“Are we literally living in a bubble? And when it bursts, will it get as ugly as it did south of the border? Here’s where the most recent speculation is pointing:
Yes, we’re in a bubble, and it will probably pop soon.
The signs of a bubble are unequivocal. At 13 years and counting, Canada’s current housing boom is one of the longest-lasting in the world, the Bank of Nova Scotia noted in a recent report. The real price of Canadian homes has increased by 85 per cent on average since 1998. Prices stagnated in 2008, at the height of the financial crisis, but they were back on the rise again as soon as 2009, when they grew by nearly 20 per cent, according to the Canadian Real Estate Association.
Meanwhile, Canadian household debt set a new record last year. On average, the debt burden of Canadian families stands at 153 per cent of their disposable income, according to Statistics Canada. That’s almost as much debt as American households had at the peak of their bubble.”
“The scary part is that, by most accounts, 2012 is going to be the year when housing prices start heading south. The housing market is already showing signs of weakness. Despite a rebound in December, housing starts fell in the last quarter of 2011. And in some smaller markets on the west coast, condo prices have already declined 15 per cent, according to Merrill Lynch. The bank predicts that prices nationwide will slip by five per cent this year in the best-case scenario. A spike in unemployment could trigger a 10 per cent price drop.”
“No, it won’t be “housemageddon.”
The good news is that, in all likelihood, our bubble won’t go KABOOM! Instead, we seem to be in for a painful but not devastating pop. That’s because only certain parts of Canada are in a bubble. Overcrowded markets in B.C. and Ontario may be close to busting, but many other areas of the country remain very affordable. The very same survey that ranked Vancouver most-unaffordable-city after Hong Kong rates Canada the third most affordable country, after the U.S. and Ireland.” …
“Most likely, then, the Canadian market will let the air out gradually. As inelegant as that sounds, it’s good news.”
- excerpts from ‘What happens when Canada’s housing bubble pops?’, Erica Alini, 26 Jan 2012 [hat-tip Potato]
Well, hard to get more mainstream, or more definite, than that.
All of the signs of a speculative mania were very definitely present by 2006-2007, but the MSM were silent about it then.
Now, 5 years and tens-of-thousands of overextended buyers later, it is even more glaringly obvious that the bubble is present, so the media ‘warns’ of this. What do they expect the record high number of homeowners to do about this now?
The MSM are rear-view commentators, and their articles have little predictive capacity. Like all other mainstream commentary recently, this Maclean’s piece is overly optimistic in its price-drop predictions.
Note ‘Maclean’s’ is calling for a soft landing. All those predicting a slow gradual reconciliation of prices and the fundamentals (which are currently far, far below prices) have to answer one big question:
Who do they imagine these buyers will be, who will step in and buy, in an orderly fashion, all the way down?
Who will, essentially, step in and bail out current owners, with promises to pay banks a stream of money for the rest of their lives, at these still very elevated prices?
And, while they’re pondering that, ask them for historic examples of speculative manias that have resolved with a soft landing. (There aren’t any.)