As Good As SOLD

Mortgage Money

July 31st, 2007

Canada’s real estate market is the picture of health, yet the American market, in contrast, is experiencing its lowest existing-home sales level in five years. It’s down 11.4% over last year, and there are more than a million homes unoccupied and for sale.

Worse, foreclosure rates are on the increase.

There are many contributing factors, but one of them is certainly the ‘subprime‘, or high risk, end of the mortgage lending business. No job or prospects of one, coupled with shaky credit — not a good lending bet. In Canada that segment comprises only 5% of mortgages; in the U.S. it’s closer to 20%. Further, ARMs or Adjustable Rate Mortgages have generally not been available to subprime borrowers here; in the U.S. they have, and that has added still more unpredictability to an already unstable situation.

How big will the subprime losses be as they roll over for renewal? Estimates vary, but Federal Reserve Chairman Ben Bernanke recently put the number at $100 billion — yes billion. As the bulk of them won’t reset for another year or so, the picture is unclear. Some say higher — much higher.

Woo hoo, as Homer Simpson is wont to say.

Entry Filed under: Real Estate Matters