On March 25, 1969 Prime Minister Pierre Trudeau strode to the podium at the Washington Press Club and famously said to a gathering of American reporters, “Living next to you is like sleeping with an elephant. No matter how friendly and even tempered the beast; one is affected by every twitch and grunt.”
That line is often recounted and it remains true to this day in all aspects of life here in Canada. Including real estate.
The Canadian real estate market is slowing down right now but it has been amazingly resilient compared to the real estate market in the United States. Everybody talks about it. Everybody boasts how much better we are up here.
The reasons for the astounding difference in property values between our countries are complex but it really all comes down to one thing – regulation. At the end of the day there was very little if any regulation of mortgages and property valuations in America. Financial companies falsely drove property values up in an enormous bubble that burst. It was such a colossal burst that it spread around the globe and almost took down the entire world economy with it.
Here in Canada we were lucky to have tighter regulations that prevented banking and loan scoundrels from buying and selling mortgages like these vastly inflated loans that were created in the USA. We never had trouble like that. There is no bubble here.
But before we get all smug and start clapping each other on the back about all this, let us not forget that there are plenty of con artists and criminals here that cause enormous grief in the financial sector. Some sources at the RCMP note that mortgage fraud is the greatest threat to financial institutions and homeowners today. We must also not overlook that some of our banks here in Canada actually took a role in the “toxic” loans in the United States and got burned along with everybody else, albeit not as badly.
The degree of corruption and greed is the same in Canada as it is in the United States. So how about we all put our fingers back in our pockets and stop pointing them at America?
We should not forget that the United States is our greatest trading partner. The American economy is driven by real estate just like ours, so when they get hurt it affects us too. It affects how much they buy from us, all the jobs that relate to that and the real estate that is sold because of it. The crippled economy and the real estate market in the USA are very hurt right now. More than it has been for many years. It is devastated.
Don’t think for a minute that we are not sharing the pain. Just look around. Our markets are slow, our government is in deficit again after years of surplus and our community services are straining under the weight of human need. We’ve taken some pretty good hits here too.
There is, however, good news on the horizon. Property prices in the United States hit bottom some time ago. They are starting to rise. They may not get to the inflated levels they once were in the next few years but they will rise significantly. The market will slowly, surely and solidly recover. It is happening now if you look. The real estate market in America is moving in the right direction.
Many homes will need renovation. Some will even have to be completely rebuilt. Some neighbourhoods may even need bulldozing and gutting to build new homes.
How I wish that I was a young man who was clever with tools and had the energy to work on home renovation. I regret that I am neither. I could make more money down there than a J.P. Morgan banker in New York City right now.
Sometime in 2011, maybe by spring but certainly by the fall, there is going to be an extraordinary turn around in the United States real estate market. It will be like a rolling stone. It will take a lot of effort to get it going but once it starts; man it is going to roll.
Say what you like about the long road back the Americans have before them. They will make it. They are still America. The home of Hollywood movies, the New York Yankees, Microsoft, The Ford Motor Company, cheeseburgers, fries and Coke. It’s still the land of opportunity. Let me tell ya pilgrim, their record of making dreams come true is just as consistent and as rock solid as it ever was.
They are still the elephant. We will still be affected by every twitch.
Heino Molls is publisher of REM. Email [email protected].
