Dawn and her squeeze wrote me a few weeks ago asking if I thought they should bail out of their little bung. They were feeling the pressure of debt, and wanted to start getting ready for the after-work part of their lives.
You betcha, I said, knowing the city where they live (Kitchener) has recently been infected with the brain-eating parasite called Househornysicosis, GTA strain. If you’re ever going to pull the trigger and move on, I added, this is the moment.
So they did. I got this today:
“About a month and a half ago I wrote to you asking you what you thought of the idea of my husband and I selling our bungalow (3bed, 2bath) in Kitchener and downsizing to a condo. We were concerned because we wanted to get out of debt and because of the difference in our ages we wanted me to be able to retire soon. You thought it was a great idea.
“So we updated the bathroom (it really needed it!) and 2 days after it was finished last week we put our home up for sale at the price of $399,900. We did the usual thing of not accepting offers until Wednesday of this week. We had close to 30 people through in 5 days and ended up with 5 offers. Three agents came to present their offers. Garth, I couldn’t believe it but our 1st offer was for $465,100! As that was the highest offer we received we accepted it:) 65,100 over asking, like wow! It was from a young couple who had bid on 12 other houses and lost out on them.”
See what I mean? A vicious outbreak.
Here’s more evidence. A sad semi in a sketchy part of 416 that had even the realtors shaking their heads. “This is the place my clients bid on last night (alongside 20 other buyers),” says super-agent Lisa. “I didn’t know whether to laugh, cry or scream when I saw this.” Let’s go with scream.
The little house on Glebeholme is both 18 feet wide, no garage, no drive, no soul, no reno. The best the listing could say about it was “sun-filled” and “lots of light pours into the upstairs rooms.” Oh, and bonus. It comes complete with “couch in basement.” The asking was $699,900, and the sold was $950,500. Add in closing costs, and it’s a million-dollar gut which will never be more than an old semi glued to its mate on a street where hipsters go to die.
Meanwhile, not far away, more kids were at it in Greektown. The teensy little house at 69 Muriel even made the local papers – an anorexic teardown that went for seven figures.
The 20-foot-wide shack with a paved front lawn cost the current owners $10,000 in 1966. Adjusted for inflation, that’s $73,000. The current assessed value is $645,000, and Royal LePage listed it for $679,900. The bidding war that ensued – all desperate young buyers – resulted in the “winner” shelling out an astonishing $1,050,000. All for a place you might feel okay about storing your motorcycles in.
This silliness is the result of many factors, chief among them normal demand in an area of six million people, and the smallest number of detached homes for sale in memory. There is barely a 10-day supply of houses, hundreds of people attracted to every new listing, dozens and dozens of showings and five to 25 offers on each. For bidders the mantra’s simple. Go high, or die. Extreme offers are the only way to win a deed, and the lower the asking price the most outrageous seems the premium offered.
As mentioned here some weeks ago, besides diddling high-income taxpayers in the next budget, the T2 gang is planning on “measures” to corral this kind of excessive behaviour. They understand each nutso sale of a crap house on a dodgy lane sets the bar higher for every other property in the hood. Since most of these purchases are floating on an ever-expanding sea of personal debt – and since every rational person understands prices will correct (as they are in Vancouver) – the economic implications are ugly. Either slow this now and deal with the consequences, or let it bloat and blow on its own. Uglier.
Of course at the heart of this is the core T2 voter – a millennial. This reminded me of a US survey surfacing earlier this week, concluding moisters are overcondifent and underprepared when it comes to financial stuff. Three-quarters lack basic financial literacy, and yet almost 70% give themselves high marks for their own financial savvy. Recipe for disaster.
“Millennials are known for having unrelenting belief in their own abilities. This generation is diverse and highly educated. However, their overconfidence puts them in an extremely fragile financial position, and sadly, they don’t realize it,” says the National Endowment for Financial Education.
Seems places like the semi on Glebeholme or the dollhouse on Muriel are ideal examples of what happens at the corner of stupidity and greed. So how is Justin planning on slowing down this juggernaut?
Unknown for now. But I see a whipping boy ahead. Guess who?