Many economic analyst out there are warning that the Canadian housing market is overvalued and flooded with supply. While the U.S housing market crashed in 2007 and still have not recovered, Canada during that time has boomed.
However, Canada is not completely immune to global slowdowns. If anything we are in a delayed cycle, Canadians now have record high debt levels and are buying houses driving prices higher on cheap mortgages. This behavior in somewhat like what happen to American’s except we are a few years behind.
If the unemployment rate rises above 8% and Canadians start losing their jobs and cannot afford their mortgages because of being over leveraged, we will see even more houses on the market driving prices down. In the past two months net loss of jobs was 73,000 and with the slowing global economy more might be on the way in 2012.
A hard landing for the housing market is definitely possible as the housing market is directly related to jobs and income growth. Add to this that within the next 5-10 years as well that there will be about 7 million elderly people retiring, looking to downsize and this can further add to supply and downward of pressure in houses.
by Das Brain
Source: Look for 5% to 10% drop in home prices in first half of 2012
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