Live chat Tuesday

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How long will the housing boom last?

globe.jpg Globe and Mail Update
Garth Turner has some unsettling news for Canadians who’ve tied their financial future to their homes – every real estate bubble in history has burst, and there’s no reason to think it will be different this time.

Mr. Turner’s new book, Greater Fool, The Troubled Future of Real Estate, argues that Canadians have been buying homes at inflated prices by taking advantage of expensive mortgages that last 40 years and signing up for incentive plans that allow them to forego the traditional down payment. As a sub-prime-mortgage crisis unfolds in the United States, with more than 400,000 families losing their homes in the past year and a million more said to be on the brink, should they smugly assume they are insulated because of high commodity prices and a strengthening dollar?

“When the average family can no longer afford the average home, how can so many people be deluded into believing a boom will last forever?” he asks. “How could we put so much money into something we might never be able to sell, except to a greater fool?”

Mr. Turner – a former Progressive Conservative minister of national revenue who is now a Liberal Member of Parliament – has written seven other finance books and has been a nationally syndicated newspaper columnist. He’s also served as business editor for the Sun Media newspaper chain.

Join him for a discussion Tuesday at 1 p.m. Or get a jump on the queue by submitting a question here.

To chat Tuesday at 1 pm, go here.

6 comments ↓

#1 Robert on 03.17.08 at 2:27 pm

Eighteen months ago realtors were saying, “buy now before interest rates go up”. lol, I was telling my friends, sell as soon as you can and get some long term locked and guaranteed place to dump your cash.”
Well they didn`t listen even though I reminded them the coming spring was the end of the buyers market.
I even had a couple of realtors I play poker with tell me the BC market will go strong through 2010 but when I got them alone they said I might be offering good advice to my friends.
Still it`s hard to compete when the realtors have all the ad space.
Thanks for giving us one man bands a voice Garth.
Much appreciated.

#2 Paul W. on 03.17.08 at 6:12 pm

Amen Garth! I’ve been preaching the same thing to my family, friends and co-workers for at least the last year and a half. My friends in Real Estate laughed when I told them a market downturn was imminent. Nobody, including my own daughter and brother listened and most others derided me in some way for selling my own home, which BTW sold for an absolutely ridiculous price, in preparation.

The new owners who thought they’d flip that house are now stuck because they can’t find the ultimate fool to sell to. They’re over financed and have already dropped the price by $40k in desperation! My bet is they’ll have to drop it another $40k before it will sell… We’ll see…

#3 Radley77 on 03.17.08 at 6:56 pm

Good luck on the live chat, Garth!

I have a blog regarding the Calgary real estate market at the following website where I’ve done analysis on real estate market valuations:

http://calgaryrealestatemarketblog.wordpress.com/

Calgary Historical House Prices
http://img85.imageshack.us/img85/4922/calgaryinflationadjustede7.png

Calgary Price to Rent Ratios
http://calgaryrealestatemarketblog.files.wordpress.com/2008/01/calgary_real_estate_valuation_large.png

Canadian Mortgage Risk Spreads
http://calgaryrealestatemarketblog.files.wordpress.com/2008/02/risk_spreads-a_red_light_on_the_real_estate_market_large.png

#4 HDB on 03.17.08 at 8:19 pm

Excellent Book Garth. Someone needs to be the rational voice in this mess.

Question though. Don’t you think its a mistake to try and prolong the bubble with low interest rates or possible parlamentary steps? Ultimately it will just mean that more people will get hurt. I personall don’t feel sorry for people that overpayed and pushed up these prices. Its their own fault along with the real estate speculators and flippers.

We need legislation protecting people from flippers. How about a 20% tax for businesses that purchase residential homes? That should slow them down.

#5 Oscar,Montreal on 03.18.08 at 3:33 pm

Hi Grath,

Love your blog

I have a question – by lowering aggresively the rate (and more cut might be coming) is the Canadian Central Bank not creating another bubble !
What impact do you think will it have on home prices ?
any comment on the Montreal market
Thank you
Olivier

#6 SMWhite on 03.19.08 at 8:52 pm

Its bubblicious Oscar!

Our central bank is going to try and follow the American peso to its death!

I hear Japan just came out of the wreckage of a 20 year housing bubble, maybe invest in Yen?