5 reasons why the housing market won’t crash

Canadian Business has published a counterpoint to their article about why the Canadian housing market is about to crash. Anyone have some comments/rebuttal for the 5 issues he cites? Note he makes an exception for Vancouver in reason No. 2.

Summary of the reasons:

1. Interest rates will be low unless the economy is growing in which case there will be lots of jobs.

2. Real estate is local, Vancouver might be overpriced, but New Brunswick isn’t

3. Predictions of a bust are simply based on seeing the US market bust and has nothing to do with reality

4. Lenders have recourse to go after people in Canada and there’s less subprime

5. Price-to-rent and price-to-income ratios don’t indicate a turning point.

Here’s the full article.

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I agree with the author that all real estate prices are local. Calgary and Alberta Real Estate Market in 2011 shows that there was a steady increase with controlled selling and buying in other parts of the country. Toronto is not far from becoming what Vancouver already is. I hope that people will pay more attention and listen to people like Garth Turner before they buy any real estate property.


@fixie guy:

"What’s especially egregious is the proclaimed party of free market capitalism is using the socialist technique of underwriting financial industry risk using individual taxpayer money"

CORPORATIST technique. The socialist technique would be to nationalise the financial industry. Socialise profits, socialise risk.

Free enterprise is of course privatise profits, privatise risk.

fixie guy

It doesn't matter which party does it, only the seated government has the power to manipulate the market (only temporarily and always temporarily) by distorting traditional lending requirements. They all share some blame, it just happens the Cons currently hold the bag and did the most damage. What's especially egregious is the proclaimed party of free market capitalism is using the socialist technique of underwriting financial industry risk using individual taxpayer money. Not only do we not get any of the benefits of a true free market, we get to pay for the down side. World historical hypocrites.



Governments which introduce or continue policies which inflate RE prices are responsible for any overvaluation that happens during their tenure.

You cannot blame the Liberals for the impact post-2006 of policies that they introduced and which the Cons continued. They were not written into the Constitution. When the Cons made financing even easier that was an explicit endorsement of the previous loosening. They could have gone the other direction without even passing any legislation.

You can certainly blame the Liberals for any overvaluation 1993-2005 (only Vancouver was clearly in bubble territory that period), just as you can blame Mulroney's PC's for 1984-1993 (the Toronto bubble of the late 1980's). And so on.

"The buck stops here".


@DEFAULT NAME: "So 40 year mortgages with 20% down = bubble? Doubt it" The biggest issue is zero down payment. When people don't have to save anything to buy a house and the government insures almost all of the risk then conditions are ripe for a bubble. Note that zero-down continues today because any bank will lend you the 5% "down payment" for the CMHC. In 2006, I'm not sure if you are aware of this, but the CMHC was the "real estate speculation underwriting agency". If you wanted to invest in property, you could put nothing down and deduct the entire rent from the mortgage payment to determine your debt service ratio. I'm not kidding. This allowed practically infinite leverage with all risk insured by the government. The change occurred after the conservatives were elected, and it persisted for… Read more »

HAM Solo


Pretty thoughtful 12 page report outlining the complete and utter unsustainability of the great China bubble. Cole's notes version = massive leverage -> attempt at government control -> emergence of shadow banking system to keep real estate/infrastructure bubble afloat -> final crushing collapse under its own weight now in progress.

Required reading for anyone hoping to be taken out of real estate hock by well heeled HAM types.

Patiently Waiting

Looks like some bitter realtard is voting everything down 🙂


@patriotz: ….As the master himself put it:


TItle of the book: All Real Estate Is Local: What You Need to Know to Profit in Real Estate – in a Buyer's and a Seller's Market

Skip the book! I'll tell you what you need to know: buy low, sell high. If you follow that rule (nobody else in Vancouver has) you'll be fine.

Wishful Leverage

Canadians. We're so far behind we think we're first! There is only so much Carney can do to shield bad real estate trades from price discovery. Taking comfort in hiding behind central bank smoothing could go very wrong if inflation targets are lowered to match public sentiment on fairness to other asset classes, savers, renters etc. Eventually the government will feel pressure from the money confiscated from Peter to subsidize Paul's delusional spending spree on double and triple priced homes. Let's be clear. Anybody buying today is paying double the value of shelter even in New Brunswick. This is a dislocation in the economy that will be corrected. Hence the term "correction". It is height of humor to hear comments to the effect that correction is bad or impossible or even undesirable. The price is incorrect! Creating more loans isn't… Read more »


@frank: Who was in power in 2003?

