Canada's Housing Bubble

Dec 29,  2010 Mike Shedlock favstocks.com

Interview Snips

• Canadian banks are not as “bulletproof” as everyone thinks.
• When the housing bubble bursts there will be tremendous consequences to Canadian banking system.
• We are in a massive bubble and there will be an enormous comeuppance.
• Canada housing bubble currently peaking.
• When you are in a bubble, the psychology is such that you cannot see it for what it is. Talking to Canadians about the housing bubble is like talking to Americans in 2006. There is a tremendous sense of denial.
• People pay 50-70% of their income for mortgage costs in places like Vancouver, but it’s not just Vancouver. Such things are absolutely characteristic of a bubble.
• Canada will play catch-up to the downside in the fairly near future.
• Ireland-like dynamics absolutely coming to Canada.
• There is also a tremendous commercial real estate problem that will affect Canadian banks.
• Canadian banks have also acted as reinsurers in the derivatives market for a number of extremely risky things. So in a number of cases “the bucks stops with the Canadian banks”.
• Real estate prices will fall about 90% on average. Deflationary credit collapse coming.

“Stoneleigh” lives in Canada and is author of the popular Automatic Earth Blog. Also see Stoneleigh and Max Keiser Flatten the Canadian Economy

I agree with everything “Stoneleigh” said in the above bullet point list except I do not see a price collapse of 90% on average. I think 50-60% in some areas is more like it. Even 40% would be devastating and that would be my best case scenario.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com