Canada's Housing Bubble

Latest news indicates that housing prices are up by 72% over last year:

ca.news.yahoo.com/s/capress/100115/business/cdn_home_sales

And yet, even the country's finance minister has not indicated publicly that the recession is over:

www.metronews.ca/ottawa/comment/article/...of-economic-recovery

www.cbc.ca/money/story/2009/07/28/flaherty-recession-over.html

But people, or at least some of them, keep buying homes.

What's keeping this market going?

If unemployment is high:

www.cbc.ca/money/story/2010/01/08/jobs-canada-december.html

...and people keep losing their jobs, how can house prices keep rising?

Is it middle class people going further into debt buying homes they can't afford based upon a shaky job market?

Are they buying now, thinking that they may as well buy now while they've go jobs, and if they lose them, they'll still find a way to pay for these homes?

Or is it mainly the rich, who are letting go the purse strings, snapping up the properties, thinking/hoping they'll just keep going up.

Anyone? Comments? Analysis.

Hey guys,

I'm from the better USA! and I think I found my new home and hangout

So, what does everyone think about the Great Olympic Games here?

Its pretty simple -- nearly everyone in Canada who has a mortgage, is on a teaser rate, adjustable rate mortgage.

The fundamentals and the structure of loans available in Canada do not even support house prices that are as high as those in the USA. Current levels are ludicrous.

Yet Realtors, mortgage brokers and bankers run around saying, "Canada isn't like the USA", or "we have much higher lending standards here". Which are complete lies, but they say it anyways.

Combine such with a near universal hatred, by the Canadian investing public, for stocks -- and you have a recipe for disaster.

Trust me, this disaster will not end well for homeowners (bagholders).

Hello authors,

I read couple of your arcticles.

Questions: who are you and why do you do all of this work for canadian real estate bubble?

You do a lot of work but who are the people behind it?

We are an ordinary family living in Vancouver.

This site is your source for news about Canada's housing bubble. It examines the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole. It warns people to be more careful about the whole process of buying real estate.

The more people talk about bubbles, the less chance there is that a bubble will occur. Many Canadians feel concerned about over-valued realty prices and the resulting decline in real estate affordability. Homes are usually considered a place to live first, and a source of wealth second.

Working Canadians wanting to own their home could voice their concern about housing price increases that had put home ownership out of reach for many.

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This is an excellent blog on the Canadian housing bubble.
I frequent Garth Turners blog where these is a good deal of informed discussion on the bubble.
In short, I attribute the bubble to overly cheap money, non existent underwriting standards, disregard for fundamentals and irrational exuberance.
The biggest fear that I have is that the housing bubble will metastisize into a broader financial pathology as it has everywhere else that went through a housing bubble experience. Being a critic is tough work and it does not win anyone friends.
Try telling people that house prices are supposed to be linked to rents or house price growth should lag slightly behind the rate of inflation or that home ownership should bear some relation to affordability and family income and just see how far you get with your friends and family on that one.
Government policy certainly was an enabler of the bubble. Relaxing the down payment requirements to zero equity and allowing gimmicky mortgages with 40 year amortisations or 10 year interest only options greatly expanded the number of home buyers who probably could not safely afford a house otherwise.
A small number of people have done very well off this Ponzi racket in housing while a large number of buyers put themselves at great personal financial risk and in fact created a great deal of systemic risk to the overall financial system.
Unfortunately there is no possible return to sanity without a very deep and painful correction that will be at the expense of those who paid to much for houses with no equity at absurd interest rates. None of us should forget that the guarantor of all that mortgage paper is the good old Canadian taxpayer via CMHC.
Pretty scary scenario what has been happening in housing masquerading as a robust market.