Why Canada is not headed for a U.S. style crash
Economist Benjamin Tal discusses why Canada should not experience a U.S. style housing crash, and how many are misinterpreting the statistics.
There has been much recent speculation surrounding the direction of Canada's housing market. Warnings that Canada is heading for a market crash, and that Canadians are too indebted pepper the headlines. In this Financial Post piece, Benjamin Tal, deputy chief economist at CIBC shares his market insights.
Tal acknowledges the likelihood of falling house prices, but predicts the decline will be much more moderate than what the U.S. experienced. "Panic is the worst thing that could happen because when that mentality sets in and people become irrational, it's hard to forecast how low prices will go," Tal states. His concern is that Canadians are 'talking themselves into a housing crash' by interpreting every statistic negatively and making constant comparisons to the U.S.
This article also addresses the popular topic of debt. While the average debt to income ratio is now being measured at 163.4%, Tal points out that many of the individuals taking on debt are more equipped to service it. In addition, a recent study revealed that the net worth of the average Canadian is $363,519, and $269,024 (over 70%) of that average lies in real estate equity.
For more information, talk to an Ottawa Mortgage Broker.