How Bad Could Housing Get? Look To Canada.

As crazy as the US housing market has been it doesn’t hold a candle to what has happened in Canada. After two decades of parabolic growth, the Canadian housing market is falling back to earth and could give the US a glimpse of what the next stage of the housing market might look like, according to Ari Altstedter, Kevin Orland, and Lizzie Kane at Bloomberg.

• Variable Rates Strike Again. This, of course, was the downfall of the US housing market in the mid-aughts and could very well be the catalyst for our neighbors up north. “During the final leg of the boom, Canada’s skyrocketing home prices pushed a record number of borrowers into variable-rate mortgages…almost 20% of the total market, were borrowed when rates were around lows of 1.5%. Those rates have since climbed to more than 5%.”

• Not Stress Tested. While Canadian regulators did up the standards for institutional institutions “alternative lenders with short-term products aren’t subject to the federal government’s stress test because they are under provincial regulation, which helped them grow market share.”

Read the full piece at Bloomberg

I don’t think the US will see as big of a downturn as Canada mostly because of one chart. (h/t Financial Samurai)