Martin Armstrong lists Canada under “RE markets to avoid”

While some Canadian cities offer reasonable affordability compared to household incomes, Vancouver’s housing is, by any measure, highly overvalued and vulnerable to a sharp correction. Prices have risen 55% from their 2009 trough to a level 29% above their prior peak. The average home price reached nearly C$800,000 (according to CMHC).

Full article

60 Responses to “Martin Armstrong lists Canada under “RE markets to avoid””

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    Anonymous Says:

    AKA the needle and the damage done, with the "heroin" still being sold freely on the street.

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    Florida GOP primary rides on housing crisis blame

    The housing crisis is at the heart of 2012 politics in the quintessential swing state. Florida Republicans are making their choice in Tuesday’s GOP primary based on which candidate they feel bears less blame for the mess their state is in.

    The collapse that sent the massive luxury homes around Lutz plunging to a quarter of their 2007 values upended not only the lives of those with underwater mortgages and unbending bankers. It cut a swath through every sector and social stratum.

    Of course nobody – not the candidates and not the voters – is willing to talk about who bears ultimate blame for the housing collapse.


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    southseacompany southseacompany Says:

    Another view from the outside:

    "Canada's Subprime Crisis Seen With U.S.-Styled Loans: Mortgages" San Francisco Chronicle, Jan 30/12

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    southseacompany southseacompany Says:

    Also made Canadian press;

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    Anonymous Says:

    Look at page 18 in the Martin Armstrong article. He shows a 78 year real estate cycle with the final 26 years being a contraction. Those waiting for a quick bottom may be disappointed. Real estate will likely be a declining asset for the next 20 years. Renting may be the best option for a long time. Look at the US they are over 5 years in to a RE contraction with no bottom in sight and many areas still being very pricey.

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    speaks for itself..

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    the Cons are planning to increase French and English speaking immigration at the expense of family reunification immigration.

    Currently, immigrants can sponsor their parents and dependent children. I strongly suspect the Conservatives will try to remove the parents from this equation. After all, they are beyond their working years and will almost certainly become a burden on the healthcare system.

    As well, they may try to do away with the practice of recognizing dual citizenship. I recall there were whispers about this back during the trouble in Lebanon in 2006 (we spent $85 million evacuating citizens who turned around and went right back to Lebanon after things settled down).

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    SunBlaster Says:

    Now with CONservative government in majority, get ready for supersonic speeds in wealth transfer, where private losses will be transferred to a public balance sheet for a greater good. Anyone who believes that this government in particular is going to to anything about curbing this overheated RE market, knows nothing about finance and politics or the global power structure.

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    "As well, they may try to do away with the practice of recognizing dual citizenship."

    Do you mean recognizing dual citizenship or allowing dual citizenship? Not recognizing dual citizenship means that if you are a Canadian citizen you cannot represent yourself as a foreign citizen to the Canadian government. Not allowing dual citizenship means that you cannot hold Canadian citizenship at the same time as that of another country. China, for example, does not recognize dual citizenship but allows it.

    I double very much that you're going to see dual citizenship outlawed as it would negatively affect a great many people many of whom are Con supporters. I believe the country that has the most dual citizens with Canada is the US.

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    observer Says:

    Martin Arthur Armstrong (born November 1, 1949 in New Jersey) is the former chairman of Princeton Economics International Ltd. He was indicted on September 29, 1999 in the United States District Court for the Southern District of New York for conspiracy to defraud the United States.[1] for alleged fraud involving Japanese investors. On August 17, 2006, he pleaded guilty to one count of conspiracy to defraud the United States.[2] On April 10, 2007, he was sentenced to five years in prison.[3][4] He was released from prison on September 2, 2011.[5]


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    [BMO denies housing bubble]

    The Bank of Montreal poured cold water on the idea Canada's housing market could be headed for a crash, suggesting that prices are only "moderately high across the country."

    "Expect the housing boom to cool rather than crash," BMO's chief economist Sherry Cooper and senior economist Sal Guatieri said in a report published Monday.

    The bank does note, however, three risks to the outlook.

