Scotiabank sent the following email blast to realtors, intending they pass it along to the nation’s property virgins – those unfortunate social misfits, financial losers and shame of mothers-in-law everywhere, known only by the doleful and piteous term, ‘renters’.
Most of us dream of the day when we own our home outright.
Turn your rent payments into ‘own’ payments
When you add it all up, there’s really no better time to purchase your first home than right now.
Renting an apartment is like borrowing a home from someone else – it’s never really yours. In contrast, owning a home allows you to experience the pride of ownership, and the satisfaction of knowing you’re making a smart investment. Buying doesn’t necessarily cost more than renting. And since a home is something that can increase in value over time, the sooner you become a homeowner, the sooner you can benefit.
Banks, natch, are in the business of pumping mortgages. So they have to pump real estate. But in doing so, the very trustworthy financial titans that control the financial system and dominate the economy by their systemic importance, are no better than Ben Dover, the local Re/Max humper. Just think about that message – given credibility merely because it flows from a $575-billion corporation.
‘There’s really no better time to purchase your first home,’ is false. No dewey young virgin should be jumping into real estate, at least not in urban BC, Alberta, the delusional bits of Saskatchewan, Winnipeg, the GTA or Montreal. Prices are at or near historic highs, while sales have been inconsistent, condos are wobbling, the economy stifled and rates elevated. Every credible economist has been forecasting some form of correction. Including those at Scotiabank. Check out the bank’s last major housing report:
Record prices combined with incremental regulatory tightening are reducing affordability and the housing market’s earlier momentum, notwithstanding the lowest borrowing costs on record. Pent-up demand has been effectively exhausted after a decade-long housing boom, with Canadian home ownership at record levels. Canada’s housing market is expected to avoid the sharp downturn witnessed in the United States and Europe. However, the downside risks to domestic housing activity are increasing. The full impact of the slowdown may not become fully visible until mid-decade. Affordability will be increasingly strained for existing and potential homeowners when mortgage rates eventually drift up.
And this is the most recent analysis:
Underlying fundamentals are less conducive to further gains in the latter half of the year. Any remaining pent-up housing demand has likely been satisfied with sales now moving back in line with historical averages. Affordability remains a challenge for many buyers, particularly those in high-priced markets such as Vancouver and Toronto, and will be further strained as interest rates inevitably drift higher.
See what I mean? Bank economists clearly underscore the inherent risks of jumping a house right now – weaker fundamentals, deteriorating affordability, exhausted demand and a negative outcome the extent of which may not be known for several years. So how can Scotiabank in conscience say ‘there’s really no better time’ to buy? It can’t. The hypocrisy is breathtaking.
Then there’s the reference to ‘knowing you’re making a smart investment’ when a first-timer buys. If the bank said this of its Scotia Canadian Growth Fund, for example, the regulator would ream it. Funny how a 22-year-old is warned of risk when putting $1,500 into a mutual fund, but when borrowing $300,000 to buy a condo in a troubled market is told, “the sooner you become a homeowner, the sooner you can benefit.”
By the way, the average first-time buyer is 29 years old and will purchase a house worth $443,000 in Vancouver or $347,000 in Toronto. The downpayment will be a combination of savings, the Bank of Mom and cash mortgage incentives. The mortgage will average between 85% and 90% of the purchase price, with 46% locking in to a fixed-rate loan and virtually everyone requiring costly CMHC insurance because of the high-ratio borrowing.
Of course, there’s nothing wrong with buying or owning real estate. I have some myself. But this is now a vaguely deflationary world, where anything can happen (like the US government shutting down this week). We all know interest rates will rise, and a half-decade of cheap money, specking, flipping and house lust have swollen prices painfully.
Owning does not cost the same as renting, as this blog’s often shown. And how’s it responsible in a world of diminished job opportunities and intense competition among the over-educated to push mortgages when what young people really need is mobility? Isn’t the bank being a self-serving, rapacious, uncaring and greedy monolith?
Of course it is. And the kids love it.
Their boomer parents taught ‘em well. They live for mortgage payments; to be moist little versions of their wrinkling, greying, expiring elders.
I have no idea why I keep this up. We’re doomed.