“I own my house. I have no debt. Why? Not because I was lucky or rich. But because I never borrowed for consumables. My house is not an investment. Whether it is worth $100,000 or $1,000,000 is irrelevant. It’s where I live. It’s a roof over my head. I had to get a mortgage for the house, but worked on paying it off with spare cash. I didn’t have to have a car. Nor yearly vacations in exotic locales. I didn’t eat out a lot. I didn’t need a lot of clothes. And I don’t give a sh*t about impressing the neighbours.
For the most part, all the debt problems people have stem from their own greed, consumerism and lack of self-control. Don’t blame the market. Don’t blame the banks. Blame yourselves. But in our society, it is impolite to force people to confront the consequences of their own actions.”
– Old Curmudgeon, commenting at ‘Why lower home prices are a national priority’, Globe and Mail, 11 Jan 2013 9:26PM
‘Old Curmudgeon’ is in this situation in part because of his sensible ways with money, but also because he was very likely fortunate enough to buy at a time when house prices were more reflective of underlying fundamental value. And that is how it should be, after all. Homes as places to live, rather than as financial instruments.
His indignation with debt-spending is well placed.
From the article on which ‘Old Curmudgeon’ is commenting:
If Canada wants to slay its household-debt dragon, it will have to cut down house prices at the knees. But there’s an economic price to pay for that – and it goes well beyond a cooling of the residential real estate sector. …
“…house prices appear to drive non-mortgage debt, too – the more valuable your house, the more debt you’re likely to take on outside of your mortgage. And, since close to half of all non-mortgage debt is used to finance consumer purchases, higher house prices ultimately boost our national consumption, too.” …
“… the 52-per-cent rise in national house prices from 1999 to 2007 was responsible for a 19-per-cent increase in homeowners’ non-mortgage debt.”… “Multiply that by approximately 13 million households, and that’s nearly $10-billion more in annual consumption – or roughly a 2-per-cent juicing of non-housing consumer spending.” …
“A substantial downturn in prices – say, 10 to 20 per cent – would, in theory, not only reduce mortgage debts for new home buyers, but, significantly, push down non-mortgage debt to the tune of 4 to 8 per cent.” …
“A downturn in consumer borrowing is going to put a serious lid on consumer spending growth – which up until now has been a critical driver in Canada’s economic outperformance since the 2008-2009 global recession.
In the long term, this is the price to pay to get Canadians back living within their means, and the economy on more solid footing. But in the nearer term, the medicine could well feel worse than the disease.
– from ‘Why lower home prices are a national priority’, David Parkinson, The Globe and Mail, 11 Jan 2013