If you read my little blog you know that I (and my colleagues) believe that the Village on the Edge of the Rainforest is in for the mother of all real estate collapses.
How big of a collapse?
We stand by our prediction of a minimum drop of 40%-50% in the value of single family houses from the highs, and likely much more.
Strengthening that conviction are reports like this one from the Canadian Association of Accredited Mortgage Professionals (CAAMP).
CAAMP simulated the impact of mortgages hitting 5.25% – a rate which isn't even 2% higher than the current average of fixed-rate loans outstanding - and the impact will result in about 500,000 mortgage holders who will be in trouble.
When you add in the 375,000 who are already having difficulties, you have a total of about a million mortgage holders who very shortly be falling on difficult times with their payments.
How significant is that?
About 9.3 million families own houses in this country and 5.5 million have mortgages. So if rates rise less than 2%, 2 out of every 10 mortgage holders will be under significant 'financial stress'.
The US housing market dominoes started falling on far less than this.
Ramping up the heat on this percolating mess is the fact that approximately 2 million mortgage holders carry variable rate mortgages. Economists are predicting that those prime variable mortgages will be going (in very short order) from the current 2.25% to 5%.
That's a jump of almost 3%, higher that the forecast increase of less that 2% which could cause so many 'problems'.
'Financial Stress' are going to be the buzz words of the coming next two years. Followed very quickly by the companion catch phrases of 'default', 'bankruptcy' and 'foreclosure'.
In the United States these conditions were a recipe for real estate implosion.
Thank God it's different here.
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