Are Canadians Still Sitting on the Sidelines?
Many Canadian real estate investors have been witnessing what has amounted to the biggest sale of real estate in our lifetimes, albeit from a distance. If you have been waiting for the right time to “pounce” on your deal…your time may be running out. Let me explain briefly.
When the government mandate back in the early 2000’s was for every American to become a homeowner, unprecedented banking legislation came to pass that allowed banks to lend virtually as much money to anyone that could essentially fog a mirror. The result was home sales and prices escalated at a phenomenal rate and existing homeowners were using their home as an ATM, refinancing and pulling money out of their ever increasing equity.
Real estate professionals were getting rich; banks were selling their mortgages to Wall Street who in turn bundled them and sold them as “mortgage backed securities” to the world and by2007 everyone was so happy and didn’t want this to stop. Two things happened around that time.
Firstly, people began defaulting on these mortgages which resulted in the huge international market meltdown we are still reeling from today. The foreclosures that occurred from this “sub-prime” catastrophe (and there were thousands) have all gone through the foreclosure process and have been sold to investors and retail buyers.
Secondly, during 2007, the method to entice more buyers into the market was to offer an adjustable rate mortgage. This is a mortgage that offers a really low teaser rate for anywhere from 6 months to 5 years and then adjusts to a rate that results in a much higher rate. Because property prices had been going up for so long, people were convinced the trend would never stop and therefore were told they could refinance their mortgages before the teaser rates kicked in. This campaign worked incredibly well.
What people didn’t count on is their property values dropping, which is obviously what happened. Right now, today, these mortgages are adjusting and the inevitable foreclosures are happening. As a result, they are going through the foreclosure process and are being sold to investors like you and me. The key point to consider is this. The last of these adjustable rate mortgages will be adjusting in 2012. This means the big sale on these foreclosures will be over sometime next year.
As Canadian real estate investors, we continuously research all over Canada and the US for deals. We like deals which possess good cash flow as well as contain a predictable appreciation component. For us, Phoenix AZ has been producing those results…and at very little cost because the prices are so good!
The phrase “some people make things happen, some people watch things happen, while others don’t realize what is happening,” is very prevalent right now. As was said earlier, this sale of our lifetimes is going to come to an end before we know it. This will be the biggest transfer of wealth since the Great Depression…which side of that do you want to be on?
For more information, email me at [email protected]
Is it still TOO EARLY to buy in the U.S?