The Sky Is NOT Falling

Doom and Gloom is all you ever hear about from the Canadian Media when discussing the state of the real estate market.

They love to compare the Canadian Real Estate Market to the Americans linking us to a U.S. Style housing crash (God Rest their Soul if Romney gets elected).

CIBC's Chief Economist Tal puts it in perspective and explains “…Any comparison to the American market of 2006 reflects deep misunderstanding of the credit landscapes of the pre-crash environment in the U.S. and today’s Canadian market.”

Here are a few key points on how the Canadian Market differs then the US in layman terms? (Credit: Canadian Mortgage Trends) 

Lender Recourse – If you default on your mortgage in Canada, you are still on the hook for the amount owed

Less Subprime – Canada’s exposure of non-A (sub-prime & Alt-A) deals are approximately 7%, compared to the US with 1/3 of all mortgage originated a year before the crash were non-prime

Equity- Canadians cannot get into the market unless we have a minimum of 5% downpayment, this means we are not sitting in a negative equity situation

No Teasers- We qualify a lender with a higher interest rate to ensure they can afford an increase in rate

Credit Scores – Canadian credit scores have improved in the last 4-years, whereas before the US crash were considered high risk and comprised of 22% of the market.

So, is the sky falling? In my opinion it's not. We are in a buyer’s market and some sellers are just not getting the price they want.