    1. A sudden hike in interest rates,

    2. a widespread Canadian recession, or

    3. an economic slowdown in Asia reducing the number of foreign buyers would all take the air out of Canada's housing market.

    "But barring one of these triggers, however, a dramatic correction is unlikely," the bank said.


    IMO risk #1 will come sooner or later, but risks #2 & #3 are already in progress.

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    trash crash alert Says:

    Bank of Montreal (BMO-T58.08-1.14-1.93%) says Canada’s somewhat pricey housing market is likely to cool, not crash.

    The bank’s economists say the only real trouble spot is Vancouver, where there are plenty of vacant high-priced condos going begging.


    They forgot to mention dramatic price drops to take take place in West Vancouver, swamped stucco houses in Vancouver to implode and cardboard built box houses in rest of Greater Vancouver and turtle pool country in Surrey and beyond where 20% plus drops are expected in short term.

    Asset deflation is taking the world by storm – BC is next up!

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    patriotz patriotz Says:

    @trash crash alert:

    Their "Canada" does not seem to include Calgary and Edmonton, where prices are over 10% off peak and falling again, and the disaster area of Kelowna and the southern BC interior.

    Why don't their reasons for why we're not headed for a bust apply there?

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    Anonymous Says:

    these kinds of articles drive the bears nuts! soon, more bears will leave for ottawa.

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    My understanding is that BMO managed to sell a nice package of MBS that then allowed them to drop the interest to 2.99. From talking to someone at another big Canadian bank BMO is a little late to the party and they want to keep the game going.

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    Isn't Michael Campbell a disciple of Martin Armstrong? Be care full with the negativity Martin. Only Ozzie J will be left to pump R.E. on Money Talks.

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    [Canada needs more tools to cut household debt: FSB]

    – 1/30/2012

    On the debt issue, it said: “Given recent global market developments, it is important for the authorities to continue to strengthen macroprudential surveillance and consider expanding the range of tools at their disposal – which currently include the leverage ratio and various government mortgage insurance eligibility requirements – in order to effectively address any emerging concerns.”

    The report did not prescribe any specific action to rein in mortgage debt.

    The issue is not new to Canadians. Carney and Finance Minister Jim Flaherty have warned consumers repeatedly against taking on too much debt at a time of historically low interest rates. The household debt-to-income ratio has reached a record high of more than 150% and the FSB said the price-to-income ratio in the housing market is at a 30-year high.

    Since 2008, Flaherty has intervened three times to slow the real estate market. He has lowered the maximum amortization period for new mortgages to 30 years from 40 years, raised minimum down payments required to qualify for government insurance, and required all borrowers to qualify for a five-year fixed-rate mortgage to get insurance, even if they chose another mortgage option.

    The FSB urged the government to closely monitor the Canada Mortgage and Housing Corp (CMHC), the federal agency that backstops many high-risk mortgages, to ensure its liabilities are manageable. CMHC is not regulated by the banking regulator but complies with the same rules as the insurance industry.

    “It is therefore important that the Canadian authorities continue to closely assess the contingent liability to the public finances posed by CMHC and ensure that its underwriting standards remain appropriate,” the report said.

    The peer review of Canada is the first of its kind and is a follow-up to recommendations made to the country by the International Monetary Fund in 2007-08. The FSB has conducted similar reviews of five other countries, including Switzerland this month.

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    link to above news:

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    For some reason this tune seems appropriate…

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    And people thought HAM would come to save us all…

    Shanghai New Home Prices Tumble 41% In Past Week

    While the number is likely influenced by the Chinese Lunar New Year, property consultant Shanghai UWin Real Estate Information Services Co. released an update on the Chinese new home sales market which is, to say the least troubling. Specifically, according to UWin, Shanghai new home prices fell 40.96% in the week ended January 29, compared to the previous week, to 16,144 yuan/square meter. If correct, it means that local homeowner violence is about to come back with a vengeance, as happened back in October when property developer office were stormed by angry mobs of home purchasers who saw an implosion in the indicated values of their purchases. Furthermore, not only has the market stalled, but it appears to be frozen, with just 4,400 square meters of new transactions closing, or an 89.21% drop on the week. And while the holiday has an impact, the volume is 36% of the 7 year average for Chinese holidays, so there is more in play here than just a seasonal grind. So just like the Baltic Dry where everyone is expecting a surge "any minute now" that the Chinese new year is over, nervous China bulls will have this new vertical to keep track of and make sure that it is merely a blip, as the alternative is a full blown Chinese housing bubble collapse.

