Skip to main content

Canadian House price continue to rise

Look at the dichotomy between Canada and the U.S.  Between 2007 and 2010, house price in the U.S. fell by, on average, 29%, in Canada they are up by 6%.  One massive difference is income, whereas average income has been stagnating (some would say even falling once you remove health care) it has been rising in Canada.



The impact of this on the economy is two fold:  First, Canadian banks – the primary lenders to the housing sector are seeing few problem mortgages, and even if there are problems sales prices are sufficiently high to minimize losses (moreover in Canada a loan is a personal liability, any shortfall from the disposal of the property remains as a liability of the mortgagee).  Secondly, is spurs the new home construction industry, since demand keep s on growing, a result of Canada’s different aging factors and the continued growth in household formation.  It is difficult to believe, but U.S. household formation has dropped, over the past 5 years, from 600,000 per annum to just slightly more than 200,000.  While in Canada (1/10 the size of the US) household formation has remained constant in the 175,000 to 210,000 range for the past 4 years.

One question is always, are house prices, on an income basis, higher in Canada than in the U.S., despite the recent 29% drop in the U.S. and the 6% rise in Canada, the reality is that if you look at house prices from 1987 to 2010, Canadian house price index is lower than in the U.S.  However, if you use average income, then Canadian house prices are  remaining reasonable.  Moreover the U.S. figure for household income doesn't take into consideration the annual increase in health care costs, which have been growing at a double digit rate.

Housing market is "fully priced" by all accounts.  There is no doubt that Canada could easily face a pricing correction, especially if the Canadian dollar continue on its current trend.  However, the level of over-valuation is hard to estimate, it could be in the range of 5% to 20% (the more gloomy forecasters)





Popular posts from this blog

The end of Tesla?

 it takes a special kind of idiot, to think that he can antagonize his entire customer base, and think that it will not impact his business. When Elon Musk went to work for Donald Trump, and created the doge department, he antagonized every liberal, and these people represent 90% of his client base.That’s not a brilliant move. Now Elon Musk is worth hundreds of billions of dollar, so he shouldn’t care a great deal, however, he needs to care because of several other issues. The cyber truck has been a disaster, most have had to be recalled because of defective glue, it’s not a truck, it’s not a car, it’s noisy, relatively uncomfortable, but great as a development platform. What Tesla has learned in making car manufacturing more seamless is truly amazing. The problem was that Elon Musk was so pissed with the Democrats, and with Joe Biden, in particular because of some slight, which were just plain stupid too. By the way, that he decided to support with hundreds of millions of dollar, ...
Post a Comment
Read more

Donald Trump‘s bad bargain

 The entire of 2023 and 2024 when Donald Trump was running for the White House, his mantra was no war, that the Ukraine conflict would be resolved in a day, and that he would do everything not to involve America and war. How the world has changed! He finds himself facing three conflicts; Ukraine, still going on almost 5 months after he became president. Gaza, an unspeakable crime against humanity, is obviously going to go all the way to its bitter end. And finally, Israel’s attack against Iran. It’s important to note, that Benjamin Netanyahu first indicated at the United nation that the Iranian were 3 to 5 years away from having the nuclear bomb. He made that statement in 1995. Therefore, no one is surprised that he uses the same two lines every so often. It’s entirely possible, that 30 years after he first announced it, that Iran has finally developed the bomb. It’s also remarkable that Iran, local power has been destroyed, from Yemen, to Syria, via Lebanon and Gaza to small exten...
Post a Comment
Read more

TACO again, but worst!

 Donald Trump got the rare earth metals that he had thrown away on April 2, liberation day as he called it. What did the Chinese get in exchange? The whole deal, is on the wrap right now. But let’s be clear. It’s the Chinese that have the upper hand.Some of the materials made by the Chinese, are simply unavailable anywhere else. suspicions are that the Chinese got the high-end chips that they lost under Biden. Tariffs will probably return to the level of April 1, and in the end Donald and his friends got nothing for it. It gets worse, Chinese exports to United States are down 40%. The Chinese have found new markets, I probably never gonna buy American grain again. Once again, Donald Trump proved he’s a great negotiator. He got absolutely nothing for his Showmanship. He told the world, that everyone would come and kiss his ass, instead they’re laughing At him. There’s no joke about Donald Trump, a 25 and inherited a huge fortune and proceeded to make it a small one. Bottom line, the...
Post a Comment
Read more