THE COMING HOUSING CRISIS

“Be very afraid of the Canadian Housing Bubble”, said Don Pitts of CBC News on April 16th 2012.

You should be very afraid of the Canadian Housing Market.

People who are considering buying a house in Canada should be most frightened. People who just brought a house also should be very afraid.

I want you to listen to the Economist, Canadian Business and the Wall Street Journal. Macleans went a step farther with a screaming headline saying it is “time to panic”.

Since 1992, Global Demographics Group has been saying this was coming. When we saw, the shift from stock market to housing boom in 2003.We started to have seminars here in Toronto, warning of a massive downturn in the economy as Baby Boomers start to retire that in turn will see home prices cut in half around 2010-2012.

Forcing anyone in the Housing industry including Banks, Real Estate and Mortgage Companies, plus their Agents deep concern. As 50% of their market will be gone.

So is there a reason behind this, maybe there are many.

According to the (IMF - International Monetary Fund), when housing Bubble pops, spending dries up for five years and stays flat for years after.

If you suffered from Government cuts, you have not seen anything yet. If you’re unemployed, it will only get worst. If you’re poor, expect to get poorer.

In the Business section of the Toronto Star on April 12th 2012, the headlines said the Condo market slow-down looms.

It stated that despite the current surge, a senior analyst says those looking to make a quick flip “may be disappointed”.

On paper, in the GTA, the new housing market looks hot with a 36.1% increase in construction, compared to last year, and as I said, this is mostly due to the construction of condos. However, single family homes are down 1.4% in the same time period.

The higher net-worth individuals, (investors) have been driving the market to a large extent, over the last few years while the acquisitions for new units have slowed down.

SUPPLY SEEMS TO BE GROWING FASTER THAN DEMAND. In fact, High Rise starts were 57% higher after the first six months of 2011 compared to 2010.

The inventory of new condos for sale seems to be growing at the same time, resale prices are flattening out.

Another sign is new Condo construction accounts for roughly two thirds of all new housing construction.

The supply of completed but unoccupied Condominiums [sounds like China] is elevated which suggests a higher risk. New construction continues at a breakneck pace.

According to a recent report by the Toronto’s Economic Development Committee, 132 high rise buildings were under construction in September of 2009, compared to 88 in Mexico City, 86 in New York City, much larger cities than Toronto, while Chicago, a similar size city has only 17 Condos in development.

Another scary factor is 40%-60% of pre-constructed Condos are owned by investors, unlike homeowners, THEY WERE ONLY DOING THIS TO GET A QUICK PROFIT. What happens to them when panic hits? They will want to sell quickly and liquidate their investments as fast as they can. This means the unprepared will suffer. This also means foreign investors that include predominantly wealthy Chinese citizens, which are a greater flight risk, will simply liquidate their positions.

According to David Madani, an Economist of Capital Economics,

“Any listings they dump on the markets will drive down prices even more”. He also pointed out the recent housing boom has resulted in the largest rises in house prices ever seen in Canada, which has been similar in magnitude to those during the recent boom in the U.S.

Unfortunately, any fall in prices, could also be just as severe as those elsewhere. That is scary.

Sheryl King from Bank of America Merrill Lynch says” Condo values could drop 15% shortly.

The Canadian Mortgage and Housing Corporation to suffer massive losses.

This would expose the Canadian Mortgage and Housing Corporation to significant losses. This in turn would mean the government would try to get that money back by increasing taxes as we enter a recession. That is scary too.

That’s why here at Global Demographics Group, we want not only warn you about doing something now before you loose your equity in your home but also show you how to, at very little cost to you, when using our unique concepts. In fact, why not have the Government pay any costs for you. We can show you how. But time is running out, you need to act now, today, if not with us. With someone else who knows what to do. But act you must before prices drop.

The Canadian Business Magazine dated February 20th 2012

Headlines said “Outlook 2012 Crash” Why house prices are about to fall.

