While most real estate news stories focus on the US housing bubble and bust that occurred from 2005 to the present, what about our neighbors to the north? We’ve seen real estate predictions detailing that 2010 is expected to be a steady increase from the bottom for the US housing market, but Canada might be on the verse of experiencing another real estate bubble. According to the linked article, many of the real estate practices in Canada mirror the reforms made in the US. But other risks remain, including the amount of debt most Canadians have and home prices that increased during the recession.
In the US, the main bust for the housing market was adjustable rate mortgages, or ARMs, that many got for not having satisfactory enough credit. ARMs generally started increasing after a year and, at this point, many who had bought a new home in 2005 could no longer pay their mortgages and, instead, filed for foreclosure or a short sale, as we saw in many instances around the Gulf Coast. While companies giving new homeowners ARMs were inaccurate about the assets a person had, many of the recent reforms are designed to restrict who can purchase a home to avoid ARMs.
According to the article linked above, Canadian homes are 12 percent overvalued presently, although some say they’re only 7 percent overvalued or not at all. Nevertheless, the past recession saw flat or increased prices on homes, while Canadians, much like their American neighbors, also went into debt. In fact, according to the article, the ratio of debt in Canada is 145 percent to the average income. Additionally, the Federal Finance Minister has threatened to increase down payments on mortgages. While this last statement could detract those who can’t afford a home from purchasing one, could the debt and increasing home prices set Canada up for its own real estate bubble and bust?
March 16th, 2010 at 10:17 pm
When the bubble was inflating, some big bosses made big money. You would only expect that the bubble would eventually explode in some other people’s hands. A bubble is a gamble. Some win, some lose. I did not ride that bubble not because I don’t like good yields on my investments but because I knew it was a bubble, and it was a gamble. Now, some people made their bets, and they lost. Now what I don’t understand is why do I have to pay for the losses of the ones who decided to ride this bubble only because they were not satisfied with the moderate yields that I was earning. Tell me why. Anyone? If they are looking for a resource to fund the losses of the losers of this bubble, then they should go ask the winners of the same gamble. They are the ones who made big and I mean big money during the bubble.But then I am being ridiculous to expect that the big bosses would be made to pay for the loss. After all this whole crisis thing was cooked up so that they can plunder our cash.
May 28th, 2010 at 3:39 am
Is purchasing a foreclosed home really the best idea right now? Shouldn’t we hold off and see if the market turns around? I know some cities are better than others, but how about our country as a whole?
June 4th, 2010 at 6:47 pm
Purchasing a foreclosed property is fine, as long as you’re able to afford it. With foreclosures, you need to be aware of the state of the property and, considering some homes are damaged and not maintained by banks, the property may need some work done.