    More specifics from Bloomberg:

    – New home transactions by area plunged 89% W/w in Jan. 23-Jan. 29 to 4,400 sq/m, Uwin says in e-mailed statement.

    – Sales during Chinese New Year holiday decline to lowest level since 2006 for same period; volume 36% of 7-yr avg. for CNY holiday

    – Avg. new home price down 41% W/w

    – New home supplies plunged 87% W/w

    – Property developers may have to continue price cuts for cashflow to survive, Uwin analyst Zhijian Huang says

    – China may remove or relax home purchase restrictions during June-Oct period: Huang

    – Policy turnaround may boost sales before home prices rebound moderately: Huang

    Next coming near you…

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    Anonymous Says:


    What a shame that we're doing so poorly. It's depressing looking at that info-graphic. Who's been on watch during this time?

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    jumping in Says:

    It feels really good to read so many MSM papers bringing this society back to sanity. I was about to doubt my common sense 😉 But it also troubles me that we had to reach such an extent of madness before reacting. Let's hope the landing won't be too hard…

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    Best place on meth Says:

    Thank god CNY is over, now HAM can get back to listing their houses.

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    Et tu, Martin Armstrong?

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    Another Mortgage related news update:

    RBC Mortgage specialist Jason Wong just wrote:

    "For a long time, mortgage debt was not included in many people's credit check reports.

    Starting this year, mortgage debt will be listed on credit reports."



    An “M” for mortgage

    Date reported / opened

    Original balance

    Mortgage balance

    Payment amount

    Payment history

    <a href="” target=”_blank”>…” target=”_blank”>

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    900kCrackHouse Says:

    @DEFAULT NAME: Keep in mind that HAM, grow-ops and cash deals skew the stats. Each of these problems has gotten worse over the last 30 years.

    Some of the highest child poverty rates in Canada in west Vancouver? Really???? Anyone who works with the impoverished knows that they have been consistently been pushed out to New West / Surrey over the last 5-10 years.

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    asalvari1 Says:


    Well, this is certainly opposite from what we were told by local media and realtors in the last 10 days or so – the CNY is the time when people go bananas and buy more properties…

    I guess (/sarcasm on) all those people from china got here to buy properties, so nobody was buying there. (/sarcasm off)

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    Robert Shiller: A Housing Bottom? What Are They Thinking?

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    I hear this a lot but empirically the average person tend to 'max out' at any opportunity given. In my opinion the slogan should be 'The lenders that lent too much'.

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    Anonymous Says:

    Saw on BNN this moring the Cons are planning to increase French and English speaking immigration at the expense of family reunification immigration.

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    @southseacompany: Read it, and this:

    OSFI head Julie Dickson said in a Sept. 26 speech the agency is “very focused” on mortgages and home-equity lines of credit, which allow individuals to borrow against the equity in their homes.

    In a Nov. 2 letter to Canadian financial institutions, the agency encouraged them to follow mortgage underwriting principles recommended by the Financial Stability Board, including limits on the ratio of loans to property values and regular stress testing of mortgage portfolios. OSFI regulates Canada’s biggest banks, as well as smaller loan providers and credit unions.

    Home buyers usually qualify for “non-income-qualified” mortgages because they make a large downpayment, according to the August 2011 analysis by OSFI. Lenders typically waive the requirement that buyers prove their income, OSFI says, which identified such loans on a list of issues to be considered by its “emerging-risk committee.”

    Low ratio loans along with their lax income verification requirements are a huge ball in the air if home values start dropping quickly. Flaherty has undoubtedly been presented the data, and should be investing in some adult diapers if prices start dropping.

