Barbara Yaffe: B.C.’s housing market unaffordable? Our debt rising? What a surprise

Barbara Yaffe: B.C.’s housing market unaffordable? Our debt rising? What a surprise.


Being accountable

I work in an environment that demands full and absolute accountability for every decision I make regardless of its outcome. The root cause analysis behind the reasons of many individual and organizations failing in this industry is a simple lack of accountability for their actions. Another misunderstood concept of accountability is that it is the same as responsibility; here lies a problem because the two are completely different in nature and consequence.

If you do not know the definition and meaning of the word “Accountability” then please read here before reading on.

There are hundreds of thousands or perhaps millions of Canadians that leave comments and opinions in regards to their own personal feelings on how the government, society, policy makers, politicians, etc.. are to blame for their own hardship and problems. Very rarely is anyone of the opinion (at least not openly) to admit that they made serious mistakes in their own personal judgments at various points in their own lives. People are quick to criticize and attack the winners and administrators of our society and demand full accountability from them without ever taking into consideration of how their own lack of accountability has shaped their current situation.

One of the basic fundamentals of growing up as children is the development and gradual assumption of more and more responsibilities in our own lives. Most of us learn how to go to the bathroom by ourselves, most of us learn how to brush our teeth by ourselves, most of us learn how to clean our rooms by ourselves – most of us learn how to take personal responsibility for our own lives. Later on down the road most of us learn the importance of being responsible for studying and getting good grades in school, we learn to understand and be responsible for showing up on time for work and being responsible with our weekly allowance money. Most of us learn that failure to be “responsible” often produces negative and unfavorable results and circumstances hence the motivation to “be responsible”. By the time we leave home, get an education and find a place for ourselves in the real world most notions of being responsible are 2nd nature and we do not give it much thought since it has been ingrained in us since childhood.


What many people lack though at this stage in their lives is an understanding of how responsibility interacts with accountability, and when we fail to be responsible we ultimately fail at being accountable. And it is here where many people begin to lose their foothold on the winning side of life and slowly find themselves more and more on the losing end. These are the people who then start a regular routine of blaming the rest of the world for the situation they now find themselves in and demand “change” and demand “answers” and demand “fairness and equality”.

Allow me to give a real world example of what I mean:

Wendy graduated in 2003 top of her grad class; she immediately took the next step and enrolled in University. She had a scholarship and a few bursaries to help her along the way to pursue her passion and dream of becoming a lawyer. By the end 2nd year and after a couple of spring break trips to Mexico and a few months backpacking in Europe she decided that her life was destined for something else. She dropped out of University and enrolled in an exclusive Fashion Design program at a private college, she wanted to be a fashion designer and the program brochure showed lots of “success stories” and previous program grads working at the top of the industry. She completed the 4 year program through a combination of student loans, part time bar tending jobs and summer jobs back home. She graduated with $48000 worth of student loan debt. She was engaged to her fiancé of two years at this point and was pregnant with her first child. She struggled to find a job with the current job market and could not afford to leave the city to pursue opportunities elsewhere, on top of it her fiancé could not afford to leave his construction job. She took a job in the mall “designing displays”, eventually she was promoted to a store manager.  The first child came, they got married. A second and third child came along after pressure from family to raise at least 3 children. They bought a house; after all they are entitled to have a home to raise a large family in right? They secured financing and financed the down payment on a beautiful $890000 4 bedroom house only 30 mins from downtown. They owned 2 cars one of which was a BMW (trendy want to be fashion designer).  Finally one day the assessment came for their property and they discovered that they owed more on their mortgage than the value of their house. To make things worse her husband’s hours had been cut as his company had fewer contracts. Their combined personal consumer debts alone now stood at over $80000 including those student loans. Day care costs for the three kids were going up again, grocery bills getting higher and the mortgage payments were wiping out every last cent of take home. House went on the market and sat for 6 months. Now Wendy is an outspoken critic of absolutely every single component of society. The government for their ridiculous tax rates, the government for not creating job opportunities in her field of work, the politicians for not being accountable and balancing budgets, the local city hall for raising property taxes again.. it goes on and on and on.

The problem here is at the end of the day she has failed herself and there is nobody else to blame for her situation now in life besides herself! She has not taken the ownership and “accountability” for all of the decisions and actions she has made in the past. She has lived the life of “entitlement” and society owes me a great life! She CHOSE to have 3 kids. She CHOSE to drop out of University. She CHOSE to study a field with little demand and poor employment prospects. She CHOSE to buy an outrageously priced house for her level of income.  She CHOSE to take on all of the debt she now has. She CHOSE the direction of her life from day one and this is now the outcome. Now why should anyone else be to blame? Wendy simply CHOSE to live a life BEYOND HER MEANS of income.

