleen Wynne has been vote buying since she got into office, but her financial policies seem to have been pointed towards groups of people that are not the minority. Paying $1 million dollars for home is not common in Ontario, it’s common if you live in a bubble whereby all your close friends are buying $1 million homes but it’s not common amongst voters looking for government handouts. If you even qualify for a million dollar home the expectation is you’re the type of person or family that Kathleen Wynne’s government wants to tax more.
I have to be honest and say that I laughed when I saw this website “Community for Fairness” because these are the entitled people the Government is creating. The expectation is that the provincial government must fix a problem created by the private sector. Ok, so if the government fixes a private sector problem do not think another problem won’t arise? If a company creates a contract prior to a new law being created what do you think will happen when the government creates yet another law? For every law there exists a loophole that’s how the real world works.
If what you’re asking for is for the government to approach finances the way it approaches murderers well then what you’re asking for is a Venezuelan, Cuban style financial system. Sorry people that’s the way these things work. Government can’t close loopholes in the financial sector. Homeowners used to know this stuff in the past. It’s the reason housing prices used to be so low in comparison to now. There are risks to owning a home, there are risks to purchasing a home, there are risks to every aspect of making a purchase of anything. If you expect the government to regulate everything, expect to pay more and get less. Government is slow to react and Government might not react at all if Government feels another issue deserves more attention.
Personally I don’t blame these families for speaking out and defending their own financial interests, but this stuff makes me laugh because these are the people the government is creating. The fact that housing prices are so high in Ontario is because it’s the most populous province in Canada, our housing market is federally subsidized via CMHC and others, it’s heavily regulated and the illusion of strong federally backed Canadian banks, allows schedule 2 and schedule 3 banks to lend money to people and entities with the expectation, that if the Ontario housing market crashes the Government will bail everybody out.
This is why I say housing prices can’t come down unless… There’s a housing crash. A housing crash in Canada especially now would be disastrous, because the first thing that would happen would be schedule 2 and 3 banks existing the Canada market. What the means first and foremost is that there would be less entities willing to lend money, the moment that happens existing homeowners would have to pay in full or have to deal with power of sale, now, this might not make any sense to most people because they don’t understand finances, but banks don’t really lose when there’s a housing crash, because the creation of the money for the property was an illusion in the first place.
The only entity that would lose in a housing crash would be schedule 1 banks and they would only lose because the government would probably want to regulate them more.
So by the bank selling and taking a loss and in the power of sale process in a down market giving nothing back to the mortgagor/borrower they can exit the market with a tidy profit and return when things get better. Now of course the expectation is that the government will bail everybody out. Personally I think the government will bail everybody out by expanding amortizations to say 100 years, which will basically be an economic stimulus, but in the meantime there will be winners and losers. My thing is I don’t see a crash coming but if I’m wrong, with the ways people think nowadays Canada, Ontario has a larger problem looming. Entitlements!