RE:RE:RE:RE:Yikespasternak94 wrote: They are not exactly the same, but the fundamentals are.
The truth is that Canadians are much more leveraged than the average American circa 2007. The truth is that Canadian prices have overshot their historical means by a lot more than the US' prices.
The GTA and GVR have price to median income ratios of about 10x and 13x respectively. All you need for a government insured mortgage of $1M is $75k in down payment.
The World Bank recommends a housing price of 3x to 5x median income. We are in for a complete collapse of housing prices by 50-70% for some places.
The Bank of International Settlements has said Canada is only second to China in its Credit-To-GDP gap of 17%. Anything more than 10% puts a country at serious risk of a financial crisis.
We are headed for a very bad time and it is inevitable. This deleveraging needs to take place and it will take housing prices with it.
I dont believe this in any way. Everyone needs a place to live and the first thing to fall in canada will be CC debt . Houses are rarely included in bankruptcy in canada and you cant just "walk" away from your mortgage to begin with.... like you can in the states.
And the rules you are siting are coming from standards set AT or ABOVE normal inflation and interest rates. House prices rise with lowering interest rates and fall with rising interest rates. So yes... if prime jumps to 7% without a price correction there is a huge problem.....
Your "record debt" issue is answered witha simple question......
Who pays more. 250k mortgage at 7-10%
400k at 2.5?
It is silly to think that the equity wont be removed by rising interest rates but the main problem is that you cant build houses from the same price you used to be able to. House prices cant CRASH in canada by 50-70%... ITS IMPOSSIBLE. I build houses for a living, I know what it costs. The average profit is 10-20% for builders.... Lower margins the higher the value of the house.
Tell me where the 50-70% is going to come from?
There definitely can be a correction in the Toronto in Vancouver but tehy are not expensive on a direct price comparison method