Canadian Housing Market Bounces Back

Great news according to the Financial Post. Many top economists are pointing to recent data that shows house prices improving in Canada and the United States.

Not only are housing prices going up in these markets, but the rate of change for price changes is also increasing, which is an indicator of more activity in the market.

It’s great to hear these economists using terminology like “turned the corner” and “the worst is behind us”. The question I have is, will it last if mortgage interest rates go up? I feel like the majority of demand for homes is a result of low interest rates…which is a good thing for my business, but concerns me a bit in the long run. Are prices higher than they need to be? Will affordability be a problem in five years when rates are higher?

Perhaps this is all setting the state for five to ten years of really low interest rates…because frankly, if rates shoot up in five years, a lot of people could have affordability problems or worse, house prices could collapse. I suppose we could get into a bubble / burst / bubble /burst kind of cycle with housing if that scenario plays out.

According to the article, mortgage rates will likely stay flat or increase only moderately over the next year, which sounds about right to me. I do think that fiscal policy of low interest rates, in combination with the monetary policy of printing money (particularly in the US) can and will cause an inflationary reaction. The only question is, “How big?”

Here is the link to the Financial Post Article: Worst is over for housing markets, economists say