Many think their homes are making money for them however they are blind to the fact that it is just a price unless you sell. Many of my neighbors over the past 2-3 years upgraded from reliable 5-10 year old Toyotas and Hondas to BMWs and Mercedes with some going as far as a landrover. Where are they getting this money even when they have not sold their homes? Did all of them suddenly get promoted at their jobs? I suspect that they are doing HELOCs or some other financial instrument which uses their homes as collateral in exchange for cash. Some even do a HELOC on their primary residence and use the borrowed money to start a business, buy stocks or as down payment to purchase another property as an investment. I have no clue just how many people are taking advantage of their homes equity this way but it is very scary. A HELOC is very, very easy to get.Precisely. There are real estate agents that specialize in money laundering. There are mortgage brokers that specialize in creating fraudulent documents for mortgage applications. There are few checks and balances. It's the wild west.
Is it a surprise that people are willfully ignorant? 70% of Canadians own their homes. Many people have become very rich over the past decade because of this. How many people do you know that make $50k/year but made hundreds of thousands in profit on their homes? It's the only thing keeping Canada's hollowed-out economy going.
Say that rates rise or you get fired from your 50K/year job and can't make your payments anymore. Not only do you lose your primary residence but also all the assets that are tied to it using HELOCs. So what happens in the event of a default is not only your home gets foreclosed but also your business is closed and liquidated, your stock portfolio is liquidated, your cars are liquidated and your other properties are foreclosed and liquidated. With one home goes potentially many other things tied to it.
People that don't own a home look at housing price increases and feel like they are missing out and feel pressured to buy now or never. Whats funny to me is that even if they were lucky enough to get into the market before it became red hot, they STILL feel like they are missing out and as a result they take out HELOCs to buy even more homes. MADNESS.