US Style Housing Meltdown Not Expected Here

Posted by Chris Proctor on Saturday, December 25th, 2010 at 1:23pm.

ok_800Few scenarios keep home owners, or would-be home owners, anxiously awake at night more these days than the fear of a US-style housing meltdown making its way up here to Edmonton and the Great White North.

Indeed, we’ve all seen the pictures of American ghost towns full of foreclosed homes, and anguished home owners who are either barely staying above water, or who actually can’t afford to sell their homes – because they owe more than the home’s going market value.

However, as dismal and tragic as that situation is, last week real estate lawyer Mark Weisleder wrote an interesting article in the Toronto Star, which attempted to sooth jangled nerves and let Canadians know that they’re not headed for a US-style housing meltdown anytime soon.

Weisleder claims that the underlying factors that contributed to the US housing meltdown were uniquely made in the USA. He pointed to causes such as:

  • US political leaders telling banks to make lending easy – even to those who, right now, wouldn’t quality for a mortgage (or, at least, as lucrative a mortgage)
  • US government programs contributing to home buyers’ down payments – which, ultimately, let people buy homes with very little – or sometimes none – of their own money
  • US banks and lending institutions that offered the now widely discredited “sub prime” mortgages, which tantalized home buyers with artificially low interest rates, only to suddenly boost the rate to an unaffordable level later on
  • US tax laws that let homeowners write-off interest paid on the mortgage – something that can’t be done here in Canada (unless the space is used to run a business, and then only the “business use” portion of the home can be used as the basis for a deduction – not the whole house)
  • Many US states prevent banks from suing customers who default on their mortgage – the only remedy is to take back the house

Weisleder goes on to outline other key differences, and also to point out that even with growing concerns over increasing average household debt across Canada (a trend spurred on by historically low interest rates), there really is no reason to panic here, or even to expect a “mini meltdown.” He concludes with the optimistic: "There is a reason that the Canadian economy is now the envy of most of the G20 countries. It is also a reason for continued optimism for 2011. Enjoy the ride."

Enjoying the Ride in Edmonton

Amidst all of the real estate doom and gloom that we’ve seen across the country (though not much here in Edmonton and Alberta as a whole, where the economy remains strong and growing), I appreciate Weisleder’s views and how he’s clarified the core, structural differences between the housing marketing in the US, and the rules that we follow up here in Canada.

If you’re a home buyer or home seller who is as optimistic as Mr. Weisleder – or even if you’re just a realist who knows a good trend when you see one – then call me at 780-709-0811.

Whether you’re buying or selling, I’ll create your unique real estate plan that moves you towards a smooth, satisfying and stress-free transaction. Now that’s something to really be optimistic about!

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