Why we STILL do not think there is a housing bubble
…another report released.
Kiyoko Fujimura – Buzzbuzzhome Corp.
If you follow Buzzbuzzhome’s Blog! then you probably know that we’ve been posting about the potential housing bubble. And as much as we’re sick of talking about it, there’s been yet ANOTHER study released by yet ANOTHER think tank. We’re growing a bit tired of it, but it’s what people are talking about. So here goes yet ANOTHER post.
Okay, here we go.
The study was released by the Conference Board and concluded that (drum roll please) we are NOT in a housing bubble. I repeat, we are NOT in a housing bubble.
So how did they come to this conclusion? Basically what they said was this: our housing market has been in a state of delirium for the past little while, but it doesn’t necessarily follow that we’re going to see prices go into a free-fall like our American neighbours.
According to the Financial Post:
“Signs of a slowdown were unmistakable in Statistics Canada’s report. It showed weakness in residential permits was much more broadly based than in the nonresidential sector, with declines registered in six of 10 provinces, said Scotia Capital economist Derek Holt. Yet, he added, the report “is directionally in line with expectations for softer housing markets,” and that the number of residential permits “nonetheless remains 31% higher than a year ago.”
The report goes on to indicate that although we will see a slowing housing market in the next few months, the slowdown is due to specific factors (i.e. the introduction of the HST, declining consumer confidence, a general slowdown of the economy, worries about the US economy and European debt concerns).
And while those that insist there is a bubble point to the fact that prices are well above the historical average in six major markets, that doesn’t mean there’s a bubble. The report points out that sales could never have sustained the level we saw in 2009 and the first half of 2010.
The report further indicates that the US crisis was caused by factors that don’t exist in Canada which include tax deductibility for mortgages and the inability for banks to go after other assets when an individual defaults on their mortgage.
Okay, so yet again we’re concluding that there is no housing bubble in Canada.
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