Home building contractor Barry explains that “if you take a day drive up to nearby Vancouver, British Columbia, it looks like Coos Bay back during the housing boom of say 2007 and 2008.” While Barry and other area homebuilders are reporting improving sales, and “more interest” from buyers thus far in the month of May, “it’s still not what it should be,” reflected Barry at the Port of Coos Bay where timber is being loaded almost non-stop from area timber mills. In turn, National Public Radio (NPR) reported how “confidence among U.S. builders rose to the highest level in five years in May, a hopeful sign that modest improvement in the housing market will pick up.” Still, NPR housing experts noted how “any reading below 50 indicates negative sentiment about the housing market. The index hasn't reached hit that level since April 2006, the peak of the housing boom.” At the same time, NPR reported May 15 how “housing prices are going through the roof in Canada. The real estate market there is one of the hottest in the developed world. In Toronto, prices increased 10 percent in March alone. The average detached house in the city costs more than $600,000.” However, NPR noted how this housing boom up in Canada “has economists and the government worried that Canada is experiencing a housing bubble that's about to burst.”
At the same time, some prime south and central Oregon coast property is also selling fast with those wanting a getaway or summer home now that both home prices and interest rates are more attractive.
“I would never, ever think of living that close to the ocean due to fears about Tsunami’s, but darn it, today’s low-ball housing deals with low interest rates makes it seem like a good investment,” explained local Coos Bay retiree Helen who said she wants a second-home for “when the family visits the coast.”
Canadians buying homes as an investment
At 44, Canadian Jeff Douglas says he knows there are "more responsible" things to do than take on a mortgage he'll be paying until he turns 70. But he and his wife did it anyway, and shared their story with NPR during a May 15 report that explained how Douglas and his wife recently bought a 1,300-square-foot duplex in Toronto's West End that most Americans wouldn’t even take a second look at in this uncertain economy and housing market.
The house, “which Douglas recently showed off on a real estate website, is pretty basic, with three small bedrooms, two bathrooms and a partially finished basement. Douglas paid $632,000 — that's $76,000 more than the owner was asking for it. But in Toronto's hot real estate market, paying more than the asking price is par for the course. Douglas thinks he got a bargain,” stated the NPR report.
"It was kind of one of the last houses I think we would have had a shot at," Douglas says, "because the price of the housing goes up every week, as the spring goes on. So we thought this might be our last chance."
Canada not part of America’s housing mess
Canadian real estate prices did drop during the financial crisis. But they started increasing after a few months and haven't stopped since, explained the May 15 NPR report; while pointing to Canadian real estate agent Brendan Powell who says “bidding wars are the norm in many Toronto neighborhoods — even for tiny homes, like this 14-foot-wide row house.
Powell also told NPR how things are changing housing wise in Canada: "Last year, we were seeing bidding wars that went up to $100,000 over, and that was a really big deal. Now we've actually seen a handful that were more than that — maybe twice that — which is insanity."
Powell's partner, Melanie Piche, says record-low interest rates are fueling the insanity. For instance, NPR reported how “to keep the economy going, the Bank of Canada has held its prime lending rate at 1 percent. This winter, banks were offering mortgages for less than 3 percent, making house prices more affordable for many buyers.”
In turn, Canadians have a different view on buying a house as an investment today as compared to most Americans who turned to renting over purchasing their part of the so-called “American Dream.”
"For every extra $50,000, they're only looking at an extra $200 a month, or $210 or $220 at the current rates. And those numbers are manageable for a lot of people," Piche says. "So, suddenly you can get the house that you want for an extra $220 a month — go for it. And you've just paid $50,000 more than what you were planning on paying."
Powell and Piche also told NPR that they “don't believe the Canadian real estate market will crash the way the U.S. market did. Canadian banks have stricter lending rules, and they're not allowed to give mortgages to people with no job or income. But analyst Ben Rabidoux is one of many experts who believe house-crazy Canadians are spending themselves into financial disaster.”
"All of the models scream to me that we're looking at house prices nationally that are overvalued on the order of 30 percent — at least," Rabidoux says.
Canadians going into debt for new homes
To buy their homes, NPR reported how “Canadians have built up more debt than ever. Most can afford it, as long as interest rates stay low. But the government has warned that rates could start going up soon. When that happens, some studies show that at least a million Canadians will be in over their heads.
In turn, “Rabidoux predicts people will stop spending, house prices will drop, and the economy will fall into a deep recession. Douglas says he knows that's a risk. But he's willing to live with it.”
"We made a choice as much on quality of life as much as the actual quality of the investment," Douglas says. "If it goes down, it goes down. And you sell at a loss, like it happens on the stock market all the time."
Despite his upbeat outlook, Douglas also told NPR that he's stopped buying coffee at Starbucks and cut back on nachos and beer nights “to help pay his mortgage.”
Image source of central Oregon coast homes that are again popular with homebuyers wanting a coastal getaway or summer home property for investment. Photo by Dave Masko