1. The average American now has to live within the means of their income in the absence of the home ATM previously enabling ever increasing consumer spending.

2. The losses in the valuation of housing are leveraged losses. Leverage is a very powerful investment tool, magnifying gains but more painfully magnifying losses. There was no real hard invested capital related to the growth in housing. This wealth and purchasing power will not be replaced for years to come and only after incomes rise and people can save money. A very slow process which will not facilitate growth in the US Economy.

Job Growth + Migration + Resource Constraints = Supply Shortage & Increasing Prices

This makes Vancouver a very predictable real estate market. For now.

My comment: Canadian Banks have stopped lending to each other as a direct result of the US credit crisis. Obtaining financing to acquire non-residential property is suddenly more difficult and more expensive as the swapping of funds between lenders has now come to a standstill. Typically most fixed commercial mortgages are priced relative to the 5 year bond (the competing vehicle for the same investment $). Class A borrowers were previously able to achieve 5 year bond +150 bps (1.5%) but are now facing 225 bps and greater. Class B and C product and borrowers are looking at 300 bps and greater. As spreads increase and underwriting continues on a stringent path there will be a slowdown in new project starts counteracting any liquidity and growth measures initiated by the Bank of Canada.