Toronto Anecdote - "There hasn’t been a lot of time spent on discussing the human side of investing in a real estate bubble"

VREAA is a collection of anecdotes from Vancouver and its immediate surrounds. Occasionally, however, an anecdote from elsewhere in Canada speaks so powerfully of issues that are relevant to our market that they merit mention here. This anecdote from Garth Turner’s greaterfool.ca article 24 Nov 2009 crosses that threshold, so I post it here, with it’s out-of-province source (Toronto) clearly noted. It speaks to the financial and social risks of being a young FTB in a RE bubble market. A mortgage broker in Toronto describes their children’s friend’s travails -

“House purchase summer of 2008.   100% financing, 40 year amortization.  Husband a carpenter, wife at home with the new baby.  November 2008, husband laid off, wife goes back to work for minimum wage. Still not enough family income to pay the mortgage and buy groceries. Value of house has dropped 10%.  Payout of mortgage was higher than the purchase price the day they completed, by virtue of 100% financing and the CMHC fee.  Real Estate commission 7% on the first $100,000, 3.5% on the balance.  Shortfall would be $49,000.  Couples’ families want to help.  Daughter and baby move home with her parents.  Son moves home to his parents.  Duplex is rented out to cover the mortgage payment. This doesn’t work.  Husband moves in with wife and her parents.  This doesn’t work.  Couple rent cheap apartment. This doesn’t work.  Mother and child leave after 8 year relationship. There hasn’t been a lot of time spent on discussing the human side of this recession or investing in a real estate bubble but it is important to note the consequences are not [limited to] a loss of money or investment.”