Tuesday , 17 May 2022

Home Prices Have Grown 13x Faster In Canada Than In The U.S.!

The U.S. Federal Reserve considers both Canada and the U.S. to be in real estate bubbles but they’re even close to the same issue. Here’s why.

This post by Lorimer Wilson, Managing Editor of munKNEE.com, is an edited ([ ]) and abridged (…) excerpt from an article by Stephen Punwasi, for the sake of clarity and brevity to provide you with a fast and easy read. Please note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

As of Q2 2021, Canada has seen real home prices rise 139% since 2005 while the U.S. has only seen real home prices rise 10% over the same period. Canadian home prices have seen 13x the growth of American homes over the same period. Prior to 2005, they had charted a similar path, before disconnecting.

Canadian Incomes Grew Faster, But Not Enough To Justify Home Price Growth

Canadian incomes must have grown much faster than American incomes over that period, right? As of Q2 2021, Canadian real disposable incomes increased by 46% from 2005 while, in the U.S., incomes increased only 10% over the same period, so Canada grew faster – but not nearly enough to justify the gap between home prices and incomes.

Canada’s Gap Between Home Prices And Incomes Looks Ridiculous Beside The US

It’s hard to appreciate those stats, so let’s combine them to show how wacky they are. Home prices in Canada advanced 64% faster than disposable income in the country, from 2005 to Q2 2021. In the U.S., incomes advanced 16% faster than home prices. Homes are developing a significant premium in contrast to labor in Canada. In the US, it’s the opposite.

Now, back to the Fed’s exuberance index showing that both Canada and U.S. real estate are in bubbles. That might be true, but it’s not even close to the same issue. Americans are trying to avoid disposable income from turning into non-productive shelter costs. In Canada, that ship sailed a long time ago. Now shelter costs and a lack of productive investment is forecast to make it one of the worst performing countries in the OECD for the next 40 years.

Editor’s Note:

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Related Articles from the munKNEE Vault:

1. The Fed Says the U.S. Is Now Officially In A Real Estate Bubble

The U.S. Federal Reserve’s latest Exuberance Index (Q2), considered a “smoking gun” for bubbles, shows Canada is well into a real estate bubble – a bubble on a bubble.

3. Toronto Home Prices Now Rank As World’s 2nd Biggest Bubble

According to the National Case-Shiller Home Price Index, house prices have spiked 19.7% on average in the U.S. from a year ago, the biggest year-over-year increase in the data going back to 1987. The national index of this raging mania doesn’t do justice, however, to certain individual metropolitan areas where price spikes reached up to 32%. Here are the details of those metropolitan areas.

6. Canada Is The Second Riskiest Housing Market; USA Is #?

The whole world might be in a property bubble, but Canada is the second riskiest (only beaten by the Netherlands) according to Oxford Economics which believes a correction is likely to take place and the longer it’s put off, the worse it will be.

7. Some Real Estate Markets In Canada Are Overvalued By As Much As 91%!

Moody’s Analytics’ latest Canadian real estate model shows markets are overvalued by up to 91% across the country. As disastrous as that sounds, the firm isn’t expecting a big housing crash [but] the baseline model shows low to no price growth, as mortgage rates rise.

8. There’s NO Comparison Between the U.S. Housing Bubble of 2006 and Canada’s Today

High flying home prices may be getting close to pushing their limits as last month home sales also saw a sharp decline in volume, partially attributed to prices.

10. Your House: A Home, An Investment or a Ponzi Scheme? (+4K Views)

In the past few decades, the concept of home ownership has been completely turned on its head. Previously, homes were considered a very long-term consumption good…[No one] ever considered tripling the value of their homes by retirement time and selling them to move beachside yet, somehow along the way, this became a reasonable investment expectation. Even today, home buyers still make their purchases with the hopes of escalating prices. [It begs answers to these questions: Is a house just a home? Should a house be expected to behave like an investment? Is the housing game nothing more than a Ponzi scheme where the end buyer before the market corrects becomes the “greater fool”? Let’s try and answer those questions.] Words: 935

11. Is a House/Condo a Good “Investment”? Hardly! Here’s Why (+3K Views)

Most people seem to think owning a house is a great “investment” but, in actual fact, when you look at the numbers closely, such an acquisition is anything but. Let me explain with supporting evidence.

12. Bubble Ranking of World’s Frothiest Housing Markets

Bloomberg Economics says the run-up in global real estate prices over the last year has produced a warning signal unlike any other, not seen since right before the 2008 financial crisis.

One comment

  1. The United States and Canada are huge nations geographically and they culturally are diverse within themselves. I own rural land in Nova Scotia that hasn’t grown in value since 1990. But some houses in southern Ontario have doubled in price over the past two or three years. In the United States, California is becoming so pricey that people must leave … for places like southwestern Virginia which live in poverty and prices don’t move.

    Peasants in Central America can build their own houses and live in them, fully paid for and tax secure (none). That delivers peace of mind. Millennials in Canada will sign up for life-long killer mortgages and never get that kind of peace, though their accommodations will be much fancier. Different ways of living.