Trudeau's magic tricks
"Canada to allow 30-year amortization for first-time buyers' mortgages on new homes"
That's the headline of a CTV News article.
For those of you who have been in my circle for a while, this shouldn't be news to you.
I've been saying that the government will have no choice but to extend the length of amortization.
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The reason is simple. It makes the politicians "look good".
A longer amortization spreads out a mortgage over a longer time.
That means one can expect a slightly smaller monthly payment.
Or, when the payment is the same, a 30-year mortgage will allow one to buy a higher priced home compared to a 25-year mortgage.
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What a great solution! Problem solved!?
I hope you're smarter than that. Don't let the politicians fool you.
Regardless of what Trudeau is telling you, we are in a housing crisis because of 1 simple reason:
Demand is much higher than supply.
And there's ONLY 1 simple solution to fix the problem:
Build more houses!
Unfortunately, this crisis is so severe that no amount of trickery is going to solve the problem...
Until more houses are built.
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Politician like Trudeau likes to perform magic.
Most adults understand that magic is essentially an illusion.
The magician is skilled to keep the audience's attention on what they want you to see.
With a highly trained skill of misdirection, they shuffle or move objects around and make something disappear.
Trudeau is the magician today.
He knows by changing the amortization, it will make housing appear more "affordable".
He sells to the audience (the Canadian middle class) this great act of illusion.
Look! Now you can buy a house for less payment!
Abracadabra!
If only magic is real.
If only extending amortization will solve the real problem.
Unfortunately, just like a rabbit really didn't disappear from a hat, the housing crisis isn't really getting solved.
The outcome of this is sobering.
With the ability to qualify for a bigger mortgage with a longer amortization, it means people can now pay more for a house.
As more demand chasing after a limited supply, it doesn't take a rocket scientist to figure out that we'll see housing prices to keep going higher.
Much higher.
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Since I'm not a magician, I'm not bound by the "code" of not revealing a magician's secrets.
There you go. The secrets revealed.
How are you liking Trudeau's magic show?
What do you think of his magic tricks?
Reply to this email to let us know.
Eric Chang
Calgary, AB
June 11, 2024
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