Political uncertainties

Political uncertainties

Polling booth sign. Original image at
http:www.flickr.com/photos/explode/43951115/

Not much is obvious

When my mind isn't full of real estate, it often dwells on the ups and downs of economics and politics. Thus, right now I can't help wondering what's going to happen to us here in Canada and to those to the south of us during the next couple of months.

Of course, election results in both countries aren't easy to predict these days. If the general public is fickle, the voting one is exceptionally hard to get the measure of. Candidates of all persuations know that the question isn't as simple as left of centre or to the right of it. They're perhaps all committed to doing their best for the voters, but there are shades of differences between them that aren't as clear cut as they once were. Republicans and Conservatives may be cousins of a sort, but they're more distant than close ones. Equally, Democrats and Liberals aren't exact mirrors of each other. And who knows where the parallels to our NDP, Green party, and Bloc Quebecois are in America?

To compound the agony -- if that's what it is -- Canada has become used to minority governments, which have no equivalent in the US. At most, the White House isn't always on the same page as members of Congress and political action is often the outcome of a lot of horse trading in order to reach a consensus.

But whether Harper wins a greater majority (or even one at all!) and whether Obama becomes the next president or not, the uncertainties extend to the real estate markets in both our countries. In fact, it's difficult to decide what effect the election results will have.

For what it's worth, though, here are some thoughts that I'm not afraid to put forward.

Different factors

Without doubt, the forces at play aren't the same north and south of the 49th parallel.

If only in oversimplified terms, it can be said that the US sub-prime problem has its roots in the American fondness for unfettered free enterprise. In fact, if either Republicans or Democrats noticed that lending practices had gone beyond good business sense, they paid little heed to it, Even now, with the collapse of major investment houses like Bear Stearns and Lehman Brothers, the general party line is to let the market sort itelf out, backed by an all but hallowed belief that it probably will.

In contrast, our own mortgage situation isn't of any great concern. Regardless of their flavour, few Canadian politicians see a problem that calls for urgent attention. Fortunately, we've largely avoided the spillover from the sub-prime debacle, even if, without real justification, our houses have begun to take longer to sell and buyers are more hesitant than they really need to be. Not the least, our financial institutions have generally avoided the temptation to purchase large blocks of US mortgages that have turned sour.

(It's not widely known, but banks have a habit of spreading their risks by buying and selling one another's debt loads. Some U.K., European, and Asian circles did in fact underwrite lots of the U.S. subprime loans and are now having to cope with the consequences [which just happen to underlie the Bear Stearns and Lehman Brothers failures], but our somewhat more conservative banking people have preferred to deal with their own problems rather than someone else's.)

Only in Canada, eh?

If I'm forced to make predictions -- and I suppose choosing the topic of this month's newsletter doesn't gives me much choice! -- I'm inclined to think that our market is going to stay much the same for some time yet. I don't forsee any noticable shift in either the rate of sales or the level of prices. To some minds we've moved into a Buyer's Market, but my view is that we're more in balance than during the days when bidding wars made paying a realistic price more difficult than it ought to be.

There are still going to be exceptions, but I consider that now is a good time to make a purchase. Buyers aren't as much in evidence and sellers aren't often going to be flooded with offers. Anything that's in keeping with the current market value stands every chance of being accepted. It's unlikely to be rejected because a better one may turn up.

In other words, I don't expect any major impact on the market because of who does or doesn't win the election next month.

Changes in America

Whoever becomes the next US President, a decided change in America's involvement in Iraq seems inevitable. Whether originally justified or not, the situation has some similarities to Vietnam in that it's become, to many minds, a war that can't be won. Thus, Obama is likely to hasten an end to it and McCain will probably be unable to continue it indefinitely.

In any case, one consequence will be an American ability to focus on other preoccupations, not the least of which is is its economic downturn. There are no easy answers and recovery is going to take time, but there seems to be a compelling wish on the part of its citizens to resurrect the American Dream.

No nation's economy can be considered in isolation these days. International decisions, not to mention the growing demand of China and other Asian countries, cannot be ignored. Their impact lies well beyond their borders and the US isn't going to escape them. Due account has to be taken of a country's foreign relationships as well (a fact that -- if I may interrupt with a quick tangent -- is something that the likes of Robert Mugabe of Zimbabwe will eventually be made to recognize).

My point, though, is that the current instability in America is going to be given serious attention by its political leaders. Whatever their persuasion, they cannot be pleased with their country's reputation abroad. Nor can they overlook the voting public's often expressed dissatisfaction with health care, employment security, and financial prospects.

To coin a phrase: The American tendency to go Gung-ho doesn't sit too well with people if it ever tries to "went".

As far as we're concerned ...

Whether a new US president turns the economy around quickly or allows it to find its own way to better days, the better days will, at least as I see it, arrive and probably sooner than later.

We're certainly going to need to wait out the rest of this year and quite possibly all of 2009 but, once 2010 dawns, we should be back to what can be considered normal.

Meantime, I'll still argue that our own real estate market is going to remain somewhat soft, even though I'll also be surprised to see any significant drop in prices.

But, once the political and other dust has settled, I expect to see a return to a healthy market -- one that allows people to sell within a reasonable period of time and lets people buy them at a fair price.

Indeed, in that we're unquestionably tied to the US economy in so many ways, I don't see why we won't get back to moving in step with our American neighbours.

The mortgage difficulties they've been facing are an interlude in my opinion, but that's all it is: a temporary interruption in the customary real estate pattern.

With hopes that you've been able to enjoy the summer (when it hasn't rained, anyway!) and that you WILL remember to vote.