Canada’s real estate market has been experiencing a strong rebound from the slump at the beginning of 2009 to return to record levels. Sales of existing and new homes have reached new highs, and prices have surpassed 2008 peak numbers. In most markets across Canada higher levels of sales are steadily outpacing the growth of new listings.
Meanwhile, here in the U.S. we have the opposite. Our decimated housing sector may get considerably worse before it gets better, according to housing-industry experts, who expect foreclosures and home-price deterioration to continue pressuring the sector through at least the rest of fiscal 2010.
If you are wondering why Canada’s housing market tended to be ‘less turbulent’ than ours ; here are the main reasons:
- Mortgage insurance in Canda is compulsory for federally regulated financial institutions when the loan-to-value ratio is over 80%.
- Only about 30% of mortgages in Canada are securitized, so most lenders have ongoing exposures to the mortgages they originate, and that gives them an incentive to be more prudent in their lending practices.
- Borrowers in Canada also have reasons for prudence: mortgage interest on primary residences is not tax deductible in Canada and (in most provinces) lenders have full recourse to borrowers in the event of default.
