Will the housing problems in the US become a similar problem in Canada? Well, I hope not, but what has happened in the US? As reported, many homebuyers had no obligations regarding their home until construction was completed. It was then appraised upon completed construction based on what it would sell for in the current market. This tended to encourage people to build homes in excess of their needs. Worse yet was that home mortgages were higher than if they were based on the market at the time of construction if the markets and interest rates were on the rise. Homeowners were then left with a home they couldn’t make payments on if the interest rates went up and often ended up losing their newly built home.
Financing practices by financial institutions both in the US and Canada cater to the natural inclination of people to often strive to finance what they don’t need and can’t afford. This fault of humankind to finance their way to equality with the rich and famous is a recipe for financial disaster. When will people learn that you must repay what you have borrowed or your creditors will take it away?
Unfortunately, in many cases, the banks employ people who are good at encouraging you to finance beyond your needs and ability to repay. It is here where the banks get the upper hand and your first step to financial ruin has just been taken.
Interestingly, people in both the US and Canada have become increasingly untrusting of their politicians and their governments. For many years consumers have placed too much trust in the banks. Are they really acting in your interests or their own? I will leave that for you to answer, but it is time to be less trusting.
The housing crisis in the US is not confined to them alone. Yes, it can happen here and it can happen to you unless you can predict the markets and interest rates. Good luck!