Wendy is one of hundreds of thousands of Canadians that are complaining today of not being able to afford and live the life they imagined, instead of making 6 figures they are make minimum wage at the mall. Sure there are blame and accountability issues with 

society, but I don’t believe anybody has the right to demand anything from anybody else before they have accepted and taken accountability for their own lives.Image

Avoid playing the blame game, you look like a fool – take ownership, responsibility and accountability for your own life.

Canada Real Estate Numbers Audit

Interesting read here:



We are all fools; we prove it every day… We fall victim to the same cycles of economics consistently and more predictably than gas prices spiking right before the long weekend.

Markets and retailers take advantage of this phenomenon all the time, the best deals to be had on seasonal items is at the end of their seasonal cycle… when the days start getting shorter and nights get cooler we all of a sudden see those huge sale signs in the windows and too good to ignore offers to buy the latest styles and trends of the summer even though the season is at its end, how many times will you wear that bikini in September and October? The answer from many of you is it doesn’t matter; you bought it because it was a “good deal”

The same holds true for housing… and more so these days than ever before, several years now of ultra-low “too good to pass up” interest rates has fueled a fierce and uncontrollable fire that has consumed many un-educated and over indebted buyers. The cycle of Real Estate in Canada was clear in 2008 and 2009, it was destined to correct… the long term natural cycle of this sort of investment behaves like the seasons.

To avoid this correction the Bank of Canada pursed its policy of lower interest rates to near zero, the effect of this essentially being the same as the 60-80% off Sale signs that go up in store front windows at the end of a season… a last ditch effort to keep sales volume high, move inventory and protect the businesses bottom line from unsold stock. Real Estate in Canada exploded while all hell broke loose in the States, while their sales plummeted ours shot up and all the fundamentals of normal historical trends and averages went out the window. People BOUGHT houses, BOUGHT condos, BOUGHT anything REAL ESTATE… Mortgages were on sale, it was the BEST time to BUY and of course… Real Estate is always the BEST investment.

And if none of that convinced buyers, then the threat of interest rates eventually rising scared the crap out of potential buyers to stop “waiting and seeing” and jump into the market right away.

Where do we stand now? Well, interest rates are on the rise and it has nothing to do yet with the Bank of Canada moving on interest rates. The fact that interest rates have been rising considerably and consistently solely as a function of the Bond Markets should be concerning to all, this has the effect of increasing the impact that a near future rise in the Bank of Canada’s interest rate policy will have. When they start to raise interest rates, mortgage rates will follow and they will rise on already elevated mortgage rates that the bond markets have been responsible for.

So I guess that means everyone who has purchased in the past 3 years and heeded the advice of mortgage brokers and Realtors are going to come out ahead, they bought while mortgage rates were ultra-low. Allow us to address that another day when their mortgages come due for re-financing.

For those of you that are “waiting and seeing” let’s do some math and number crunching.

First, we need to buy into a couple basic assumptions here:

Number 1Real Estate prices are near their peak and will correct anywhere between 5%-30% depending on the region and product type

Number 2Interest Rates will rise

If you do not understand or agree with either of these two then you are just wasting your time reading on…

You are a potential buyer; you have an income that can service about $2500 per month of mortgage debt. Your options right now are as follows:

#1           BUY NOW because rates are on the rise, you pre-qualify for a 5 year fixed mortgage @ 3.5%. This gives you a maximum purchase price of $500000, you buy today and 3 years later your house value has depreciated 10% and is now worth $450000. You have paid out a total of $90000 over those 3 years with 2 years left until you need to re-finance at a rate guaranteed to be higher than 3.5%. You are technically underwater at this point.

#2           You decide to wait a bit because you see house prices starting to drop… at the same time mortgage rates are rising, you are worried your $2500 will not get you into a comparable house until you do the math. With a 10% drop in the $500000 house, it now is worth $450000 and with interest rates at 4.5% your $2500 will still buy you that house without you losing $50000. If we take it even further, interest rates at 5.5% and $500000 house dropping 18% to $410000 you now get the same house minus you LOSING $90000 in value.

If we take it EVEN FURTHER with interest rates @ 6.5% and house values dropping 26%, then that $500000 now costs $370000 and you have avoided LOSING $130000 in value, you are still paying the same monthly $2500 for the same house… Granted you are paying higher interest, however the important part here is your investment is in a better position now to APPRECIATE and GAIN value over time since you bought in LOW instead of buying in HIGH and LOSING VALUE right away.


The latest numb…


The latest numbers from RealNet Canada paint a picture of rapidly dropping confidence. In Toronto, Calgary and Vancouver purchases of residential development land plunged in the first six months of the year, at the same time sales of new houses and condos slumped by more than a third. Land buys tumbled 51% in Toronto, 52% in Calgary and 30% in Vancouver – a clear sign, say insiders, a big slump’s coming for housing.

“This is definitely a major slowdown which will last for some time,” according to RealNet’s research guy, Richard Vilner. “It’s not going to turn around in the third quarter. There’s not going to be a major correction back to the high-flying land acquisitions of 2011 or the first half of 2012 because there’s still a huge amount of inventory to sell off.’