When people are using debt to maintain their lifestyle, they are also foregoing savings for the future. Spending on debt thus reduces funds for future spending and hence economic strength and stability for years to come. A focus on short-term spending and lack of fiscal discipline has compound costs.
Scott Terrio, estate administrator at Cooper and Company, says Canadians are taking on too much mortgage debt. Here is a direct video link.
As you watch this report, remember that bank economists are required to temper their reports on financial risks, and understate downside forecasts, so as not to scare off customers from their bread and butter investment underwriting and sales side. But if you listen between the lines of the placid delivery here, there is some interesting info for the time capsule.
A new report from TD examines the level of speculative buyers in Toronto housing, and finds it might be worse than previously thought (or admitted?). Their conclusion: housing is divorced from fundamentals and some 24-40% overvalued at present. Existing home sales per person are now at a higher level than the peak of the 1980’s price bubble. (Before values collapsed by 25 to 60% in many areas, sending the economy into recession and a host of realtors, lenders, speculators and households into years of financial and legal problems.) Here is a direct video link.
Also see: Investors now speculating on single family homes across the GTA.
The credit bubble enabled a massive overbuild in the scale of housing as well as the retail and commercial sector. The mean reversion began in 2008 and then was stalled for a time by excess liquidity driven by QE and indiscriminate investor flows looking for yield. The end result has been the addition of even more excess capacity which is now having to shutter and repurpose.
As anyone can see in the growing retail and commercial vacancies all around us, the downsizing wave is now picking up pace. It has much further to go. See: Sears warns of ‘substantial doubt ‘about company’s future.
