Canada’s housing market still bubbly

I found this a bit humorous:

Bank of Canada won’t raise interest rates to cool housing – The Globe and Mail

“The Bank of Canada won’t raise interest rates to cool the country’s hot housing market, a spokesman said Monday, preferring to leave any tinkering to the country’s Finance Minister. Those who fear a bubble worry that many people are taking advantage of cheap money to buy homes they wouldn’t be able to afford once rates rise, leading ultimately to a crash in prices.

Mr. Lane said the bank understands the concern, but it uses its lending rate to keep inflation in check for the whole economy and the housing market is “only one of several factors” that influence inflation.

Other sectors could be adversely affected if the rate jumped before the broader economy was ready, he said.”

A ‘fever’ in housing market, why Latin America’s a hotbed – The Globe and Mail

“Bank of Canada deputy governor Timothy Lande, whose institution has issued warnings on the mortgage market, speaks in Edmonton today on the state of the housing market.

“Over all, the uptick in Canadian residential starts underscores the improving response of builders to the dramatic rebound in overall Canadian housing market activity,” said TD Securities economics strategist Ian Pollick. “It is increasingly looking like the ‘fever’ in the existing home sales market is starting to catch in the residential housing market.””

In Vancouver, camping out for condos is norm again – The Globe and Mail

“People were sleeping on the streets of Vancouver the other night.

This is nothing new, of course. Except these people weren’t homeless, they were home-hunters, camping overnight on a downtown sidewalk to be among the first to buy into a new condo tower opening in the city’s trendy Yaletown district.

About 20 people spent a frigid Friday night a week ago outside the sales office for a new building called The Mark. By the end of business the next day, 163 of the 214 available condos had been sold.”

Why Canada’s Housing Bubble Will Burst

The above piece suggests that a Canadian entity functionally equivalent to FNMA has been loosening its lending standards.

“what few Canadians realize is that the housing market has avoided collapse (prices are down 32 per cent in the U.S.) because the Harper Conservatives directed the CMHC to change the mortgage rules to effectively make the Canadian government the biggest sub-prime lender in the world…So long as borrowing requirements were tight, the percentage of loans that were securitized remained modest. But in 2007 the Harper government allowed the CMHC to dramatically change its rules: it dropped the down payment requirement to zero per cent and extended the amortization period to 40 years. In light of the mortgage meltdown in the U.S., Finance Minister Flaherty moderated those rules in August 2008 (it’s now five per cent down and 35 years).”

It would appear that nothing has been learned from the USA’s experiences.

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1 Comment »

  1. I think, there are more things that Canadians shouldn’t learn from Americans….in housing markets mainly. When we take an example of British Columbia, it is all thanks to help of Leonard Asper and his Canwest spinmachine in promoting canadian economy and housing,especially in BC. Every other day the Vancouver Sun and Global news is pimping the real estate market,multiple offers,record prices…..Just look inside the numbers…. And according to my own “statistics” the crash will be biggest in BC, I would say by summer 2010 the big slide will start.
    Julie

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