An alarming number of US homebuyers are underwater
I&#x27;m keeping an eye on Canada.  They had barely a blip in 2008, and the same run up post-2008, so the average home sale price was 2x that of the US in 2021, despite no 30-year fixed mortgages (most float or are fixed for 5-years at most).  During Covid prices were up 20-30% over those two years.  Absolute insanity.<p>The bank of Canada has increased interest rates from 0.25% during Covid to 4.25% with the latest increase this week.  The economy isn&#x27;t really slowing much, so a few more increases are likely next year.  Plus Canada needs to keep up with the US interest rate or else their currency will depreciate which is great for exports, but crappy for imports (and thus inflation).<p>Cracks are starting to show.  In Toronto the outlying suburbs are down 20-35% in just the last 8 months (which bring them down to pre-Covid or slightly below).  A ton of people took variable rate mortgages during Covid (30% last year) so each interest rate increase is increasing their monthly payments.  It&#x27;s not unusual to hear people say their $2000 mortgage is now $3800&#x2F;month.  All while home prices are dropping.<p>It&#x27;s going to be really interesting.  I&#x27;m guessing a 2008 like correction (without the financial institution crisis like the US).  Some areas will likely see 40%+ down from peak which will likely bring prices back to the early 2010&#x27;s.<p>Another problem is that most mortgages in Canada are recourse (except Alberta).  So if you can&#x27;t make payments, sell, and your proceeds don&#x27;t cover the remaining mortgage, well the bank is coming after your other assets for the difference.<p>Quite the situation.