Canada’s housing prices continue to escalate [there has been no housing collapse as there has been in the U.S., Spain, U.K., Australia and elsewhere over the past 4-6 years] but concern is rising as to whether they are now, finally, ‘in a bubble’ and about to correct either modestly or severely. This article discusses what would cause a change in direction in Canadian housing prices. Words: 500
So says Ian R. Campbell (www.StockResearchPortal.com) in paraphrased excerpts from one of the components of his subscription service* which is presented here with his kind permission for posting on www.munKNEE.com (Your Key to Making Money!). This paragraph must be included in any article re-posting to avoid copyright infringement.
Campbell goes on to say, in part:
Clearly things that could/would cause the direction of Canadian housing prices to ‘go downward’ include:
- at a micro-level:
- Canadian consumer household debt levels,
- Canadian unemployment rates, and
- future changes to mortgage rates, mortgage rules, and mortgage lending policies; and,
- at a macro-level:
- what happens in the world economy, and if we see further world recession, or worse, the contagion consequences as they affect Canada on a regional basis.
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In our integrated world economy…the Canadian economy will not be exempted from further economic downturn. The Canadian populace will not be sheltered from its effects of decreased exports, decreased employment, likely rising food prices, and so on. All these things will negatively impact Canadian house prices – and perhaps no more so than in the major metropolitan areas. As such, watch for Canadian:
- monthly net trade balances decreases;
- manufacturing data downturns;
- negative unemployment data;
- increases in labour unrest; and,
- decreases in consumer confidence in the weeks and months to come.
Don’t be shy about asking retail clerks, automotive salesmen, people who work in new construction, and in particular real estate agents ‘how is business?’. Make sure if you ask that question of real estate agents that you read their body language, not just their lips.
If unemployment data, in particular, begins to worsen that will be an indicator that Canadian house prices likely have peaked and will begin to reverse.
Topical Reference: Will Canada’s housing boom end with a whimper or a bang, from The Financial Post, Pamela Heaven, July 17, 2012 – reading time 2 minutes.
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Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
Canadians are becoming increasingly vulnerable to a housing correction, exposing them to a perfect storm of high debt and falling assets, the Bank of Canada warns…suggesting that many Canadians have constructed their finances on a house of cards, with ever rising home values the key and vulnerable support. [Sound familiar?] Words: 770
The ownership premium in Canada’s largest cities is unprecedented, dangerous to new buyers, and unlikely to persist – and if analogies to the U.S. situation at its peak back in 2005 are at all valid, this is bad news. [Let me explain.] Words: 430
The following charts indicate relative performance of US home prices in Phoenix, Los Angeles, San Francisco, Chicago, Las Vegas, New York and Miami to Canadian home prices in Vancouver, Calgary, Toronto, and Montreal. US home prices are reflected in Canadian dollars for comparison purposes. Words: 240
Canada, France and Switzerland stood alone among nine markets measured in recording annual price gains, based on second-quarter data, with inflation-adjusted price increases of 5%, 5% and 4%, respectively, compared to declines of 6% in the U.S., the U.K. and Australia, 10% in Spain and 14% in Ireland. In fact, Canada’s home prices have escalated 44% since 2005 – with a high of 68% in Vancouver – and they are up 7.7% in the past 12 months! Words: 1244
The explosion of Australia’s mortgage debt is viewed by many economists and commentators as the key factor behind Australia’s unaffordable housing [and the primary] reason why Australia’s housing bubble is larger than that experienced in the United States in the mid-2000s. [Another factor is] the strangulation of fringe urban land supply via increasingly restrictive planning processes. [Let me substantiate that contention by comparing the two countries housing situation via a number of descriptive graphs. Words: 817