🇨🇦 Canada is experiencing its first housing crash after 30 years of inflating it.
The most extreme housing bubble in the world is popping. t.co/KLQKmQNooh
— Financelot (@FinanceLancelot) July 4, 2024
- Current Situation:
- The Canadian housing market is at high risk of unravelling, according to experts. The level of debt that Canadians have taken on in comparison to their incomes has put many in a precarious position should mortgage rates continue to rise — which is likely.
- In fact, Phillip Colmar, a partner at Global Strategist at MRB Partners, has warned that “Canada is probably sitting on the largest housing bubble of all time.” The inflated home prices are a result of two decades’ worth of easy money supplied by the Bank of Canada’s monetary policy.
- Historical Context:
- Canada’s housing market has experienced significant fluctuations over the years. In 1990, mortgage rates topped 13%, leading to a deep freeze in the Toronto housing market for years. Prices plummeted, and it took until 1996 for them to recover after losing more than a quarter of their value.
- Since 2002, Canada has witnessed a prolonged period of rising real estate prices, with short periods of falling prices in 2008, 2017, and 2022. Some observers have called it a real estate bubble.
- Challenges Ahead:
- While Canadian banks are working to prevent a housing market collapse, the risk remains. Debt-to-income ratios are sky-high, and debt servicing costs have increased significantly.
- If mortgage rates rise further or if there’s an economic downturn, the housing bubble could lead to a deleveraging cycle.
In summary, Canada’s housing market faces significant headwinds, and the current situation echoes historical challenges. The bubble’s impact will depend on various factors, including interest rates and economic conditions.
Not just Canada…
Buying a house is as unaffordable as ever, per NYT: pic.twitter.com/u8Y8ij3FjV
— unusual_whales (@unusual_whales) July 4, 2024
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