The Bank of Canada is predicting a ‘soft landing’ for the Canadian housing market as the national real estate boom cools. The central banks deputy governor Sheryl Kennedy gave a speech yesterday in Banf Alberta where she referred to the cooling trend in the Canadian real estate market as both ‘expected and welcome’.
As one of the country’s largest housing booms loses steam, most economists are forecasting a small increase in prices this year that will keep pace with the central bank’s 2-per-cent target for inflation.
In similar news Federal Reserve Chairman Ben Bernanke is predicting a soft landing for the US market as well:
“Our assessment at this point … is that this looks to be a very orderly and moderate kind of cooling,” Bernanke said.
Though it is a minor concern, both the Bank of Canada and the Fed see potential problems when it comes to new mortgage products:
Despite her fairly positive outlook, Ms. Kennedy cautioned that Canada can’t afford to become complacent about the real estate market, noting it took a decade for prices and sales to rebound after the bust of the late 1980s.
To that end, the central bank is keeping an eye on “challenges,” including ensuring that mortgage innovations, including 40-year amortization products and “near-prime” mortgages, don’t detract from prudent lending practices.
While Bernanke had this to say on the topic:
On the issue of risky home mortgages, Bernanke pointed out that the Fed has issued some guidance for lenders and he underscored the importance of borrowers making sure they understand how interest-only and other non-traditional mortgages work.
“We’re not saying you shouldn’t make these loans. What we’re saying is that they be done the right way,” Bernanke told the banking conference.
Wait a minute.. I just noticed that US article is a bit out of date – it’s actually from 2006, sorry about that. Here’s a more recent article on the US market:
Home prices in 20 U.S. metropolitan areas fell in April by the most on record, signaling the housing recession is far from over, a private survey showed today.
The Case-Shiller home-price index dropped 15.3 percent from a year earlier, less than forecast, after a 14.3 percent decline in March. The gauge has fallen every month since January 2007. The group began keeping year-over-year records in 2001.
Mortgage defaults and foreclosures are adding to the glut of properties on the market, while stricter loan rules are making it more difficult for prospective buyers to get financing. The prolonged real-estate slump, along with higher fuel prices and a shrinking job market, is taking a toll on consumers and the economy.
Thank goodness it’s different here eh?