|Vancouver Housing Bubble: Part 2|
Two weeks ago, we looked at the possibility of a Canadian housing bubble, and saw that Vancouver looked particularly bubble-icious in terms of new inventory. This is often a good indicator, as builders in a free, capitalist society should only overbuild if they are getting a strong price signal to do so. But of course, it is possible that builders are just irrationally overbuilding for some reason (e.g. government stimulus, tax credits, expectations of price increases etc.), so it does make sense to look at more metrics than just new home inventory before concluding that there is a price bubble.
The ratio of house prices to income levels is another useful metric for judging how expensive houses are relative to a historical standard. Canada-wide, this ratio is elevated, but perhaps not dramatically so. Recall from last week, however, that there is considerable variability with respect to housing data within the country. It, therefore, makes sense to look at this ratio for specific regions in order to identify trouble spots.
You may help and contribute by posting your thoughts and adding comments to all articles. The Forum actively encourages your voice at any time. All opinions are appreciated.