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    Anonymous Says:

    @southseacompany: This is a great article. Below are some abstracts taken from the SF Chronicle:

    Canadian lenders are loosening standards, offering mortgages similar to U.S. subprime loans that pose an “emerging risk” to financial institutions, according to the country’s banking regulator.

    Banks and other lenders are becoming “increasingly liberal” with mortgages and home-equity credit lines that don’t require individuals to prove their income, according to 152 pages of documents obtained by Bloomberg News under freedom of information law from the Office of the Superintendent of Financial Institutions. The mortgages, typically granted to the self-employed and recent immigrants, “have some similarities to non-prime loans in the U.S. retail lending market,” the documents show.

    “It just speaks to the general easing in lending standards, which has contributed to a booming housing market,” said David Madani, an economist in Toronto with Capital Economics, which estimates that Canadian housing prices may fall 25 percent over the next few years. “The problem is sort of baked in now, so I’m not sure there’s a way to prevent a weakening of the housing market.”
    While there are differences with U.S. mortgage practices, the Canadian housing market is displaying classic signs of a bubble, with a run-up in prices, high ownership rates and overbuilding, said Madani of Capital Economics.
    Home-equity credit lines without income verification have become “an increasingly popular option,” OSFI says in the analysis, adding that they “pose greater risk” than mortgages because the credit lines are offered at floating interest rates.

    Slackening lending standards were one of the early warning signs of the subprime crisis in the U.S., said Joshua Rosner, managing director at research firm Graham Fisher & Co. in New York. “U.S. history should be a guide to the irrationality of that practice,” he said by phone, referring to granting mortgages to borrowers without verifying their income.
    OSFI officials assessed Canadian banks’ potential losses from defaults on home-equity lines of credit last year, the documents show. The results were blacked out under legal provisions that allow the government to withhold commercially sensitive information.

    Bank of Montreal, the country’s fourth-biggest lender, has “prudent credit criteria, and we regularly review our credit qualifications,” spokesman Paul Gammal said in an e-mail. Other banks declined to comment on their mortgage lending standards, referring questions to the Canadian Bankers Association, an industry group.
    Non-income-qualified mortgages aren’t necessarily riskier than conventional loans, said Jim Murphy, head of the Canadian Association of Accredited Mortgage Professionals, which represents mortgage brokers, lenders and insurers.

    “There’s no data out there that I’m aware of that says these sorts of mortgage products have a higher arrears rate or a higher default rate,” Murphy said by telephone.
    While CMHC validates the income of all borrowers whose mortgages it insures, the agency “may accept non-traditional means of income validation” from newly self-employed borrowers with an “acceptable” credit history, spokesman Charles Sauriol said by e-mail

    CMHC’s policies “help ensure that newcomers and others without a Canadian credit history have access to CMHC mortgage loan insurance products through the utilization of alternatives to validate a borrower’s credit history,” he added.

    We have a Canadian version of all the wrong doings that occured in the US and put their economy down. You want to profit from the bust? Short Canadian banks…

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    Larry's numbers for today:

    Vancouver East & West*

    New Listings – 87

    Back On Market Listings – 2

    Price Changes – 31

    Sold Listings – 44

    Vancouver All Areas*

    New Listings – 288

    Back On Market Listings – 5

    Price Changes – 93

    Sold Listings – 119

    *Attached & Detached – Date: 01/30/2012

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    New Listings 292

    Price Changes 95

    Sold Listings 123

    TI: 13380

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    Ahhhh. Back to business as usual, as I knew it would be. Early January numbers always have low/unpredictable sales and are basically meaningless.

    Thanks for the laugh again this year gents. See you next Jan for the same "Oh its crashing……doh" game again. Never gets old.

    Lather, rinse, repeat

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    Well, huh:

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    Ummmm, how the hell is a +170 listing day bullish???

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    @Conrad: Yo Conrad. Its different this time.

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    @VMD mobile: We'll see what happens. They may not make any more land, but will they make more money?

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    oneangryslav2 Says:

    @oneangryslav2: Well, according to this link, this was the situation as of 31 December 2005.