From the CMHC website Q and A:

7. I heard that there is an upper limit to the price of a house I can buy with a small down payment?

Not any more. As of September 2003, CMHC removed its price ceiling limitations. For the purposes of qualifying for CMHC Mortgage Loan Insurance, CMHC does not have a limit on the purchase price of a property.,



@frank: "If you dont think doubling the CMHC capacity to underwrite mortgages is a big deal, then you need a math lesson."

You need a history lesson. The Liberals took the ceiling off the CMHC insurance so people could take out million $ mortgages with insurance.


@rp1: "You’re correct about starting the bubble, as for less impact…"

So 40 year mortgages with 20% down = bubble? Doubt it. The Cons changes were window dressing. Maybe it doesn't go as fast and as far, bit no way it stops in 2006 after what the Liberals put in place.

The Cons have nearly reversed everything they did and the bubble is still inflated. Change the things back to the Liberal era with 20% down and put a cap on CMHC insurance and the bubble would be deflated in 12 to 18 months.


February 2012 data Average Sales 112 Total Sales 782 Average Listings 275 Total Listings 1927 Average sell/list 41% Days in month 21 Days elapsed 7 % days elapsed 33% Expected sales 2,346 Expected listings 5,781 Max daily sales 155 Min daily sales 38* Max daily listings 325 Min daily listings 249 February 2011 data at same point in month Average Sales 149 Total Sales 1044 Average Listings 281 Total Listings 1966 Average sell/list 53% Days in month 20 Days elapsed 7 % days elapsed 35% Expected sales 2,983 Expected listings 5,617 Max daily sales 210 Min daily sales 93 Max daily listings 350 Min daily listings 227 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… Read more »


@DEFAULT NAME: " Those changes started the bubble and it was well underway by the time the Cons made any changes which I would argue had much less impact."

You're correct about starting the bubble, as for less impact…

Go to:

Click on Calgary, Edmonton, Victoria, or Vancouver, and note the rate of increase in 2006-2007. The conservatives were elected in January of 2006, and government-backed zero down mortgages were introduced that spring. 40 year amortizations where added that fall.



If you dont think doubling the CMHC capacity to underwrite mortgages is a big deal, then you need a math lesson.


@fixie guy: "Flaherty and the Cons didn’t expect Canadians to take advantage of the greatly eased access to lenders their policies inentionally created?"

Actually it was the Liberals who got rid of the 20% down payment rule and took off the cap on CMHC insurance. Those changes started the bubble and it was well underway by the time the Cons made any changes which I would argue had much less impact.

fixie guy

51 patriotz Says: "The problem does not really lie with Flaherty and the Cons, but with John Q. Greedbag Homeowner."

Flaherty and the Cons didn't expect Canadians to take advantage of the greatly eased access to lenders their policies inentionally created? Wonder why they did it then. Or is everyone who bought over the last half decade a 'greedbag'?

Some may accuse those crushing the theatre door for acting in a predicatable human manner, most still blame the one yelling 'fire'.


You guys (and gals) are awesome. I just got back from a California road trip and couldn't stop myself from checking the site several times while we were away. Gotta keep an eye on the insanity, dontcha know. Stayed several nights near the Monterey Peninsula, and several more in Palm Springs. In Monterey, you can buy a wonderful home, overlooking the hyper-dramatic coastline and just a couple minutes from Pebble Beach, for less than $2 mil. It was my first time there, but it BPOEs the BPOE to death. There's this sweet litle area they call 17 Mile Drive. It essentially hugs the golf courses (PB, Spanish Bay, etc), and it's as pish-posh as they come. The coast there is stunning. Massive waves crashing against the shore, huge rock outcropppings mixed with pure sand beaches, one of the world's preeminient… Read more »

Navin R. Johnson

I freaking love it! Sink you biatch! Sink you biatch!!


"…41% sale/list is very weak for February."

That's because it's over. Finally.

It had to happen,and everyone knows it.


@paulb.: 41% sale/list is very weak for February.


2 days, sorry forgot. Skiing at BigWhite

New Listings 516

Price Changes 138

Sold Listings 214

TI:14013 Party on!



Wow you know your classic Detroit.

FMC put out a lot of Ford/Mercury twins like the Maverick/Bobcat. In the same equine/feline menagerie were the Mustang/Cougar. Remember the twitching tail lights?



It's local, but it spreads from area to area like the cold virus