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Given the global economic backdrop, and in particular the sharp
correction in energy prices to which Canada is highly exposed, the risks of a Canadian housing correction are rising. Home prices, which corrected about 10% during the recession, have surged again, making household balance sheets look increasingly fragile. Economists are becoming concerned. [Should Canadians be worried too? Let’s review the situation.] Words: 280
So say paraphrased comments from an article posted in its original format* at http://soberlook.com.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
The article goes on to say, in part:
Canada…did not experience the same level of housing bubble, nor the correction that followed, as did the US (see chart below)….[In fact] Canadian home prices [continue to] …grow quite rapidly…. Some may argue that this is justified because Canada’s unemployment rate is lower. 8.1% in the US vs. 7.4% in Canada. Is that enough to justify such a divergence in housing prices, particularly when the GDP growth rates in the two countries is fairly similar?
In addition, construction in Canada is booming. The chart below compares construction jobs as a percentage of total jobs for the US and for Canada. The divergence is quite striking.
Source: Bloomberg
Canadians have also been growing household debt levels. The chart below, though a bit dated, includes mortgage debt (total debt as percentage of net worth).
Watch the BBC video below to get a feel for the situation on the ground.
*http://soberlook.com/2012/05/soberlook.html?utm_source=BP_recent (To access the original article please copy the URL and paste it into your browser.)
Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
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5. Believe it or Not: Australia’s Housing Bubble is Worse Than That in the U.S.
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