Comparing the Canadian Housing Market Against the US

Comparing the Canadian Housing Market Against the US

Happily for Canada the housing market did a u-turn out of the recession sooner than anyone thought. The decline reversed in the spring of 2009, and the sales numbers escalated through to summer. When we look at the winter months we notice an even larger increase with reports of over a 100% jump. Not only did the figures bounce back but the typical price topped the pre-crash figures.

So why does the Canadian housing market do better than the rest of the world? Let's have a look at the reasons why. The first reason is likely due to the very low interest rates set by the Bank of Canada at 0.25%. When looking at the rates in the USA, although we see low rates as well, they didn't have the same outcome as seen in the Canadian housing market.

The Canadian mortgage area was not as riddled with sub prime mortgages as observed in the US market. About 5% (potentially upwards of 10%) of loans in Canada can be attached to the sub prime class, while sub prime loans in the US took a 22% share of all loans during the critical years, 2006-2008.

The World Economic Forum constantly state that the banks in Canada are are the soundest in the World. Furthermore, the tough financial stance has also helped Canada avoid the subsequent credit crunch.

Even though jobs were lost and the unemployment figures rose, the figures were not as awful as they were in the US and recovery has been seen since Summer 2009. The personal bankruptcy situation has been supported by the sound social setup that Canada has in place.

In conclusion the Canadian housing market is certainly very secure. Sadly with news this good a few people are starting to mutter about the likelihood of bad news, in the not so distant future, for the housing market. I don't think this is the way forward, for a few reasons.

The Bank of Canada promised to keep interest rates stable until summer 2010. Rates will rise as summer arrives and we have already seen some mortgage rates increasing a little. Likewise despite not having an official deadline, the window for taking advantage of the First-Time Home Buyers' Tax Credit is slowly becoming smaller. Finally, the shortage of new listings, which we have been enduring since the autumn of 2009, is slowly letting up. As Jay Banks from Vancouver Lofts, adds: "The situation has improved with an increase of new real estate listings on the inventory over the last 2 or 3 months."

More levelled sales and prices of houses settling at reasonable figures, is probably going to be the outcome of all these items starting to come together.

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