The housing market will crash. It has long been predicted, and several trends indicate 2012 will be the year it happens.

Despite a trepid domestic economy and turmoil around the world. The average price for a Canadian home sold in November stood at $360,396 according to the Canadian Real Estate Association. Meaning in the last ten years prices have doubled.

That means valuations in Canada are approaching the level the U.K. hit just before it’s housing market tanked and we are already far past the level the U.S. peaked at.

Defying logic is one of the key elements of a financial Bubble.

There is little argument among economists that housing in most major Canadian markets is at the very least overvalued.

In fact homes are less affordable now then they were 30 years ago.

Rising prices draw people to the market in part because they’re afraid that they will eventually be shut out.

When ordinary Canadians are unable to afford real estate, even when borrowing at unusually low interest rates, the market will adjust. Unless our income goes up, house prices are coming down. It may happen in 2012 according to Canadian Business article dated February 20th 2012.

Over the past decade or so, many developed nations experienced a real estate boom. Canada happens to be among the longest running. In the wake of the Global recession, prices in most other countries have fallen back to earth. The U.S., U.K, Australia and China have already lost over 20% or more.

The heads of the three Banks [CIBC.RBC and BMO] expressed concern about the housing market at an investor conference this month.

All agreed that increasing housing supply and growing debt means the market is reaching its peak.

TD states that housing prices in Canada will fall over the next several years by as much as 25%, creating a massive impact on the economy and possibly pushing the country into recession.

The time may be right for Canadians to consider selling, as industry experts forecast prices are peaking. The Royal Bank forecasts Canadian market will return to much slower sales and growth to what it was like 15 years ago

The Federal Government made it even easier for Canadians to buy homes in 2006 by permitting the Canada Mortgage and Housing Corp, to insure 40 year long mortgages with no money down required.

As the gap between values and income widened, affordability becomes an issue and the Bubble gets bigger. The market is headed for a severe correction says George Athanassakos, Finance professor at Richard Ivey school of Business.

Another concern is the market being driven up like this by new home buyers for fear of missing out as prices increase. Turn to fear when prices start to drop and panic selling starts. That’s why they call them Bubbles.

Undisciplined first time buyers drove up the countries household debt to personal disposable income ratio to a high of 152.98% according to Statistics Canada.

This puts new homeowners in a precarious position.

A large gap between prices and income, worsening affordability, and an indebt nation of homeowners, less able to withstand economic shocks.

“The Bubble has become worse” and according to George Athanassakos, the market is headed for a severe correction”.

How bad can it get?

Lenders in the U.S. are poised to take back more homes this year. More than any other year, since the meltdown began in 2006.

The massive number of foreclosed properties on the market keeps pushing prices down, which, in turn, has driven more homeowners into negative equity.

About 5,000,000 are at least 2 months behind on their mortgages.

These homes being foreclosed are further reduced by 27% lower on average than congenital sale, driving down prices even further.

28% of all U.S. residential sales in the first quarter of 2011 came from foreclosures.

Prices are down by 33.1% in the U.S from the peak in 2006.

Millions of people who bought homes during the bubble now owe far more on their mortgages than their homes are worth, effectively trapping them there.

23% of homeowners are underwater, with less than 5% in equity in their homes.

This means, when they come up to renew their mortgages, they will have to cash in investments to put equity back in balance within mortgage guide lines.

This in turn will have a negative effect on anyone in the Real Estate Market.

Each new home generates three jobs and $90,000 in Taxes, therefore, a slow-down in housing has a big effect on the economy and the economy affects the housing market, in return, causing a vicious circle.

Falling house prices would lead to outright declines in residential investment, consumers’ confidence and household net worth.

“Quite frankly, given what’s happened in other parts of the world, not just the U.S., you have to think there is a significant chance of this happening”.

ARE YOU WILLING TO LOSE 33.1% OF THE VALUE IN YOUR HOME, OR DO YOU WANT TO PROTECT IT.