"I had a discussion about Vancouver real estate during a class break. Students started venting about the housing market."

pessimisticprof at greaterfool.ca 20 May 2011 9:50 pm -
“I had a discussion about Vancouver real estate during a class break and to my surprise a bunch of students started venting about the housing market. It appears it is starting to sink in that they will never be able to afford a house, and they scoffed at the idea of inheriting mom and dad’s McMansion – “That’s all they have for retirement – they will chew it up to fund their own expenses, so no hope of getting the house or help with a downpayment.” One student proudly proclaimed that he had just closed on a condo in Surrey for $300K – 30 year, 5% down. I asked him why he thought the bank would loan a kid like him so much money – he sort of looked confused, muttered “I dunno”, and admitted he had never thought about that. I took the opportunity to explain how CMHC and Ottawa had distorted the housing market by enabling people with no money (like him) to purchase property way beyond their normal capacity, leading to a huge but unsustainable increase in housing prices. When I got to the part about interest rates normalizing I thought he was going to toss his cookies! By the time I was finished his “great investment” was starting to look like a huge ball and chain. I think the rest of the class understood the message.”