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That's some seriously weak analysis in that report. Housing markets in the West started down well before the economy and turned upwards as the economy continued to deteriorate, responding to interest rates rather than economic conditions. To look at the data and suggest that the housing downturn in the West was caused by the recession is silly.

The failure to note that house prices have returned to historical levels based on fundamentals (price/rent, price/income) in most of the U.S. while remaining quite inflated in most of Canada on the same measures is again quite foolish. The biggest difference between the two markets is that the U.S. market has corrected and Canada has not, meaning that, going forward, the U.S. is in a stronger position than we are.

Also, I reiterate everything I said in my comment on your previous post :)

Not having read the National Bank report yet, I'll not defend its take on things (yet).

But let's keep in mind that there are two separate points/discussions going on:
1) Canada's housing market is "like" the U.S. market (presumably meaning that there is no substantial difference in the type and extent of housing price run-up and 'bubble', housing market structure, types of loans, problems noted in those types of loans, tendency to default, prevalence of dangerous mortgages, and - crucially - the potential danger to the financial system). To me it's clear one can really only make this argument if it's qualified by saying 'with a lag of x years' or something like that.
2) Canadian housing markets out of line with historic indicators and are overpriced.

My point is that it is entirely possible and even (potentially) consistent to reject the first argument and accept the second argument. To convince others that the first argument is correct, it is NOT enough to put forward info on housing prices being 'too high.'

It's also not particularly compelling to argue that 'if prices continue to go through the roof, it will eventually be very dangerous' - which boils down to the tautological argument that "too much would be bad" (where "too" = excessive, which is by definition bad).

Accepting the second argument does not necessarily imply that one accepts the need for a massive correction as opposed to, for example, ten years of housing price stagnation in nominal terms (i.e. slow correction in real terms), or a modest correction that doesn't harm the financial system, or any number of other potential scenarios that are substantively different from the U.S.

Oh no, these posts are a call to arms for the housing Cassandras!

Instead of a housing recession, the housing re-boom is worrying me. Unemployment in Ontario is up around 9%, incomes are stagnant and we have multiple-bids and 10% MLS house price appreciation.

I plug the macro-variables into any model and I can't see how house prices are supposed to be rising. I don't see a housing bust ahead, but I really hope it cools off soon.

Me too, but I'm hoping to be a first time buyer in the next few years. I was expecting a buyers market since last summer, and it just hasn't materialized. I'm waiting until we see one.

Stephen, regarding a bubble (at least in BC), doesn't affordability enter into it at all? If (arguably) BC prices are stratospheric, would that not make them due for a crunch?

According to the '5th Annual Demographia International Housing Affordability Survey' http://www.demographia.com/dhi.pdf, published in 2009 but based on Q3 2008 prices:

"In recent decades, the Median Multiple has been remarkably similar among the nations surveyed,with median house prices generally being 3.0 or less times median household incomes where demand and supply are balanced......

"The least affordable markets are generally in Australia, Canada’s province of British Columbia, New Zealand, the United Kingdom and California(Table ES-3). However, many of these severely unaffordable markets have experienced steep price declines in the last year. Among the major markets, Vancouver is the least affordable, with a Median
Multiple of 8.3, followed by Sydney (8.3), San Francisco (8.0), San Jose (7.2), Adelaide (7.1), Melbourne (7.1) New York (7.0) and London (6.9)."

Victoria BC is also listed as "severely unaffordable" at 7.4 times median household income. I estimate median prices in my own home town of Nanaimo BC (population around 80,000) at about 6.2 times.

Comments..... Stephen or anyone else?

Yes it has behaved very differently. Our affordability levels have been allowed to deteriorate to a much greater extent. We have a system which insures the most risky mortgages, enabling the banks to make bad loans. Just because the systems are different, doesn't mean that the ultimate outcome won't be the same (a severe correction, particularly in BC).

Now if CMHC also required a maximum income to mortgage ratio of 4 or 4.5, and could only be bought for a 'principal residence' perhaps I could be convinced that we wouldn't wind up swimming in the same soup. But it doesn't, so we will.

Unemployed people don't get better jobs. Unemployed people get worse jobs. Employers exploit unemployment to reduce wages and working conditions.

If there are better jobs in a developing economy you don't have to be unemployed to take advantage of them. You get the better job and then you quit the bad one.

Oops, wrong thread.

Oh my. The above is just terrible nonsense.


The Canadians are following the Fanny/Freddie of housing war. Fundamental analysis and "models" go out the window with 5% down and 10% price increases in TO in a recession.

CMHC is (re)blowing the bubble. This will blow up because poor people (or middle class trying to live like upper class) are terrible at making monthly payments. I'm sure it's somewhere in "the models".

I remember the good old days, here in Miami... I just didn't get it.. All housing was local.. All the debt was fine.. Here is different.

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