Housing Crash Deepens: No Recovery Until 2028 | Ron Butler

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Ron Butler (0:16)

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Ron Butler (0:58)

There's financial pressure which has been grinding for a couple of years. This looks like it's going to go on another year or two. Go crazy. Like, just go 20% less on everything. When the borrower gets in trouble, they just throw up their hands and say, well, I guess I'm just going to stop paying because I cannot sell this house even close enough to the amount of the mortgage to allow me to get out with any money, and I'll just live for free.

David Lin (1:25)

This is possibly the worst housing crisis since 2008 across both Canada and the US. US mortgage rates are at a nearly three-year high. Freddie Mac's 30-year average has hit 7.4% versus 6.27 just a year ago. Housing costs keep climbing too. The shelter component of the CPI rose 3.2% year over year, but downside pressures are already building. Redfin counts 62.6% more sellers than buyers. The biggest gap in its records in housing completions are down, and the XHB Home Builders ETF is down 22% from its June highs. In Canada, the cracks are in full view. Court-ordered foreclosures in Vancouver are at the highest level in years, decades even, even higher than 2008

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Ron Butler joins us now. He's a principal mortgage broker at Butler Mortgage and the host of the Angry Mortgage Podcast. Welcome back to the show Ron. Good to see you as always.

Ron Butler (3:22)

Pleasure to be here, David. Thank you.

David Lin (3:24)

Let's start with the US side. 30-year fixed at 7.4% in the fourth quarter this year. More buyers are choosing adjustable loans, CNBC said.

Have you been talking to people in the states about their outlook and their sentiment and what they're choosing in terms of products? Are they avoiding buying a new home altogether until rates come down?

Ron Butler (3:46)

I think the best answer there is yes. I mean, let's face it.

Sometimes there's just pressure to move. There's family pressures, there's situations that come up. People feel they have to buy something. So that's a case where they're going to, but they wish they hadn't. And anyone who could stay on the sidelines will stay on the sidelines because if it's not an urgent requirement, they're not going to go ahead and pull the trigger on a purchase, not when they're going to have a rate that high. And adjustable does, it's an alternative, but it makes people, many people, feel nervous.

David Lin (4:23)

Yeah, the arm share of mortgage demand increased 10.5%, the highest in a year. If you're getting an adjustable, you're assuming rates are going to come down. Is that a fair assumption though, right now?