The Economist magazine just released another article about an upcoming second dip in the pricing of homes in the US. I had previously explained a bit about the new round of Adjustable Rate Mortgages (ARM’s) coming up and bringing with it a new round of foreclosures in a previous posting, but this article also goes into details about some of the federal programs coming to an end.
These programs helped to artificially stabilize the housing market and now that they are set to expire, interest rates are set to rise and the US labor market continues to be so soft it is setting the stage for another substantial drop in values. Consider this another warning for you if you are looking at potentially purchasing an “investment” property in the US due to current low prices. These investments are actually much more speculative and will require much longer time frames to turn into wealth building opportunities.
Another aspect to consider regarding this is the Canadian market is still significantly different than the US market, the next wave of price drops South of the border do not translate into the same occuring here. As evidenced with the global recession while pricing did move downward in Canada, it was no where near as significant as it was in the US. We have already had our government change some of the qualifying and mortgage rules in anticipation of potential future problems. Whether that will be enough only time will tell.
Here is the link to the complete Economist Article – Waiting For the Other Shoe To Drop
Hi Bill,
To add to your note, I have also heard some speculation of our Canadian dollar growing even stronger – some saying as high as $1.10 US by late summer. With another forecasted drop in US house prices coupled with a projected stronger Canadian dollar could avail some opportunities in the future, I would agree that a wait and see approach would be very prudent at this time.
I also think that as the US economy continues to mire and our dollar grows stronger, our purchasing power will increase dramatically, particularly as Americans look to sell off some of their toys at a significantly discounted rate. I think there will be some great deals on eBay this fall!
Hi Scott,
I’ve heard parity will be a reality for a while, but our government will do anything it can to ensure it doesn’t go to high, this could involve changing interest rates to balance it out and possibly faster than they hoped if the dollar rises to quickly.
The biggest problem regarding the dollar is our trade and manufacturing industries based out of Ontario and Quebec. This also happens to be the biggest region of voters, so if those industries suffer due to a higher dollar, you can bet your bottom dollar the politicians will do whatever it takes to balance it out and bring our dollar down to at least par to stimulate manufacturing. Either that or suffer an army of unemployed voters who would demand a different government.