Why is everybody picking on the Canadian housing market lately?
US economist Paul Krugman was one of the latest to say that we’re at risk for a housing market collapse.
An economist at TD bank couldn’t let that stand though, and was there to defend our delicate reputation.
“Largely owing to a continued low interest rate environment, mortgage interest costs as a per cent of personal disposable income have fallen despite the sharp rise in the debt-to-income ratio,” she added in her report.
“Meanwhile, while mortgage delinquency rates in Canada and the U.S. were similar during the 1990s, the per cent of mortgages in arrears 90 days or more in Canada is about a third of what they were in the U.S. leading up to the 2008-2009 crisis.”
Ms. Petramala cited the “riskier lending practices” in the U.S. between 2002 and 2007, and the tighter restrictions now in place in Canada.
Of course the reason ‘tighter restrictions’ are in place now in Canada was because they had become rather loose. And as Patriotz points out, mortgages arrears are a trailing rather than leading indicator.
The TD spokesperson is ignoring the fact that the US housing bust started in 2006, when mortgage arrears were at historic lows, not in 2008. Mortgage arrears are a lagging indicator of falling prices.
Lots more “it’s different here” for your enjoyment.
Read the full article in the Globe and Mail.