Quote:
Originally Posted by I_H8_Crawford
LOL they do it AFTER the prices are driven up to insane amounts... news to Ottawa, the bubble in Canada has already been created.
All this will do is accelerate the crash now... taking even more buyers off the market.
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I hate to break the news to you. But;
1) People who can only afford houses with nothing down and 40 yr mortgages are not buyers.
2) The crash is not accelerated by taking these so called buyers off the list. A crash, similar to the one in U.S. and parts of western Europe, is averted by eliminating bad credit risks.
3) Crashes occur when it is cheaper for someone to walk away from a mortgage because the value of the house is lower than the mortgage debt.
When you give someone a house for free and they are basically paying rent on it, if that house does not appreciate in value, that is when these people dump their mortgages or try to sell their homes. Unfortunately, no one wants to pay the price these buyers originally paid. So, they walk away, the bank forecloses, the house is sold for a discount therefore making your house and your neighbors house cheaper. Now the neighbor realizes that their mortgage is higher the value of the house. You keep repeating this and you have a bust.
Calgary is by no means immune to having serious issues. If you look at some of the posts on the real estate thread. Many posters had stated that the price escalation in real estate was artificial in Calgary. Houses should not double in value in less than two years time. When something like that occurs, home values can not be sustained because very few newcomers and renters can afford a new home.
Although we haven't seen homebuilders go bankrupt and real estate agents out of jobs, there are major problems in Calgary. Housing starts this last month sank to 1995 levels. Think about that, our population has increased by over 300,000 people and we had 125+ housing starts. Not to mention the massive amounts of homes on the resale market. Don't even get me started on the condo market.