Inextricably tied into lumber market activity, home values make news on both sides of the border. In Canada, where it’s reported house resale prices are 66% higher than resale prices in the U.S., we’re told real estate now accounts for more of the economy than oil and gas and manufacturing combined. In a blog post this week, former MP Garth Turner confirms, “Canadians have decided there is only one asset they can trust – their homes, regardless of the cost.” Pointing to “artificially cheap money” over the past five years, he says that here in Canada “real estate became a cult, then a mania and finally a religion. As a result, risk has elevated exponentially… Half of us couldn’t survive one missed paycheque and the Millennials can’t climb out of basements.”
I received an email this morning from a personal connection in Southern California who read the same post. He writes, “Them be dire words from Garth Turner and must be most concerning for Canadians who witnessed the U.S. market meltdown. We know the wrath of a market meltdown on a personal basis. We purchased our Murrieta, CA home in September 2001 before the price run-up which was not the case for thousands of homeowners who lost their homes to foreclosure.” He references the assessed values of his house (see below) from the purchase through the bursting of the bubble and to the present, while adding his own comments. He notes: “A lot of homes were sold in our development during the years 2005-6-7 with virtually 100% of those buyers walking away from their underwater mortgage.”
Sept 2001 – $317,000 .. Purchase Price
Dec 2002: – $337,000
Dec 2003: – $377.000
Dec 2004: – $413,000 .. Should we buy that waterfront property?
Dec 2005: – $450,000 .. Lets rather take out a home equity loan
Dec 2006: – $600,000 .. and buy that villa in Spain.
Dec 2007: – $710,000 .. This sure does beat working for a living.
Dec 2008: – $400,000 .. What happened?? Not our best year ever.
Dec 2009: – $325,000 .. Talk about a hair cut!!!!!
Dec 2010: – $300,000 .. Yikes.. Hang on.. this thing’s no joke!!!
Dec 2011: – $310,000 .. Maybe as a greeter at Walmart you say???
Dec 2013: – $450,000 .. The forecast suggests the storm is waning.
Sep 2014: – $420,000 .. Not sure if we can stop holding our breath…yet..