Sharp declines ahead for Canadian housing: economist David Madani
Amidst a rising chorus of “soft landing” predictions for Canada’s housing markets, one Canadian economist, David Madani is singing a different tune that may or may not be music to your ears.
Madani, in a report released this week titled, “Canada Economics Focus, house prices likely to fall for several years” says rising interest rates and near stagnant wage growth resulting from low inflation will cause housing affordability to deteriorate substantially in the years ahead taking values down an estimated twenty-five percent.
The report is an interesting read addressing some of the typical, “Can’t happen here because” arguments while taking a look at how such significant declines might effect the economy and Canada Mortgage and Housing Corporation.
Read it here.
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Norm Fisher
Royal LePage Saskatoon Real Estate
8 comments so far. We'd love to hear your thoughts.
February 9th, 2011 at 8:52 PM
No comments four days later. I think that’s commentary on how far we’ve come with the whole housing debate. A report like this used to spark heated exchange between anonymous monikers who’s handles, once familiar, have faded into obscurity. Have we reached saturation? I think the die is cast and we’re gonna find out in 2011. People seem resigned now – but maybe that’s just me. Maybe housing will stay strong. But it seems like housing in Regina is just way too expensive – that there’s far too much high-end housing fuelled by too cheap credit. People have loaded up on huge gobs of debt; and that’s gonna be a heavy load to carry going forward. Beware the bond market.
February 9th, 2011 at 10:20 PM
I think his right name is David Madani
February 9th, 2011 at 10:43 PM
Hossein,
Right you are. Thank you for pointing that out.
Guy in Regina,
Maybe it’s the fact that people have been predicted a collapse since 2007 and prices are still high. It must get hard putting the same arguments forward time after time only to be thwarted by some unexpected influence that keeps the markets up there. Even if one believes that a steep decline is in the cards, he might be more inclined to maintain his silence following years of failed predictions. Just a thought.
February 10th, 2011 at 6:21 PM
I have a tough time seeing housing prices falling 25% in Saskatchewan over the next three years. I started to write out all the good things this province has going for it from the ag industry to the mining and oil and gas industry, but I was taking up too much space for a simple comment section. I just see too many positives but maybe my optimistic nature is blinding to some unknown realty. I do realize the house price to income ratio is quite high compared to historical averages, but I would say that Saskatchewan is not experiencing average times, ie relativley low commodity prices. My main point would be as long as commodity prices stay in a healthy range (ag is a basic gaurantee for the next two years and thus potash) then I won’t be losing any sleep over the new $380k house I have being built. I just want to mention that Sask is also on the cusp of an oil boom up north. Somehow I feel politics will come to play in that development.
February 10th, 2011 at 7:03 PM
Saskatchewan is doing well, no doubt, and should be; we’ve got lots of resources!
But commodities are fickle – notorious for boom-bust. And, they’re a double edged sword since rising energy and food costs exert drag on households and the overall economy.
I also think that because Saskatchewan had underperformed for so long, that perhaps we’re also a bit more vulnerable to what has been called “irrational exuberance”? Certainly, the new Saskatchewan is proud! And I much prefer it to the old Saskatchewan. But we are not an island; and there is a great deal of financial rot around us. Interest rates have been extremely low and are going up. Young people in particular carry debt that would make their grandparents shrivel. Using credit doesn’t change the amount of consumption so much as the timing (inflation generally shrinking the principle). The good times now must be paid off later. The future is uncharted; but the past teaches caution. I think you’re right about it coming down to outlook; and I think Saskatchewan is relatively well placed; but certainly there are sustainability and structural concerns going forward.
What’s with the comment box scrolling up?
February 10th, 2011 at 7:05 PM
You’re bang on Norm.
February 10th, 2011 at 7:12 PM
What makes me think I’m wrong (and blows my mind!) is that Saskatoon and especially Regina real estate is friggin cheap compared to the national average!
Holy crap!
February 11th, 2011 at 6:41 AM
Guy_
I’m not able to see any unusual behaviour with the comments box. May I ask what browser you use?
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