Canadian housing bubble
Crossposted in Canada forum
http://www.doctorhousingbubble.com/canada-housing-bubble-ripe-for-popping-vancouver-housing-bubble-2012-pop-real-estate-canada/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+DrHousingBubble-HowILearnedToLoveSocal+%28Dr.+Housing+Bubble+-+How+I+learned+to+Love+SoCal%29
In the last few years I’ve noticed that many of the cable finance and housing shows highlight families in Canada. Shows that talk about debt or home buyers are usually focused on families in Canada which is rather odd given that we are here in Southern California. Yet the funny thing about these shows is that they rarely identify that they are in Canada although I recognize locations like Vancouver. If one simply tuned into the show it would appear that a bubble was still going on in the states. This is probably the point. After all, the cable shows focused on flipping houses or making quick bucks on real estate started going off the air yet another bubble was still going on up north. Obviously these shows had an audience otherwise they would not be on the air. Now the focus is on the Canadian bubble and American audiences can swim in the nostalgic dreams of the glory days of domestic housing. Yet the shows rarely mention their location as if English-speaking families and cookie-cutter condos and homes are so easily interchangeable that they will fool an audience. Yet one thing the shows fail to acknowledge is that the Canadian housing bubble is even more pronounced than that in the United States.
Let us first get one thing out of the way; the Canadian housing bubble will burst. Just like real estate bubbles in Ireland, Spain, England, and the United States real estate bubbles do burst. Timing is always hard to predict but undoubtedly these bubbles pop because they are fueled by easy and hot money. Even at the apex here in California arguments were bandied around regarding foreign money, low interest rates, and other nonsense trying to support a ludicrous bubble. Once the ego was put on the shelf and the credit markets imploded, the housing market came crashing down. Canada seems to be where the United States was in 2007.
= new reply since forum marked as read
But there are some differences in the types of risk in Canada. I think pricing is too high, but a couple years ago the Canadians started trying to tighten mortgage rules. I think they have less of the extraordinarily funky mortgages, which should lessen the impact.
The bubble already burst, really:
They have a huge number of variable interest mortgages, so if rates go up they really are in big trouble. Also, their economy has become too dependent on housing to deal with a slowdown in building easily:
http://canadabubble.com/bubble-watch/2289-cmhc-releases-2011-canadian-housing-observer.html
Changes like this
http://canadabubble.com/bubble-watch/2288-down-form-the-peak.html
account for some of the relative weakness in the Canadian economy currently.
And finally, they really do have an outsized household debt load. Bank of Canada's been muttering about this for years:
http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/record-high-household-debt-in-canada-triggers-alarm/article2269210/
Australia is seeing a consumer-side slowdown because of Australian household debt loads.
Norway and Sweden have problems also.
http://www.bloomberg.com/news/2012-01-16/investors-ignore-nordic-housing-bubble-risks-as-hunt-for-havens-picks-up.html
Really, most countries have been operating off the same easy-money guidebook, so it is not surprising that similar tactics have led to similar results.
