Purchasing a home is a large part of the North American dream, but maybe, Canadians should be rethinking before signing their names on that dotted line.
New housing statistics suggest that home purchasing is at an all time high at 70 per cent. But some economists fear that people are investing just for the sake of having a home without truly considering all the financial repercussions that come along with making such a large purchase.
York University’s Schulich School of Business Professor Moshe Milevsky feels that new homeowners have to think more critically about the market. Because of the U.S. housing crash six years ago, Moshe says home ownership doesn’t necessarily make sense for a mobile workforce that has to deal with fluctuating property values.
Many economists are saying that Canadian government has played an active role in encouraging people to own homes prematurely.
Ben Rabidoux, creator of the Economists Analysts blog, suggests that the Canada Mortgage and Housing Corporation (CMHC) has provided an unrealistic cushion for homeowners, encouraging them to purchase.
With CMHC loan mortgage insurance, a prospective homebuyer only needs to pay five per cent down on a home. Banks will secure a loan because it will be covered by the CMHC insurance.
Although Canada’s homeownership statistics are through the roof, other countries paint a very different picture. Seventy per cent of Europeans, in cities like Amsterdam, London and Paris, rather rent than own. In some South American countries, people wait till they have 70 to 80 per cent of the money needed.