At the moment, 8,400 more families go into foreclosure every day in the States. It is estimated that for each one of those foreclosures, neighbourhood property values fall 1% in a single day. Last year 1,500,000 families lost their homes, and mortgage defaults caused panic in global financial markets.
To stem the collapse, lawmakers have raised the debt ceiling of the US by $800 billion, and are on the verge of approving homeowner relief that could cost $100 billion. Fears are, however, it will have little effect.
In Canada, the average price of a house in both Edmonton and Calgary has declined by over $42,000. Home sales are down 43% in Vancouver. And a guy in PEI tells us the cottage he sold for $89,000 last summer is now on the market for $45,000. In one of the wealthiest enclaves of Toronto, the Kingsway, a home listed at $1.9 million found no buyers, even at $1.7 million, and then at $1.5 million, before the owners gave up. In Woodbridge, local realtors say there are properties which have been shown more than a hundred times, yet no offers. A year ago, theyâ€™d have fetched more than the asking price.
This week the chief economist of the Export Development Corporation said these are â€œdark timesâ€ for our exporters. â€œIâ€™m not one to paint a rosy picture at all,â€ added Peter Hall. He thinks exports of consumer goods will crash this year by 18%, and more next year, the victim of rising commodity prices, the US financial and housing crisis, and the high Canadian dollar.
The Bank of Canadaâ€™s now forecasting inflation of something more than 4%, after the dramatic increase announced this week. Gasoline costs have jumped over 26%, and food prices are up by a third. It means interest rates will likely be increasing soon, jacking mortgage payments, just around the time the federal government ban on 40-year amortizations and zero-down home payments deflates the housing market. By the way, CIBC raised mortgages rates on Thursday.
I could go on. As few as 90 and as many as 300 US banks are expected to fail this year. One, perhaps, two major car companies could declare bankruptcy. The Fannie Mae and Freddie Mac bailout may not work, causing the mother of all budget problems in Washington, just as the Presidential election unfolds. As the Canadian exporting numbers and the job losses in Oakville show, our economy is being dramatically affected by these realities. There are families wondering tonight what the hell theyâ€™re going to do now after that third shift failed. There are more than 60,000 families across Canada trying to sell their houses. There are companies quietly failing each hour. As I drove through a number of southern Ontario cities in recent days, my eye could not help but see empty stores on main street and vacant units in the industrial park.
Sadly, the market declines I foresaw nine months ago when I wrote my latest book are starting to occur. The depths are yet to be known. My earlier forecast of a general 15% drop in the national average sale price may end up being too optimistic. In any case, billions in net worth are about to evaporate, just as the stock market bears come out, energy prices soar, Ottawa falls into deficit and interest rates rise.
The perfect storm.
In coming days, I will review some of the shelters from it.