The Foreclosure Crisis will be Less Severe in Canada
The foreclosure crisis will be less severe in Canada with expectations that this year the housing market will lose its heat. It will not be a copy of the type of foreclosure crisis that overtook USA as per the analysis of DBRS.
The analysis stated that Canada’s position will improve because the lending operations here in the north of the continent were much more solid than that of USA. Jerry Marriott of DBRS said that there is less likelihood of Canada experiencing what USA had endured. He said, “It’s a combination of the lending practices prior to the peak in 2007 — they were more restrained, so there were better underwriting practices in Canada. We also think there are a number of factors in the Canadian market which have lent themselves to more prudent lending.”
The lenders in the Canadian market were far less aggressive and the system helping the people to cope with their mortgages more sound than its southern neighbour. The cooling of the market is already noticeable as availability of credit is tightening.
All this points to the fact that this year the housing sector will be in a correcting mood rather then slipping into worse conditions of increase in foreclosures. DBRS is anticipating that the market will continue to cool into the forthcoming year of 2011. It means that the prices of properties will drop. A report recently released by TD Banks anticipates that the prices will go down by 2.7% in the next year – 2011.
Marriott said that if all the factors were taken together it would appear that the mood will be that of correction and prices will not increase; rather there “might be some moderation in housing prices.”
It is good news for would-be purchasers. A CIBC report stated that on an average count the price of residential houses in Canada are at the moment 14% more than the “fair” price. It covers nearly 1.5 million houses that calculate to 17% of all the residences.
In the report it is also focused that families in Canada are weighed down with high debt levels – it being part of present trend. But the report also states that the household debts have not reached worrying levels. The interpretation of the debt count of households can be interpreted from various angles – it is a flexible issue.
For example it should be taken into account that the taxes in USA are lower but the residents of the latter country pay more towards health care.
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