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(Cinders McLeod for The Globe and Mail)
(Cinders McLeod for The Globe and Mail)

Sarah Hampson's Currency

This spring's fever? House lust Add to ...

Seduced by a view? A certain slant of light through a south-facing window? Well, I've felt it for a wood floor; the shape and size of an upstairs hall, the quality of window sills. I've imagined a whole life because of the way a front door looks - even before I open it.

House lust. It rises in the spring, which is why For Sale signs start popping up on front lawns along with the tulips. The days are longer, the sunshine stronger. Snow banks disappear. All of which makes it easier to enter into what I sometimes think of as the filmic (David Lean as director, of course) setting of your life. And maybe, too, spring house lust is the desire for a fresh start. We want to imagine ourselves living in a new way. Certainly at this time, for many it's a desire to make a move - either to acquire a first house or to find a bigger one - before the anticipated jump in interest rates.

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The question is whether it's rational.

House lust can be dangerous. As a buyer, I have felt the infatuation kick in the minute I walk into a home. When I was younger, my then-husband and I would walk into a new house and if it spoke to us, I was soon seeing a scene of our three boys lining up their Lego ships in the basement. I could see family gatherings in the living room. I could imagine our friends coming for a party. Baking cookies in the oven. Having a bath. The film that un-spooled in my head had nothing to do with what a real estate agent said or whether the current homeowner baked bread minutes before the showing. "Ninety per cent of buyers have an immediate instinctual reaction to a house," acknowledges one Toronto real estate agent.



We are living in a day and age when real estate is seen to be a right, not a privilege. And the danger is that when real-estate-entitlement culture takes hold, all of a sudden just owning a home isn't enough. It becomes competition. Financial expert and author Garth Turner


It's like a romantic spark with a possible partner - you either feel it or you don't. And if you feel it, well, hold on for the ride. Smitten by a Ceiling Height could be the title of my obsessive romance novel about tall, dark and handsome real estate.



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In his research for his work in neuroeconomics, Jonah Lehrer, author of How We Decide, came across classic examples of "a weighting mistake" when people make real estate decisions. One study showed that if you gave people two houses to compare - a three-bedroom townhouse, say, in centre of town, that would entail no commute, versus a four-bedroom house (with extra bathroom) in the suburbs that would necessitate a 45-minute drive to work - most would make the right decision.

They would give proper weighting to the negative variable of the commute - but only if they made the decision quickly, he explains. "The more people spent thinking about housing options, the more likely they were to choose the house that's farther away. They come up with all sort of reasons why they should buy it. Grandpa Joe will visit. My brother will come in the summer. That extra bedroom, even though you may use it only twice a year, starts to outweigh the problem of having a commute, which is known to have a significant impact on lifestyle happiness."

It's called confabulation, Mr. Lehrer points out. "We love inventing reasons, so give us more time and whether it's a house or a box of cereal, we'll think all day about why option A is better than option B. And with real estate, we tend to confabulate in one direction - more space."

Before the era of debt denial - which is where we are now, folks, in case you didn't notice - house lust was easier to control. Banks could provide a cold shower. But now, with a 5-per-cent down payment and a 35-year amortization on a mortgage, a newly married young couple can buy a house their parents wouldn't have been able to purchase until well into their marriage.



I just tell my clients that whatever the bank says they can afford, go below. I don't want it on my shoulders if someone is exceeding their debt load. Financial expert and author Garth Turner


Real estate agents in the current market talk about "nuisance mortgages" of $300,000 to $400,000 on a million-dollar house. Nuisance mortgages? That makes them sound like a fly you can blithely bat away - not a sentence of "financial slavery," which is how Kelley Keehn, an Edmonton-based financial expert and author describes our relationship with debt. And I'm sure I'm not the only real estate client who has heard her agent casually talk about the cost of borrowing another $100,000 as it if were a bag of carrots on sale at the supermarket.

"We are living in a day and age when real estate is seen to be a right, not a privilege," comments Garth Turner, financial expert and author of several books including Money Road and Greater Fool; The Troubled Future of Real Estate. "And the danger is that when real-estate-entitlement culture takes hold, all of a sudden just owning a home isn't enough. It becomes competition."

The hot real estate market in major cities across Canada are subject to bidding wars and panic buying, precisely because of this entitlement culture, Mr. Turner explains. "People believe that if they don't get in now, they'll never get in. The defining characteristic of people is home ownership," he explains. "And that's being fuelled by the real estate industry and ridiculous low-interest rates that won't stay the same." Younger buyers who only put 5 per cent down will be "underwater with negative equity" if there's a 10-per-cent correction in house values, he warns.

Canadians may think they're in a better debt-to-income ratio than Americans, but "I think we're delusional. I think have been drinking our own Kool-Aid and swimming in our own soup. We don't understand what happens when an asset becomes over-valued," Mr. Turner explains, adding: "Our needle is on red. We are living in a delusional time."

Real estate agents may see themselves as facilitators, but they're "merchants of debt" he says.



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Too harsh? "It's not part of our training at all to understand the economics of mortgages and what people can really afford," observes the Toronto realtor. "But there are lots of agents who suggest that they know [about financing] I just tell my clients that whatever the bank says they can afford, go below. I don't want it on my shoulders if someone is exceeding their debt load."

In my years of house lust, some real estate agents were more cautious than others about the quality of the house, how much repair work it would entail and the size of our debt. But it didn't matter in the end, because ultimately it came down to how much in love we were with the dream of how we'd live. (As it turns out, some houses were very bad love affairs, and at least one contributed to our divorce.)

Always, though, no matter how wise or not our agent may have thought the decision to be, she sent a little present to us upon closing. It was a decorative item of some sort - another prop for the fantasy domestic tableau - and I loved finding its perfect place.

Follow on Twitter: @Hampsonwrites

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