What's going to happen to Canadian home owners?
By ebizniz on August 3, 2007 - 2:54pm
As I see it by Vancouver home mortgage:
In yesterday's Financial Post,
Reuters
Published: Thursday, August 02, 2007 reported
"Canadian, U.S. banks face limited subprime shocks"
So, it looks like the banks in the U.S. and Canada are well covered and can withstand the sub-prime mortgages meltdown.
But, Canadian home owners who bought into their homes recently will not be so lucky. The reason being that these home owners paid a lot more for their homes than those that bought a few years earlier.
In Canada, we will not be immuned to the price correction when the housing market turn south. It's not unreasonable to expect prices to correct 15% to 20% considering house prices have gone up almost 100% over the past 6 years.
In the hot housing markets in Vancouver, Victoria, Calgary and Edmonton. there are not much up-side potential in house prices continuing to increase without a correction. The down-side risk could be devastating for many home buyers who only bought their homes in the recent months.
The mortgage defaults and foreclosure problems in the US have resulted in tightening credit and cut back in consumer spending. With more interest rate hikes predicted for this year, home buyers in Canada will become more cautious.
The housing supply/demand figures in the lower mainland of Vancouver should be closely monitored. Higher inventory of new and re-sale homes, number of days on market, and price reductions are tell-tale signs that the housing market is peaking.
It's already in the news that there are likely to be another interest rate hike in September, possibly follow by another one before the end of 2007.
You are welcome to post your comments here.
As a West Toronto Realtor I think, that the only impact, the crisis in U.S. will have on Canadian market is, that some business sectors related to real estate will slowdown and that may impact Canadian consumer confidence. Second thing is, that due to falling purchasing power of the U.S. consumers, the sale of Canadian made products (like autos) may also come down.
But in Canada, there will be no mortgage crisis, because all mortgages in Canada are in comparison to U.S. insured and the investment enviroment is more conservative than in U.S.