Friday, April 07, 2006

Ottawa Housing is the Future Scary Movie

Are Canadian homeowners as irresponsible as they are made out to be? It is now common to speak of an entire nation of intoxicated serial financers who cash out every last dollar of the appreciation of their homes to support endless credit-card binges and big-ticket purchases such as vehicles, boats, and luxury vacation trips. Such a carnival cannot last forever, and it is now common to warn of a horrendous future. In this gloomy scenario, the homeowners of Canada are confronted with plummeting home values, rendering both refinancing and sale impossible because residences are burdened with mortgage debt far above their market value. To make matters worse, these households are faced with huge increases in their mortgage payments as their loans adjust from introductory to normal terms. Unable to make such larger payments, unable to refinance or sell, the homeowners of Canada will have no choice but to collectively default on their loans, abandon their homes to foreclosure, and move into apartments, or perhaps into their automobiles. These uncounted millions of foreclosed homes, dumped onto the market in a short period of time, will further depress prices and deepen the catastrophe.


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