happylandings

Hi,

Just wondered - any effects of the American mortgage problem, with 'bad debts' etc. impacting on house prices, or housing market in general in Canada?

I guess house prices continue to rise anyway....phew, nothing new there. This of course, means people getting larger mortgages to pay for them.

Cheers,

hl

johnh009

Hi hl, just a few thoughts on your post:

Whilst the American sub-prime mortgage problem is rela enough, if I were cynical, I would say that it has been overblown by the media to help manipulate the stock markets.

Our financial systems seem quite stable and Canadian banks are about as stable as you get. They are highly regulated and the TD and Royal Bank at least have recently shown an increase in quarterly profits.

I have been in Canada (Ontario) for 20 years now and have seen property prices go up and down but the general trend is up. Interesting because the economy in Ontario is not as good as it used to be but I think the demand through immigration is driving the prices up.

happylandings

Thanks for your reply, John.

I know what you mean about the media, like to make things dramatic to sell papers and air time. Nevertheless, stock market in the UK got jittery rightly or wrongly. Anyway, from what you say, things are pretty stable. I guess there's always something going on.....

2 decades in Ontario? You'll have seen some changes.
House prices still on the up, by all accounts. Alberta oil seems to be inflating things, and the resulting influx of people to AB, given the job market there. Great place, but in the long run it can't be healthy to have such fast climbs in the economy I reckon.

Anyway, all the best.

MarkG

Certainly in Edmonton the oil bubble seems to have leveled off recently; people we know there were saying that houses which would have sold in days a few months back are on the market for much longer now.

Canadian banks seem much tougher about only lending money for mortgages to people who can afford to pay it back, and mortgage rates seem higher relative to central bank rates than the UK or America. I doubt the mortgage troubles themselves will hit the Canadian market hard, but a US recession would have a significant impact; directly through exports to America and indirectly through reduced exports to China to make tat for Americans.

MB-Realtor

The Canadian economy is very different from the US. Luckily Canada is still rich in Timber, Minerals, Oil, Water, Hydro-Electric etc., that will act as a buffer to the economy.

BUT we are dependent on the US, and if their economy crumbles we will suffer, by how much is anybodies guess.

There is no Canadian Housing Market, it varies by Province, and within Provinces, infact it varies within Cities. Here in Winnipeg we have seen annual rises on average of about 10% in the last year, but that varies between a small or no increase in some areas, to 50% rises in other areas. It also varies by the type of House.

IF the US economy tanks; Here in Winnipeg I doubt that we will see any losses in property values, but it will take longer to sell homes, and there won't be the profits to be made, for a year or two.

Thats just my opinion, for what its worth,

steved61

Hi Guys
The sub prime market fiasco in the states is having an affect on canada, i can attest to that, although it may not affect the actual house prices, mortgage companies are already tightening the rules dictating the way they lend money. When i was originally looking at buying a house in March, RBC were willing to give a virtually no questions asked mortgage if 25% was put down, this has now been changed to 35%. Other lenders even if the mortgage is insured are still asking for a lot more information and guarrantees than they were before. It stands to reason that canadian lenders were heavily involved either directly or indirectly in the sub prime market (you only have to look at how HSBC and Barclays in the UK have been indirectly effected).

regards

steve

Novocastrian

I presume that as a realtor, you understand what the sub-prime crisis is all about?

Very few people seem to realize that it's simple fraud that has ballooned in the climate of laissez-faire, immoral, dishonourable activity down there under Bush.

Steve_P

This has virtually nothing to do with any so called oil bubble.

Housing prices have leveled off in Edmonton and Calgary because there is so much inventory on the market at this time.

Far too many people are trying to cash in on the rise in prices and it has made it a buyers market and slowed things down somewhat.

MB-Realtor

I don't know that I would be quite that harsh, but "Profound Stupidity" + Greed = Balls-Up

For those who don't know what happened:

The US banks started loaning money to people with poor credit ratings to buy houses with 100% (no money down) mortgages. Come the inevitable downturn people began to realise that A) they now had to pay more money each month for their house as interest rates went up, & B) their houses were now worth less than what they owed on their Mortgage. So way, way, more than expected have defaulted on their mortgages and just walked away from their houses.

The banks had also bundled together 1000's of these mortgages and "sold them on" to pension and hedge Funds, hence spreading the pain.

The banks in their typical fashion have now over-reacted and require much higher credit ratings for ALL loans, hence spreading the pain a bit more.

Canadian banks had participated in the free for all US market, and got stung, so even though the Canadian lending criteria never did get as lax as the US, Canadian banks have tightened their policies, so it will be a bit harder for everybody to borrow money for the next few years.

It has not yet had an effect on my marketplace (Winnipeg had record sales in July), I'm sure it will filter down to here, but how soon and how hard the repercussions may be, I do not know.

MarkG

The oil bubble is the reason why house prices in Calgary and Alberta have risen so rapidly, because people have flooded into the area in the hope of making a lot of money. I don't see how anyone can possibly claim that the crazy house prices there have 'virtually nothing to do with any so called oil bubble' when it's the very cause of the price rises of the last few years.

Admittedly prices couldn't have risen that high without the crazy low interest rates of that period too.

snorkmaiden

Yep, that's what I've been learning. I've been watching the market updates some of the realtors are doing and there has been a huge increase in property coming on to the market in Edmonton.

http://www.weselledmonton.com/webmrk...rketupdate.pdf

Hart50

I would concur with your view. The recent slowing down of the Calgary house market is simple supply and demand economics.

Steve_P

If you read what I said you would note I was referring to your comment regarding prices leveling off.
Nothing has happened in the oil patch to indicate any leveling off. No projects canceled, none deferred and oil prices remain around $70 US per barrel.

I did not deny the initial reason for the increase in demand and prices.

Novocastrian

OK as far as that goes. But you fail to mention that these mortgages were often similarly structured as those credit card offers we all get all of the time. "Low" interest rates upfront, so long as the balance is paid in full every month, but the rates jump to ludicrous levels (fine print) if you miss a payment.

These loans were being sold to people with poor credit records by door-to-door hucksters who (allegedly) encouraged the applicant to be "creative" in declaring their income and other debt on the application forms.

When, inevitably, a payment was missed, the high interest kicked in and the poor suckers had no choice but to default.

The first few of these in an area starts driving house prices down, triggering another wave of defaults etc., etc.

Simple fraud.

Steve_P

Was it just a missed payment that triggered the high interest kicking in or was there a time limit too.

I thought I had heard reference to an automatic increase after a certain period of time (six months or a year) and a lot of people were caught unawares.

Conditions not explained clearly at the outset.