Canada's Housing Bubble

Feb 09, 2010 Emily Friedlander online.wsj.com

In the U.S. we’re still mucking around at the bottom of the crash (or the false bottom), but in Canada recovery has been so rapid that some there are worrying about a bubble. WSJ reporter Phred Dvorak wrote yesterday about rising home prices in the country.

One index that tracks Canada’s six biggest cities posted its seventh straight monthly gain, Ms. Dvorak writes, and prices in November are now back to prerecession peak.

Citing a report from the Canadian Real Estate Association, the Globe and Mail said Monday that house prices will hit a record C$337,500, on average, in 2010 and sales activity may hit an all-time high. Fueling the rise: Low mortgage rates. On some loans rates have fallen to 2% or lower. However, these aren’t fixed. Nearly all mortgages in the country have rates that adjust every few years. One Canadian investor bought six units last year with rates ranging from 2.45% to 3.95%.

And while some economists think prices are high, not everyone is concerned about a bubble.  The country’s finance minister told the Globe and Mail that “there is no compelling evidence of a housing bubble in Canada.” Although he says they are watching the market.

Some expect demand to cool off once rates go up.

All this got me thinking: How long before the next bubble in the U.S. market?