Canadian Homes Pricey But No Bubble

Canadian Homes Pricey But No Bubble

Canadian Homes Pricey But No Bubble

According to BMO Nesbitt Burns' recent report, home prices in Canada are currently overvalued at approximately 11%. While this may seem high, consider the fact that homes in the U.S. were overpriced by 25-30% before the economic downturn in 2008.

Economists Earl Sweet and Sal Guatieri reported in a research note that "all things considered, the Canadian housing market does not appear to be in a bubble, and is unlikely to suffer a U.S.-style collapse. A key and overriding difference is the quality of loan origination in the past decade, as well as other institutional factors such as mortgage insurance and recourse against defaulters." (2010, Canadian housing: Pricey, not dicey)

Using their method, they found prices peaked, in terms of overvaluation, at 18 per cent late last year. But a 3-per-cent drop in prices so far this year, along with moderate income growth, cut that to "a less worrisome" 11 per cent in the third quarter.

The report also mentions that homes are still very much affordable due to low interest rates and unless these rates change or a recession were to hit, a significant price change is unlikely to occur. Lowering interest rates could have a negative effect on Canadian homes by inflating housing prices even more therefore causing a real bubble.

The Economist also published findings recently evaluating Canada's real estate market. Their method compared housing values and rent (versus Sweet and Guatierti's home values and income) and found the market overpriced at 24%. While this number appears to be a greater cause for concern, Sweet and Guatieri maintain that evaluating home prices against income is a far better measure and more accurate than The Economist's method.

In the nation's capital, recent home prices appear to be leveling off as many homes currently listed are going through price reductions. Nonetheless, the Ottawa real estate market is still looked at positively by buyers, sellers, and investor alike due to our strong local economy and thriving workforce.

POST COMMENT

Gout Home Remedies Flat Iron Tips: Top Five Ways to Extend the Life of your Hair Straightener real estate agent - where to invest your money ? The Science Of Flatten 6 Pack Abdominals Home Remedies for Gout Buying Tulum Real Estate – The Importance of The Agent How to Find a Great Moving Company Forex Software for Making Money From Home - Secrets of Forex EAs Revealed! How To Use Work From Home Online Stores Homemade Picnic Table - Get it Done at Minimal Cost ! Colorado Home Mortgage Refinance Loan: Manage the Top Rates and Services on your Mortgage Argos and Homebase struggle for H1 sales and margin in tight market Aluminium Sliding Doors