Alas, what goes up, must come down- even in Canada. After months of the MSM reporting that the Canadian housing market would not go the way of their neighbors to the south- the Canadian housing market is going the way of their neighbors to the south:
Canada’s long-running housing boom has ended, with the formerly bubbling markets of Calgary and Edmonton already having gone from hot to not, and with the current hot spots of Saskatoon and Regina to follow, a major Canadian bank says.
Mortgage-market innovation delayed the inevitable but couldn’t prevent it, Royal Bank of Canada said in its analysis of major urban real estate markets Thursday.
"After yet another blockbuster year for Canada’s housing markets in 2007, the much-anticipated housing market slowdown in Canada has arrived," RBC said.
"The delayed arrival of softer housing markets can be partly attributed to recent mortgage innovation that has seeped into the Canadian market during the last two years," it said, citing higher loan-to-value ratios and longer amortization periods of up to 40 years, which opened the market to a wider range of buyers and prolonged the housing boom.
The mortgage-market innovations, which make housing more affordable in the short term, also heighten the risk of default in the long term, it said.
Markets in the West, which have risen the furthest above their underlying values, are the most at risk of an increase in defaults as a result of recent mortgage innovations, the report’s author, RBC economist Amy Goldbloom, said in an interview.
Americans generally don’t pay a lot of attention to housing markets beyond their shores, but speculative fever followed by a credit crunch has hurt markets in New Zealand, Britain and Spain as well. Canada is following behind, but denial is still rampant. Doomers- do these excuses sound familiar?
There will not be a U.S.-style correction, despite such concerns in markets like Calgary and Edmonton, said the report, released amidst further evidence of the depth of the U.S. housing market meltdown — a record drop in a government index of housing prices in the first quarter of this year.
"Canada’s housing market is on much firmer footing than the U.S. market," it said, citing more conservative mortgage lending practices, healthy household finances, tight labour markets, and a manageable supply of homes on the market.
It is often said that "When the U.S. sneezes, Canada catches a cold". Well the U.S. is currently in bed with a fever, how likely is it then that Canada gets by with merely a sniffle?
But here in Vancouver everyone says “its different”!!! the 2010 Winter Olympics will keep the house prices high!!!!
I live in Regina which historically has been a very stable place to live real estate price wise. Lately however, prices for commercial and residential have gone through the ceiling.
I hope the local economy can sustain the rise in prices.
Calgary was way over inflated. Most wages just don’t support $500,000 houses. It’s really hard on families.
Iax-
Home sales in Salt Lake City have declined drastically, and prices will soon follow. Perhaps home sellers should point out “But we hosted the 2002 Winter Olympics”! I’m sure buyers will then want to pay more. : )
Montyloree-
Wouldn’t it be better if the local economy doesn’t sustain the rise? When home prices are in line with wages, people have a chance to spend money on other things- like food and clothing. It’s a lot easier on families that way.
“There will not be a U.S.-style correction, despite such concerns in markets like Calgary and Edmonton, said the report…”
True to form, the Vancouver Sun story ends with a “BUT we are special and different here!” quote or two.
I wouldn’t trust a word that the rag “Vancouver Sun” prints.
The Vancouver Sun knows who butters their bread: real estate agents and companies who advertise with them. That is why by far the VAST majority of stories in the Sun about real estate in the past decade mostly quote “studies” and “professionals” whom it is obvious have a biased interest in seeing the bubble only keep going up.
As long as Vancouverite lemmings keep believing what Sun prints, the Vancouver Sun will keep printing the, “But we are special and different here!” stories.
For example, every year there is a study put out that ranks the “least affordable cities in the world”. And, every year for the past few years the Sun gleefully makes the story front page news, as if to continue hammering the idea to Vancouverites that Vancouver is an expensive metropolitan city…and so yes, the insane prices should remain insanely high!
For example a couple years ago, the headline was, “Vancouver ranked 13th least affordable city in the world!”
Of course, the BIG problem with with the study, ,and the headlines, is that the STUDY ONLY LOOKS AT SIX COUNTRIES IN THE ENTIRE WORLD.
For people who realize that, makes them wonder if the Vancouver Sun is either full of ignorant fools who haven’t read the study once over the past few years, or is full of staff who realize the truth but want to keep the lies going and the lemmings alive.
Iax Said:
“But here in Vancouver everyone says “its different”!!! the 2010 Winter Olympics will keep the house prices high!!!!”
I’m still trying to figure out the logic of this argument. Who (exactly) is going to be purchasing homes based on the Olympics? Amateur ice-skaters, ski jumpers, or bobsled teams?
OK that was cruel. It must be those workers who are building the Olympic infrastructure then. What income will they have after the job is done? Are they locals, can they afford it? Hmmm… maybe not the construction contractor’s employees then…
Ah I have it now, all the visitors to Vancouver from all over the world will suddenly want to buy a house there because of… the Olympics! Just like they will do for housing in Beijing this summer.
LMAO.
Yeah, and here in Phoenix I had a few clients tell me they weren’t worried about their investment properties because they were going to get 3-5 months worth of the mortgage payments renting them out for the super bowl. Some did…some didn’t….either way, it’s 3-5 months later and they still have a mortgage AND the properties are worth that much less!!!!