The view from in­side the hous­ing bub­ble

The Hamilton Spectator - - OPINION - Howard El­liott

Liv­ing in­side, or at least right be­side, the “hous­ing bub­ble” makes for in­ter­est­ing times and con­ver­sa­tion.

But what do th­ese sky­rock­et­ing house prices mean for real peo­ple in real life? Yes, the value of that house you paid $165,000, 30 years ago has grown ex­po­nen­tially. Maybe a place down the street from you, sim­i­lar in size and vin­tage, just sold for $650,000. How’s that for a tidy profit?

But how real is it? Yes, you might come out with hun­dreds of thou­sands in ex­change for your home eq­uity. But if you need a place to live, you’re sud­denly a buyer in a seller’s mar­ket. You can rent, if that ap­peals. You can down­size, but you’re still go­ing to be pay­ing a pre­mium for that down­sized new place. You can move out of the ex­pen­sive city. But the sub­urbs are as bad or worse.

Time was you could trans­plant your fam­ily to Cale­do­nia, Hagersville or Brant­ford. Or Grimsby, Smithville or Beamsville. But have you seen the house prices in those places lately? You’re not gain­ing much ground over Hamil­ton. Maybe Nan­ti­coke? Even in that rel­a­tively far-flung town, prices are get­ting pro­hib­i­tive. Port Dover? Not much dif­fer­ent. Then you have the cost of com­mut­ing.

The red hot cen­tre of the hous­ing bub­ble, Toronto, is driv­ing GTA res­i­dents far­ther and far­ther afield to find af­ford­able, de­cent hous­ing. Those im­ports are adding ex­treme com­pe­ti­tion to an al­ready com­pet­i­tive mar­ket where there is much more de­mand than sup­ply.

Where does it all end? A bank econ­o­mist has de­scribed the sit­u­a­tion in Toronto, and neigh­bour­ing cities (it’s not clear if or to what ex­tent that in­cludes Hamil­ton) as “over­heated … Per­haps dan­ger­ously so.” In Jan­uary, new list­ings in Toronto fell 17 per cent from the pre­vi­ous month, an in­di­ca­tion of how much de­mand is out­pac­ing sup­ply. Sales as a share of new list­ings, de­scribed as a gauge of how de­mand com­pares with sup­ply, in­creased to a record 94 per cent.

And what about first-time buy­ers look­ing to fight their way into the mar­ket? For most, Toronto isn’t even an op­tion. Hamil­ton may be, but it’s get­ting tougher as well. Cana­dian Real Es­tate As­so­ci­a­tion (CREA) chief econ­o­mist Gre­gory Klump says po­ten­tial buy­ers have to “drive un­til you qual­ify (for a mort­gage).” He was re­fer­ring to Toronto but that ap­plies in­creas­ingly to Hamil­ton and neigh­bour­ing com­mu­ni­ties. Is the boomer-era dream of home own­er­ship be­com­ing a thing of the past ex­cept for the most af­flu­ent? What does that mean for fam­i­lies and com­mu­ni­ties?

If you’re lucky enough to own a house whose value has gone through the prover­bial roof, good for you. But it’s a long-term win for most, with min­i­mal ben­e­fit in the short term. In any case slow and steady still seems the best ad­vice, es­pe­cially in this dizzy­ing mar­ket.

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