Real estate: comparing Canada and the US – From the Desk of the Editor

KUOW radio in Seattle  this morning had a discussion about home ownership around the world, comparing Canada, the United States and Europe. As it turns out Canada has one of the largest percentages of home ownership – between 60 to 70 per cent.

In prepping to take part in the discussion (as the Canadian voice) I discovered a few interesting stats.

The main thing is that while insurance is available (and usually mandatory) for borrowers who have less than 20 per cent of a down payment, the insurance isn’t automatic. In fact, according to mortgage broker Feisal Panjwani the Canada Mortgage and Housing Corp, as well as the other mortgage insurers like Genworth, still have pretty stringent rules about what mortgages they will insure. So borrowers still need to have a good credit rating, good income to make the payments and an acceptable debt service ratio. That’s probably the biggest difference between the Canadian and US housing markets. In the US one of the problems was that insurers were insuring sub-prime mortgages, where the lenders didn’t have good credit, and whose income may have been sketchy. Then when the borrower defaulted the insurer was left holding the bag (or the bank if the insurer – and there were many of them – didn’t have the money).

Even when the CMHC agreed to insure zero-down 40-year mortgages, it still required the good credit rating and income, Panjwani said.

With those requirements arrears on mortgages in Canada are about 0.42 per cent (no numbers are available for actual defaults) according to the Canadian Association of Accredited Mortgage Professionals. CAAMP has some other interesting statistics. For example, while the total value of owner-occupied housing in Canada is estimated at $2.91 trillion, mortgages on these homes total $820 billion, or only about 28 per cent. In other words, most people have quite a bit of equity built up in their homes.

In a survey carried out last year by CAAMP (read their full report here) respondents said they could afford to pay another $1,000 a month on average on their mortgages if rates went up.

So overall it sounds like the Canadian real estate market is in pretty good shape. As always there will be people who do overextend themselves, and may be in trouble if rates go up or worse, they lose their job. But I think everyone would be in trouble in the latter case. But it does sound like being conservative, like our mortgage insurers and lenders have been, has kept the Canadian real estate market relatively safe.



About Tariq Sultan
Dear Readers, I am a dedicated Toronto, Ontario based real estate professional who has been successfully meeting and exceeding the needs of his clients for past several years. I am actively involved in the insurance, financing, and mortgage industry. Real estate is not only my career – it is my passion. I strive to continuously provide my clients with exceptional service to ensure they are fully satisfied when it comes to their real estate needs. For any real estate related inquires contact me today, I will be happy to assist you. Best wishes, Tariq Sultan

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