Maclean’s is Canada’s leading weekly news magazine, and yesterday the Ms received the double-week Christmas edition. It wasn’t long before Mrs. M was directing my attention to the editorial "Buy if you love Canada" on page 2.[1] It reads more like Realtor promotional literature than editorial comment. There is no doubt that this effort would have raised a few eyebrows in the US had it had been published as an editorial in Time or U.S. News & World Report.
The column was headed by a summery, full color (I should say "colour") shot of a raised 1 1/2 story SFH with two car garage, a Re/Max "For Sale" sign clearly visible at the bottom. The caption?
MORTGAGE debt may be high, but the social benefits of home ownership are undeniable
Unfortunately, the editorial has not been posted online. I have transcribed a few selected bits below, but Canadian Doomers might want to track down a copy and read the whole thing. Should US Doomers feel so moved, the magazine would likely be available at some public libraries and serious magazine stores.
After all the hard lessons learned in the US from the bursting bubble, it seems unbearable that my own country should be so close to repeating the mistakes made years ago south of the border. Sounds like about time to tilt at a windmill or two.
Date: Mon, 18 Dec 2006 20:11:34 -0800 (PST)
From: John McLeod
Subject: RE: "Buy if you love Canada"
To: letters@macleans.caTo the editors of Maclean’s,
The editorial "Buy if you love Canada" in the Christmas 2006 edition of Maclean’s was disturbing. It appeared to be no more and no less than a promotion of home buying and Canadians taking on debt using nontraditional products like the recently introduced zero-down mortgages. These "affordability" products have caused havoc in the US, and financial regulators are busy trying to limit the damage by requiring common sense measures like disclosing the loan terms properly and making sure that the borrowers can actually repay the loans they take out. Canada needs to carefully study the lessons learned from the recent bursting of the US housing bubble. Toxic mortgages have no place in this country, and will only harm our citizens.
The editorial points to Australia as a place where "the federal government wants to push [already high home ownership rates] even higher because the benefits are so obvious and wide-ranging." Looked at closely, parts of the urban East Australia real estate market are under stress, and Western Australia is facing an unsustainable housing bubble thanks to a boom in commodity markets in Asia. This is hardly where we want to go.
This is no time for "irrational exuberance" in the Canadian real estate market, and the editors of Maclean’s of all people should not be contributing to it.
Yours truly, John McLeod
[address & phone number]
________________________
Notes and References
[1]: "Buy if you love Canada", From the Editors (unsigned), Maclean’s (print edition), December 25, 2006, page 2.
How much are Canadians worth? The short answer: a lot. Last week’s study by Statistics Canada, "The Wealth of Canadians,"[2] was so full of good tidings one scarcely knows where to start. …
Curiously, most reporting on this study fixated on the increase in household debt, …. This was widely seen as evidence that Canadians are finding themselves deeper in debt and worse for it. A closer look reveals not a dangerous predilection for careless spending, but rather an astute investment in both personal wealth and stability.
… [the] great emphasis on mortgage debt has pushed the rate of home ownership in Canada from 59.6 per cent to 61.9 per cent over the past six years. It’s a statistic worth celebrating, but can we do even better?
…
… Low inflation and corporate competition have resulted in innovations such as zero-down mortgages and 35- or 40-year amortizations, making mortgages more affordable. …
…
… Home ownership rates in Australia are nearly 70 per cent, among the highest in the world. Yet the federal government wants to push it even higher because the benfits are so obvious and wide-ranging. Is there anyone in Canada who will take up a similar crusade?
[2]: "The Wealth of Canadians: An Overview of the Results of the Survey of Financial Security", Statistics Canada, December 7, 2006.
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John-
It smacks of Lereah’s comment, “The housing sector and the U.S. economy need home sales (transactions) more than home price appreciation. Every time a home is purchased, other industries, such as furniture and appliances are positively impacted. (Economists call this the “multiplier” effect.) You purchase a home; you then need to purchase furniture, appliances, and so on. In fact, a healthy housing market impacts about 20 percent of gross domestic product — GDP. Once sales pick up, housing inventories drop. That places welcome upward pressure on home prices once again. And the cycle of life in the real estate markets as we know it, continues.”
It appears that realtors on both sides of the border are getting desperate for excuses to talk consumers into buying. I have a hard time with “Increase your debt and risk your financial security for the good of your nation!”
Canada and the U.S. will both be better served if individuals focus on keeping their finances in order, rather than on finding ways to get everyone in North America into some crazy loan. (It might not, however, be better for commissions.)
they really should put an ad sign on top of those pages or sponsored from …….
John, since it seems the faux-millionaire real estate plague is crossing international borders to the North, a little consulation for both our countrymen. As The Economist reports,you only need a net worth of $150,000 to be in the top 5% in the world and $2,161 puts you right in the middle.
Absolutely ludicrous! The author completely ignores the social devastation of foreclosure.
NV Mike-
You are embarassing me with your nice looking HTML- I cheat and use the Doom editor. I’m going to have to get out John’s tutorial and practice!