With the recent housing crisis in the United States, which has now put the country into a recession, many here in Canada are wondering if and how it will effect us. As the old saying goes, when America sneezes Canada gets a cold.
| As of now in the United States “Market conditions are the worst anyone in this industry can ever remember. I don’t think anyone has a recollection of a total disappearance in liquidity…There are billion of dollars worth of assets out there for |
which there is just no market.” Alain Grisay, chief executive officer of London-based F&C Asset Management Plc; Bloomberg News.
These sub-prime mortgages, which have been the cause of most the financial woes, have affected many, if not all, Canadian financial institutions. These bad debts were rolled up into investment packages and sold around the world. As a result Canadian banks have lost billions of dollars. And banks are not the only losers here. Just recently Air Transat has announced that they to will lose a substantial amount of money investing into these hedge funds. It is yet to be seen how many other companies will also be affected.
| All of this loss of money has affected the job market in the United States as well. The U.S. Labour department has released its job numbers for February and the numbers are down. They report that 63,000 jobs were lost in February which is the biggest loss in five years. |
This is in addition to the 22,000 jobs that were lost in January. And in the construction industry 361,000 jobs have been lost since September of 2006 following the overall decline of the American real estate market.
For the same time period the Canadian jobs numbers look quite different. Statistics Canada have just released their job numbers and for February of 2008 employment hit a new record or 63.9% with 43,000 jobs being created. In the past twelve months more than three hundred thousand jobs were created and in the all important construction industry 44,000 new jobs were added. This could be a sign that Canada will be able to weather the storm better than our neighbours to the south or more than likely that Canada has yet to experience the effects of the mortgage meltdown.
Home buyers in Ontario, for example, have not slowed down in their demand for real estate. Mortgage rates are still at historical lows and monthly mortgage payments have been made cheaper by the introduction of mortgages that are amortized to 30, 40 or even 50 years.
Multiple offers on homes are still common and some real estate experts have warned that buyers should not be lulled into a false sense of security by how well the Canadian real estate market is doing. When faced with paying more for a home many buyers will rationalize the purchase with some commonly held myths such as real estate, unlike stocks, is not risky. Or that real estate will always appreciate in value. Or maybe that they have to live somewhere anyway and it is better than renting. The wait and see approach, however, will be the only way to know for sure as to what effect the U.S. economy will have on Canada.
For more information on the real estate market contact Adil Esmail. Adil Esmail is a real estate professional specializing in the Markham Real Estate market and a source for up-to-date real estate information. The Adil Esmail team would be more than happy to assist with all of your real estate needs.
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