To The Pointwith Boris Bozic
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Article written by Boris Bozic on the 11 Apr 2012 in Economy

I decided to break one of my own rules of blogging.  In my humble estimation blogging should be a combination of facts and opinion.  Simply cutting and pasting an article is not blogging.  That’s being intellectually lazy and boring to the reader.  So why am I breaking my own rule this one time?  I’m a fan of Andrew Coyne, and if you’re not familiar with his work you should make a mental note to look for his articles or when he appears on TV.  Andrew Coyne is a contributor to the Financial Post Magazine, and he’s a member of the “At Issue Panel” on CBC’s The National.  Whenever I read one of Andrew’s columns or if I see him on TV, I always end up saying to myself, “I didn’t know that”.  The man’s depth and breadth of knowledge of politics and the economy is impressive to say the last.  I enjoyed his work so much that I decided to bring him in as a speaker to the Mortgage Forum in Montreal two years ago.  In retrospect it probably wasn’t the right forum or audience.  Speaking to an audience for fifty minutes is infinitely different than writing an article or providing forty five second sound bites on TV.  That being said I wouldn’t hesitate to bring him back to a future conference, possibly as a member of a panel discussion.

I wanted to share Andrew’s most recent post because it speaks to the media coverage of our industry. I suspect his former employers at Maclean’s Magazine won’t be enamored with this story.   It’s refreshing to read an article which is balanced, and speaks to the facts.  If you’re like me there’s a good chance you’ll come across a word in one if his articles that you’re not 100% sure of its definition.  The article below won’t disappoint.  My new word is; “ Profligate”.

Definition of Profligate – wildly extravagant.

Until next time





Harbingers of doom

Andrew Coyne Apr 10, 2012 – 6:00 AM ET | Last Updated: Apr 10, 2012 11:55 AM ET

Even by Maclean’s standards, the cover was alarming. “You’re about to get burned,” screamed the headline, over a picture of a house that was literally on fire. “Canada looks like the us before its devastating housing crash — maybe even worse.” And the kicker, for those still hesitating: “Why it’s officially time to panic.”

This last was doubtless something of a little in-joke. For my old colleagues at Canada’s newsweekly, it is always time to panic, especially about house prices. The magazine’s editors inhabit a world beset by all manner of hitherto undetected demons, from more expensive groceries (“sudden shortages, riots over prices, the world food crisis is about to hit home”) to insomnia (“the truth about a modern epidemic”) to, well, “The Return of Hitler.”

But nothing, nothing frightens the magazine or, it is hoped, its readers, more than real estate. For years Maclean’s has been shuddering in terror of the imminent collapse of the Canadian housing market. From the relative calm of its late 2007 cover story (“Buy? Sell? Panic?”), the magazine soon picked up signals of the coming apocalypse. “House prices start to fall,” the magazine announced the following summer. By autumn, with the world financial crisis in full swing, so was Maclean’s. “Canada’s Looming Real Estate Crisis,” the cover shouted: “Why house prices may soon fall through the floor.”

As the months wore on, and the cataclysm failed to arrive, Maclean’s remained ever hopeful of a real collapse. But durned if prices, after a brief dip, resumed rising. By June 2008, a grumpy Maclean’s was warning readers “Don’t believe the housing hype,” insisting there are “plenty of signs that the Canadian housing market is still on some very shaky ground,” even if “average home prices are up more than 16 per cent this year.”

Fast forward through several more stories in the same vein and by this year the magazine and others were in even less doubt: Canada was in a housing bubble. Why, just look at the numbers. For starters, there’s the oft-repeated fact that Canadians are carrying debts worth 153% of their annual income. That’s true: but other countries’ citizens manage much heavier debt loads, from the spendthrift Swiss (200%) to the feckless Dutch (260%) to the profligate Danes (320%). We may be carrying almost as much debt as the Americans before the crash, but with nothing like the same risk factors, from subprime mortgages to small regional banks, that made their economy such a firetrap. And if we’re mentioning how Canadians’ debts have grown, we should surely also mention that their assets have as well: still five times as large as their debts.

Mortgage costs, interests and principal combined, are currently running at about 30% of disposable income — again, higher than a few years ago, but barely half what they were in the early 1990s. Yes, house prices were still rising as of year-end, but more slowly than before, as even the Maclean’s piece acknowledges — though somehow it cites this as evidence for its doomsday thesis. But then, what doesn’t? If prices were rising quickly, that would be proof of housing “mania.” If they fell a little, that would be the bubble starting to burst. And if they fell a lot? Look out below!

The truth is the real estate market is cooling slightly, helped by a modest tightening of lending regulations. It’s true that a rise in interest rates from current, historically low levels would put some homeowners in distress, but they’d have to spike a long way before the damage grew widespread — a concern, sure, but nowhere near as frightening as, say, the return of Hitler.

Posted in: Financial Post Magazine Tags: Canadian housing bubble, Maclean’s, real estate


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I wonder why Joe Flaherty doesn’t go after bringing down consumer debt by limiting the exhorbitant interest rates that the credit companies charge, up to 28% which to me seems where most of our consumer debt is.. not in mortgages.

Camilo Rodriguez @Twitter ID Website Reply

Boris, I am new to your blog and I already enjoyed this post. I agree, media and news have a huge impact on people. I am refreshed to see that there is follow up on media articles. I used to keep tags on predictions on interest rates when I started in my mortgage career 9 years ago by major newspapers etc, to find out a few months later that they did not hold true. I enjoyed your blog, great info.

Boris Bozic @Twitter ID Reply

Hi Camilo,

Firstly, welcome to the blog. I’m glad you enjoyed the read and that you took time to share your thoughts. Like you I used to keep tabs of predictions that so called “experts” made. After a while it got a little boring and mundane. I’m familiar with the story of the boy who cried wolf. I know how it ends, and too often it was no different than the story that “experts” tell.


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