Housing Collapse Not Likely


With all the instability in the market due to the European financial crisis, many people are worried that Canada will also experience a hit to the economy and that the housing market might also feel the effects. However, Mario Toneguzzi’s article in the Calgary Herald suggests that this housing collapse is not likely to occur.

The Canadian Real Estate Association (CREA) noted that “the relationship between average price and income has recently been cited as portending a U.S.-style correction in Canadian home prices, however, such warnings ignore the longer-term relationship between prices and income, and disregard typical Canadian housing market cycle dynamics.” Toneguzzi stresses that the U.S.-style correction will be avoided in part due to the conservative lending practices in Canada and accelerated payments among mortgage holders.

CTV news, as well as many other media outlets, have released articles providing statistics that suggest many Canadian houses are being overvalued. However, the Bank of Canada’s impending increase in interest rates should cause prices to decrease in order to attract more buyers. As a result of the previously rock bottom interest rates, the housing market is thought to be at a peak in the housing market cycle. Once home prices settle for a while, incomes will likely have a chance to catch up which will provide a housing stability that the US didn’t have.

If you are interested in locking in an interest rate for your mortgage, while they are lower, feel free to contact us and speak to a Licensed Mortgage Broker at First Foundation about your options.