May 18
lindsayrgwattFinance housing
So in a few months I’ll be moving to Canada. And renting. For a long time. Possibly until I’m 40. And I’m not ashamed of it.
Given that so many people consider owning a house a measure of their identity and worth, why am I not interested in buying one?
Basically I think Canada’s real estate market is in a bubble and I don’t know how long I’ll be in Canada (at least five years, but past that, who knows) nor do I know when the market will burst. So, I won’t be buying.
Now, here’s a whimsical reason why I think it’s a bubble. And here’s the graph (plus explanation) that underlines the whimsy:
From here via here.
Two caveats: if the bubble bursts or I strike it rich I might buy a house. Otherwise, you’ll find me in my condo…
Jul 16
lindsayrgwattBusiness crisis, Economics, housing, law of unintended consequences, Risk
I’m always fascinated by the unanticipated side effects of people’s actions. Here’s an interesting one related to housing.
Housing has definitely started the current economic crisis – but no surprises there; it’s just simply people taking on too much debt. However, it might make it worse than other crises. Why? Well, when people buy houses, they tend to stay in them – even if their neighbourhood goes to hell and has high unemployment, etc. On the other hand, the renters tend to get out of town.
Here’s the killer quote from a study linked to via Creative Class:
Being tied down to a house tends to make people less likely to leave an area in which employment prospects are deteriorating …A seminal study by British economist Andrew Oswald of the University of Warwick traced the link between unemployment and homeownership. Oswald looked at the United States, the United Kingdom, France, Italy, and Sweden between 1960 and 1996 and discovered that, on average, a 10 percentage point increase in homeownership tended to correlate with a 2 percentage point increase in the unemployment rate.
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