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If your home price tanked, would you spend?

BARRIE MCKENNA

From Tuesday's Globe and Mail

Latest comment posted at 12:47 AM EST 17/10/07

Neither will Americans ...Read the full article

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  1. philip d from Canada writes: What was that !!! my real estate agent told me houses always go up in price. Why did they lie to me....now I cant go out and buy my new BMW and drive it to Canada. On second thought better stay home I heard the American dollar does not buy too much any more. Turn on the TV and watch CNN...there now I feel better.
  2. RD Lone from Vancouver, Canada writes: Houses always go up in price - just ask the homeowners (err, I mean extended mortgage borrowers) in BC and Alberta!
  3. Gary Dare from Portland, Oregon, Canada, writes: What is troubling is that for at least the past year, Americans on average have been running a negative savings rate. Canadians have recorded the odd month here and there in that time, as Americans had been doing since 2001.
  4. allenparkpete * from Canada writes: my house price did tank. I live in Windsor.
  5. Rick C from Canada writes: I guess allot depends on where you live. As allenparkpete says,...in Windsor prices are down already.

    It all depends on who the buyers might be and, more importantly, how and where they earn their money.

    The speculators that buy into pre-sales with the intent to flip for a profit would consider flat prices a virtual "tanking of price."

    That may not be a bad thing for an eventual owner who intends to live there. Getting rid of the "flippers" would stabilise the prices,...at least in the short term.

    Its the speculators who help drive the prices up. They dont care very much about the cost of carrying debt,........ they hope to not carry it for long.

    The "condo flippers" in Florida are crying the blues now, and have been for a year or more. Prices are way off their highs there. You can get a condo for a (relative) song now. Be carefull of unfinished projects though,....they may never be finished!

    If you think the Cdn dollar will stay high forever and want to retire in FLA ,...it might be a good time to sell real estate in Canada and move south!
  6. Steve Not an Alberta Redneck from Calgary, Canada writes: For many years now, Americans (and to a lesser extent, Canadians) have been running up their credit cards or doing renovations and financing this by refinancing their home mortgage and drawing out the gains in the value of their property.

    In the US, this gave the economy a $850 billion dollar boost.

    When this nonsense stops, the economy will get a double whammy. Not only will the $850 million injection no longer occur but they will have to reduce their spending to make payments on the credit cards that have already been maxed out.

    Not pretty.
  7. Billy Tubawlz from Gotham, United Kingdom writes: I find it amusing to see that some Canadians think that all this applies to the US in full measure, but much less to Canadians. Last time I checked, house prices have spiralled out of all sanity in Canada as badly, or worse, in Canada. Further, Canadians are not saving money to just as extreme an extent as Americans - and this is amplified by the fact that Canada's economy is far less diverse.

    Laugh it up now at Americans' expense at your peril - Canada is the tail wagged by the dog, and all the feel-good arrogance that comes from a par loonie does not change the big picture.
  8. Bill NotGates from Canada writes: Home prices will and can drop in Canada, it has happened in Calgary/Edmonton in the early 80's. It has happened in Toronto in the late 80's and it can happen again. I think the reasons are different for the past price drops, but non the less, it can happen again.
  9. Richard Bojankiewicz from Tooronto, Canada writes: I am boring and old fashioned. I do not "maximize my spending" based on the value of my house (no lines of credit against the property) - I actually try to pay off my mortgage/lump sums every year. I live within my income abilities (a.k.a. salary or "means"). As such, my spending is completely independent of my house price and, yes, I would continue spending at the same rate if my house price tanked/went to zero. I am actually more inclined to spend when the economy is hurting/very weak because deals are better (from clothing to bathroom/kitchen renos - I am not trying to attract the attention of a tradesperson for one room when he/she can make much more working on an entire subdivision of new homes). I perfer these "out of work" people in a weak economy beg for my business rather than me bidding against you "interesting" spend-thrift types in a strong economy... Sound "mean" or "cruel"? Perhaps, but they are happy to do the reverse to you. I do not drive a depreciating asset (automobile) that is close to 50% of my house's purchase price (and $50.00 at the end of 7 years - no matter how much it costs at the beginning). I own a fully paid off, lower end, vehicle ($0.00/month and 0.00% financing) and do not make ongoing ("lower") lease payments for the rest of my life. BORING BUT CONTENT. Get a grip people... Stop buying into the North American marketing machine where no one is dedicated to any industry or activity but are all in in the business of "making money" (ie. taking it out of your pocket). Now skip to the next (less boring post). BRING ON THE RECESSION AND DECLINING PRICES!!!!!!!!!!!!!!!! I am still a consumer, but not a foolish one.
  10. Gary Dare from Portland, Oregon, Canada, writes: Billy Tubawlz writes, "Further, Canadians are not saving money to just as extreme an extent as Americans ..." I find this comment bizarre unless you can provide a citation since Americans on average have been running a negative savings rate for over a year while Canadians have only had such for odd months here and there.

    http://money.cnn.com/2007/02/01/news/economy/incomespending/index.htm

    http://www.usatoday.com/money/perfi/general/2006-03-01-savings-cover-usat    x.htm

    A negative savings rate is now a known fact behind discussions of personal finance on US business news shows.

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