    At 31 December 2005, the value of the insurance policies in force was more than $273 billion

    So they've more than doubled the level of issuance in six years.

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    oneangryslav2 Says:

    @oneangryslav2: More searching turned this up:

    Year Insurance in Force (Billions)

    2005 273

    2006 291

    2007 345

    2008 407

    2009 472

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    Anonymous Says:

    @SunBlaster: …Now with CONservative government in majority, get ready for supersonic speeds in wealth transfer,..

    Yes, you're in luck: they will be pushing additional funding for crop circles and tinfoil hats.

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    re: mortgage debt will be listed on credit reports

    was following the conversations on the chinese forum. Most of the users (including house-pumpers) are seeing this change as quite negative to home price. Previously one can use the same set of credit report to obtain several mortgages. "You used to be able to marry the same girl to several husbands, now you can't, you have to get a divorce first."

    Can anyone confirm that credit checks didn't use to include mortgage holdings?

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    @VMD: Hmm something not working here…

    My recent credit report (end of 2011) had my mortgage listed by both Equifax and Transunion. The mortgage is now discharged, don't know if that makes a difference.

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    jumpin in Says:

    Great news: we are now in a balloon. They are harder to pop than bubbles, but they make a lot more noise!

    What an idiot! And Garth says she is trying to sell her 3 million $ house. What an unbiased "study"…

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    A comment on Larry's blog:

    "Sometimes when you want to believe something, you have a different outlook. I work with mortgages and for a several months it’s been very slow. Ive notice the slowdown since summer and didn’t believe we could see prices come down. I feel different now. This decade have paid us well in the real estate business, But it’s time to face the fact that this could end one day. It looks like this boom is over for now."

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    jumpin in Says:

    She sounds like she is 100 yr old… but obviously invested a lot of her money into cosmic surgery

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    At 123 sales, today saw the highest daily sales volume of the month. Here is last February in terms of daily sales and listings. If February shows similar trends to January — with listings up 20% YOY — we are in for some big days. But the market has disappointed before so don't get too excited; it just sets you up for failure. "Trust me on this."

    sales listings sell/newlist

    210 350 60%

    147 267 55%

    104 267 39%

    104 246 42%

    93 283 33%

    182 227 80%

    204 326 63%

    81 262 31%

    121 281 43%

    198 322 61%

    153 311 49%

    219 287 76%

    166 280 59%

    116 270 43%

    178 297 60%

    209 290 72%

    172 255 67%

    137 280 49%

    142 242 59%

    204 305 67%

    February 2011 month end data

    Average Sales 157

    Total Sales 3,140

    Average Listings 282

    Total Listings 5,648

    Average sell/list 56%

    Days in month 20

    Days elapsed 20

    % days elapsed 100%

    Expected sales 3,140

    Expected listings 5,648

    Max daily sales 219

    Min daily sales 81

    Max daily listings 350

    Min daily listings 227

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    Total days 21

    Days elapsed so far 20

    Weekends / holidays 10

    Days missing 0

    Days remaining 1

    7 Day Moving Average: Sales 98

    7 Day Moving Average: Listings 246


    Sales so far 1481

    Projection for rest of month (using 7day MA) 98

    Projected month end total 1579 +/- 22


    Listings so far 5484

    Projection for rest of month (using 7day MA) 246

    Projected month end total 5730 +/- 59

    Sell-list so far 27.0%

    Projected month-end sell-list 27.6%


    Inventory as of Jan 30, 2012 13380

    MoI at this sales pace 8.47

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    looking back: USA's classic "There is no bubble" talk – April 2007

    When the Census Bureau reported a statistically insignificant decline of 3.9% in new home sales for February, the stock market dropped, ignoring significant increases in both new home construction and existing home sales. Moreover, the monthly housing numbers are notoriously volatile during the winter, because the housing market is sensitive to the weather in much of the country, and has been since the days of New Amsterdam.

    But the markets and the press have reversed the old song: they now accentuate the negative, eliminating the positive.

    This panic started two months ago, when the two largest subprime lenders, HSBC and New Century Financial, announced that they were suffering large losses from unexpectedly high defaults by homeowners.

