Yesterday we profiled the upcoming February edition of Canadian Business Magazine with their cover article "How Low Will House Prices Go"
Canada’s housing market can best be plotted on two timelines: pre-Flaherty and post-Flaherty. And for many, the post-Flaherty era is a good thing.
Sales have slipped since Canada's Finance Minister Jim Flaherty brought in new mortgage restrictions in July in an attempt to engineer the slowdown we're now seeing, and most observers expect a soft landing, not a crash.
Vancouver, in particular, has taken it on the chin, and observers believe it is the one market to have gone beyond a soft landing.
"Canada’s housing market is clearly in correction mode as we had been warning would occur well before the figures began to roll over," Derek Holt and Dov Zigler of Bank of Nova Scotia said before the CREA report.
Ms. Gulati expects the market will stabilize now over the next few months, and that the impact of Mr. Flaherty's changes are now priced in.
"When looking at previous mortgage rule tightening episodes, the housing market impacts have been temporary in nature," she said. "There is no reason to think that this time will be any different."
I agree with that assessment.
The Real Estate Industry will seize upon it with relish - complete with a flood of media stories. The angle they will hype? "It's 2009 all over again and you must get in now before you miss this chance."
Suddenly that quote from TD's Sonya Gulati will taken on blinding significance to the government.
A substantial downturn in prices – say, 10 to 20 per cent – would, in theory, not only reduce mortgage debts for new home buyers, but, significantly, push down non-mortgage debt to the tune of 4 to 8 per cent. That would get Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney a lot closer to solving the country’s household debt problem, reducing what is considered a serious risk to the stability of the Canadian economy.
Perhaps we will see down payments raised... not just up to back to 10%, but perhaps even higher.
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