Hilliard MacBeth - When the Bubble Bursts: Surviving the Canadian Real Estate Crash

Since the first edition of When the Bubble Bursts was published in March 2015, Ive learned a great deal more about the housing bubble in Canada. Ive spoken to hundreds of Canadians about their house purchase plans. Ive been interviewed more than fifty times in Canada and the United States.

My original idea in writing the book was to warn Canadians about the severity of the housing bubble and, perhaps, to help people avoid making a mistake that would impair their finances for years, even the rest of their lives. Ive talked to more than a few people who have thanked me for that.

As I said in 2015:

My goal with this book is to alert as many people as possible to the fact that Canada is in a housing bubble and its a buy-high trap similar to the dot-com bubble of 1999. If investors want to be successful in the next bull market cycle, its essential that they make some adjustments now so that they can protect their retirement assets and prepare their personal finances to insulate themselves against the inevitable deflation of housing values. Canadians must take steps to protect their investments now in order to prepare for the opportunities that are just over the horizon.

But the majority of the people who were eager to buy into the expensive Canadian housing market just went ahead with their plans. If they heard about the book, or heard me in an interview, or saw me on television, or bought the book and read it, or read one of the articles that have been published in the Globe and Mail and Macleans and many other publications, it didnt have any effect on their decision. They wanted to buy a house, the lender said they qualified for the loan, and they took the plunge. For some of them that will be fine. Their incomes will support their purchase, they will pay down the mortgage, and the slump in prices and erosion of the value of the equity in their home will be met with a shrug and the comment, Well, nobody saw that coming!

Some people did notice the book and contacted me. I talked to many people who were unsure about buying. They had felt pressure from spouses, friends, family, in-laws, and many official sources to buy a house or condo, but were uncomfortable with what was being recommended by all of these people. They didnt like the idea of signing up for huge loans or, like me, they felt that prices were too high and a crash was inevitable. They were reluctant to take money from parents and create an obligation that might taint the relationship. They wanted to talk to me to find out how strongly I felt, or to get arguments that would convince someone in their life that not buying a home was a good decision. To aid them, I have provided a list of DOs and DONTs for people who already own a home and for people who are considering buying one.

For the most part, however, Canadians continued to buy homes at hugely inflated prices, financing these purchases with massive amounts of debt. How did Canadians get to the point where they were willing to borrow so much money to have a roof over their heads? How did Canadian banks and their regulators come to believe that was a prudent thing to do? Since 2015 I have engaged in a search for an explanation of how we got to this point. Since the trend of higher house prices and massive debts is a worldwide phenomenon, the investigation took me to other countries and what had happened there.