Canada may see U.S.-style housing meltdown: report

Canada may see U.S.-style housing meltdown: report
Updated Wed. Sep. 24 2008 1:43 PM ET

CTV.ca News Staff

One of the world's most respected investment firms says that Canada may be heading towards the same housing problems that have led to the financial crisis in the U.S.

Merrill Lynch economists say Canadian households have "been running a larger financial deficit than households in either the U.S. or the U.K."

"After forty years of net saving, Canadian households moved into sustained deficit in 2002," David Wolf and Carolyn Kwan wrote in a report issued by Merrill Lynch's Canadian division.

The firm's data implies that the Canadian household sector is now overextending itself "as much as the U.S. or U.K. ever did."

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20080924/mortgage_meltdown_080924/20080924?hub=TopStories

That wouldn't surprise me, especially in the GTA and the hot western cities in Alberta, Saskatchewan, and BC.

This correction has been a long time comin'

Ive noticed a lot of houses for sale here in Port Dover that have been up a long time

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Yes and there nice houses and the prices are ok i think

I

Houses in my area sell within a week or stay on the market for months. We have one house on our street, new hardwood floors, custom built kitchen, custom carpentry throughout the house, new carpet on second floor, two bedrooms + 2 ensuites, basement is an in-law suite with interior and exterior entrances, small lot to maintain and has been on the market for 6 months. One conditional offer fell through. Another house, about the same size, with only one bedroom on main floor and second in the basement with a walk out to a beautiful ravine lot, sold within a week. I guess the location sold it.
The housing market has not yet hit a low, in my opinion, but will within the year I'm sure. I really hope we don't follow the US' market and decline to the same degree.

Stevef wrote:

In Dover at least I wonder if there isn't too much choice with all of the new homes being built or at least available. Plenty of people would rather pick their colours etc than remodel a 10 year old house.

That may be true to some extent - but as realtors say for the 3 top factors in selecting a home ... location, location, location. I for one would not like to live next to the manure-dense barn that some of those houses are backed up against on hwy 6. And people who live across the hwy in the other subdivision always complain about trying to turn left to come into town. Plus I know several people who hate living on the other side of the bridge in the summer (but new people to the area may not know about that special little treat).

I'm not sure why those existing houses aren't selling at the moment. I haven't checked their asking price. Some agents in the area (well, one for sure) tend to ask waaayyyy more than the local market will tolerate.

I wouldn't be surprised that, even if housing tanked in the major cities, that housing here might possibly increase as a result. That affect happened in some areas in the US. I'm just speculating, but it will be interesting to see.

Mortgage reforms on the horizon
September 24, 2008
Comments on this story (

Ellen Roseman

Last week, Prime Minister Stephen Harper announced a tax break for the closing costs paid by homebuyers.

But he's not promoting a more important federal initiative that takes effect Oct. 15 (one day after the election).

Major changes are in store for people buying homes who can't make a down payment of 20 per cent or more.

Their mortgages must be insured by the lender – and the premium is often added to the borrower's debt.

Here are the new rules, announced July 9 for house deals entered into after Oct. 15.

They apply to residential properties with up to four units.

No more 40-year amortizations for insured mortgages. The maximum amortization is 35 years.

Say goodbye to "no money down" mortgages. A down payment of at least 5 per cent is required.

No government guarantees for high-ratio mortgages that begin with interest-only payments.

Lenders must document the borrower's income and the property value to meet a certain standard.

http://www.yourhome.ca/homes/article/504695

yes, I've also noticed a lot of house for sale in Port Dover that have been on the market for quite awhile.

And while the asking prices may appear reasonable to people who are new to the area, they are very high for the local people. imho, a 30% correction may be in order for some of these places - especially, as one poster mentioned, once people realize the pitfalls of living on the east side of the bridge in the summer

This problem could be resolved if more commercial development were allowed there (east of the bridge)

The prices are now mind-boggling! 10 years ago I worked for a builder here in town, and you could buy a 3 bedroom bungalow with an unfinished basement for around $140,000. I think that the prices were manipulated so that builders and real-estate agents could earn larger profits.

In some cases I feel that people are buying much more house than they need. When they get in there and realize the month to month expense it can sometimes be to much to handle. Didn't we go through this in the late 70's early 80's. A lot of people lost homes because when the interest rate went up they hadn't paid down enough on their principal (or had a very small downpayment) and couldn't meet the costs. I agree that the market in Port Dover may have homes priced to suit new comers. If they are selling in GTA for 750,000. and can get a brand new home with for 350,000. must seem like a steal! I've also heard that in Vancouver that most people that are purchasing new homes are only making payments on the interest, the price is so high that they are just maintaining their loan.

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pattip wrote:

Didn't we go through this in the late 70's early 80's. A lot of people lost homes because when the interest rate went up they hadn't paid down enough on their principal (or had a very small downpayment) and couldn't meet the costs.

Interest went up to around 25%. That's insane regardless of how much you had left owing. If I recall correctly, some people had variable interest rates and were trying to renegotiate their mortgage.

Was a good time to buy GIC's.

I think a lot of young people in major cities purchase a home or condo without the intent to own it (because it's unrealistic to even attempt to do so). They treat it as an investment and hopefully make a little money when they sell (based on the assumption prices won't drop). Plus, they'd rather live in a home instead of pay rent.

I think Europe is different because in some countries there is also no new housing being built or very little so to have someone leave you their home (even if you still have to pay on it) wouldn't be such a bad thing. The way it was explained the other night on TVO was that Bush has to buy out of this because not only is the US in trouble but if they let these companies go bankrupt the European banks may too because they have purchased large amounts of stock in these companies. It would be a world-wide depression. Worse than in the 30's.

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