    …But subprime loans are a small share of the mortgage market. The latest figures from the Mortgage Bankers Association indicate that they account for about 14% of all home mortgages.

    …Many analysts foresee worse problems this time around because home prices were rising in 2001, and now, supposedly, the housing bubble has popped. It's certainly true that if prices are falling, more homeowners are likely to default on their mortgages. But, despite the common opinion, house prices are not falling. They are not rising at the double-digit annual rates of recent years, to be sure, but they are still rising nationally and in most markets.

    New York is a good example for all of this. In the first five years of the decade, house prices almost doubled, rising at over 15% a year. In 2006, the rate of increase slowed to 6%, still above the national average.

    …The overall economy is taking all this in stride. Employment in homebuilding is down about 25,000 workers from its peak last September, while over the same period total employment is up by 1 million, and the unemployment rate has remained around 4.5%, which is unusually low.

    Despite the headlines, the subprime mortgage market is not about to lead America into a recession; nor is the housing bubble. The sky is still up there, and it's still in one piece.

    Mr. Weicher is director of the Center for Housing and Financial Markets at the Hudson Institute

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    I just went through the 216 comments on this CBC article and only around 5 out of the 216 had something positive to say regarding real estate (or believed the story), the other 210 comments were either calling for a correction bigger than the article predicts or commenting on the inaccuracy of Sherry Cooper’s predictions over the years…..that’s gotta say something?

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    VMD mobile Says:

    Wonder what happens when cmhc exceeds its 600B cap…
    Also would be interesting to know if cmhc tracks its total exposure live or quarterly…

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    “Lather, rinse, repeat”

    …exactly what your mother told me while ridin’ the rod last night.

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    oneangryslav2 Says:

    Does anybody have a link that provides numbers for historical levels (in constant dollars) of mortgages insured by the CHMC? I’d like to chart that by house price to show to an especially obnoxious acquaintance.

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    oneangryslav2 Says:

    @oneangryslav2: That’s CMHC insurance in force as of the end of the calendar year.


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    What I found most interesting was the reason for the huge surge in CHMC volumes was the bank’s were taking it out even when there was a high down payment and paying the premiums themselves.

    This would of course allow the banks to make loans to anybody with no risk with the taxpayer on the hook.

    I am not sure this is what they had in mind when they made the program.

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    Do you mean recognizing dual citizenship or allowing dual citizenship?

    To clarify, I think they will try to put restrictions on dual citizens who do not reside in Canada. For example, your citizenship may expire if you live out of the country for a number of years, or there may be increased tax implications.

    I am interested in this as I am a dual citizen with the US and I was living there during the Lebanon evacuation so I remember the news stories on these issues at the time. There were grumbles cheapening the value of citizenship, etc.

    As it was at the time, all I had to do was file a statement of non-residency to avoid tax implications while living in the US. When I returned, I simply had to inform them I was back and now I again pay taxes as a Canadian.

    I am no fan of the Conservatives, but, despite my own self-interest, part of me agrees that this is not quite right. In an age of global mobility, perhaps citizenship should entail certain responsibilities.

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    Yeah you can believe whatever you want, but the truth is that there is still quite a big housing bubble. Vancouver is still listed as one of the most dangerous places to invest in real estate and I don´t see any chance of returning to the normal state without significant burst. Toronto is maybe doing a bit better, but to call it balloon instead of bubble isn´t really smart. Calgary and Alberta Real Estate Market are just slowing down after quite an increase in the last quarter of 2011, but their housing market is far from bubble. The prices are quite stable and the increases in home sales were steady last year.

    The debt level of Canadian households is one of the biggest and there are growing numbers of retiring people. This does´t make a good prospect for upcoming years, because we will probably see another home value increases, which are the key factor for starting the bubbles again.

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    patriotz patriotz Says:


    "To clarify, I think they will try to put restrictions on dual citizens who do not reside in Canada."

    You mean like Wayne Gretzky?

    NHLers aside, the Charter of Rights says that citizens have the right to enter or leave Canada at will. I don't think any attempt to limit citizens living abroad would be constitutional.

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