Transcripts of the US Federal Reserve policy meetings from 2006 were recently released which revealed just how “blind-sided” the Fed was despite all the warning signals.
Understandably, many have drawn comparisons to Canada’s housing market and how policy makers and pundits continue to laud its strength, forecasting even greater gains in the future. Is it reasonable to believe Canada might have a housing bubble on its hands?
Two markets in particular have been getting the most attention: Vancouver & Toronto. BMO concluded a brief research note released today by stating:
We are keeping a watchful eye on real estate developments in Toronto and Vancouver. Price appreciation has been slowing, which is a good thing. The general level of housing starts and permits has returned to historical norms for the country as a whole, which is also good. Although household debt in Canada is at record highs, it is not out of line for most households given the sharp decline in interest rates over the past three decades.
Nevertheless, mortgage rates have nowhere to go but up… eventually. Investment activity and foreign purchases in the condo market are not fully understood or predictable.
Corrections in housing do occur and they can occur suddenly, so while this is not a red alert, we are not flashing green, either. Further analysis is warranted and will be forthcoming.
To read the entire research note, click here