Relax: It's Just The Housing Market Cycle

Here is the summary from a report from Gregory Klump, the Canadian Real Estate Association's chief economist, that was released today, May 26, 2010.

• Canadian home prices are unlikely to undergo U.S.-style correction.
• As part of a normal demand-driven housing market cycle, the price to income ratio reverts from its peak to its long-term average by way of income growth and stable prices.
• Homes purchased by retirees with accumulated wealth, not financed with income, may be upwardly skewing the British Columbia and national price to income ratio.
• Based on the longer-term relationship between price and income, the national price to income ratio will soon revert to its long-term average via increases in income, not sharp price declines.
• Warnings of a U.S.-style correction in Canadian home prices ignore solid Canadian mortgage market trends.
• Mortgage holders in Canada have borrowed conservatively and are accelerating mortgage repayment, providing options for the small proportion of homeowners that may face financial difficulty when their mortgage is renewed at a higher interest rate.
• Canada will avoid a massive oversupply of homes and a sharp drop in housing demand, so a U.S.-style correction in home prices is unlikely.



The information in this blog has been taken from a report provided by CREA and may not be appropriate for other purposes. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. The report contains economic analysis and views, including those on future economic and financial markets’ performance. These are based on certain assumptions, and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. Cyndi Polovina, Landmark Realty Mission Ltd., CREA and its member Boards and Associations are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered