Wednesday, October 03, 2007

Gloom And Boom!

I’ve thought of the ultimate Halloween costume this year. Imagine dressing up as a ‘sub-prime mortgage meltdown’ and banging on doors trick or treating throughout the U.S. I’m sure that this would be one of the scariest costumes folks have seen in awhile.

Like many fears, once exposed, explained and understood they lose their bite…. Well in Canada anyway.

The sub-prime mortgage situation definitely has a wide arc and the ripple that it affects include; U.S. borrowers resulting in higher foreclosures, tighter lending criteria and potentially higher rates for commercial property buyers, credit card debtors, home builders, discount and luxury retailers, stock markets, industries such as metals and mining, hedge and mutual funds, currencies, Northern Rock in the U.K. and....You get the point.
But this is the result of damage control instigated over a year ago.

Despite all of the media gloom, there are many regional real estate markets in the U.S. that continue to perform well and about 75% of homeowners in the USA have conventional mortgages that weren’t exposed to the ‘melt-down’ directly.
But the question remains: “How does the sub-prime market affect my Canadian real estate?” And the short answer is…

I t doesn’t. Don Campbell wrote an excellent article entitled ‘What Subprime Crisis?’ where he explains the impact on our local market (and there isn’t much of one) cut and paste here for the full story:

What will affect us in the short-term is lending criteria tightening; hopefully in a year or two that will ease up.

The gloomy outlook in the U.S. market and a cyclical slow down in Edmonton brings a welcome cooling to investors.

I wrote at the end of 2004 that we were entering into a great buying opportunity and, as you’ve seen, the market proved it with stellar returns.

Edmonton’s market follows about 18 months behind Calgary’s, meaning that we are easing into a plateau, which creates an excellent buying opportunity for you.

Calgary’s breather has lifted out of the plateau and into steady increases, a trend Edmonton will follow. In fact the economy is stronger now than ever before, with huge multi-billion dollar projects being added daily.

Between now and spring, get ready to buy, this is it before the next big ride up!

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