Wednesday, March 31, 2010

Canada Leads USA in Real Estate Recovery

Canadian home prices in January were up 7.5% from a year earlier, according to the Teranet-National Bank National Composite House Price Index (see top chart above), which was released today. January was the fourth consecutive month in which prices increased from a year earlier, after 10 consecutive months of 12-month deflation. The turnaround is due to nine straight monthly increases in the countrywide index (see bottom chart above) that followed eight straight monthly decreases. Compared to the previous peak in August 2008, home prices in Canada have increased by 1.6%, to set a new record high level in January.

To get an idea how home prices in Canada compare to the U.S. since 2001, the chart below tells the story. Home prices in both countries increased by about 80% since 2001, but peaked much earlier in the U.S. (early 2006) than in Canada (mid-2008), and U.S. home prices fell by much more from the peak (-30%) compared to the drop in Canada (-9%). Home prices have now completely recovered in Canada, whereas it might be many years before home prices in the U.S. return to the 2006 level.


At 4/01/2010 9:27 AM, Anonymous Anonymous said...

who cares? The canadian real estate market is the size of rhode island's

it is not an indicator in any way of what is happening in the US, which actually matters.

At 4/02/2010 2:19 PM, Anonymous Anonymous said...

and who cares about Rhode Island and the size of it's market?? BTW is R.I.'s market one tenth of the US market???? It would have to be to support that flippant comment.

What DOES matter is that Canada's home ownership rate was roughly the same as the US two years ago (and it's probably higher today I'd guess).

Canada did not experience a housing bubble/crash. Canada never implemented a goverment policy, with subsidies/incentives, to specifically increase home ownership as Bush did in 2003.

Mortgage interest is not tax deductible in Canada. (no incentive to use the house as an ATM and lower your tax bill)

If you have less than 20% down, you have to purchase mortgage insurance, administered by the goverment, and the premium is added to the principal.

With said insurance, banks can lend to low equity customers and are not tempted to sell said mortgages to other institutions/investors.

In case you default, "turning over the keys to the bank" is not the end of the story...banks can go after any other assets you might own.

So, while so many view Canada as a "socialist nanny state"...the US used tax policy and subsidies to artificially boost home ownership rates...and allows individuals to skip on their debts to the big bad banks. LOL. The banks go bust and the taxpayers have to pick up the tab. I guess that makes the US a "capitalist nanny state"...but it always has been...corn, sugar, just add banks to the list.

Remember the S&L debacle in the eighties???? Hey, but don't change nuttin'....and crash again in 2045. It's your call....

Have fun down there.

At 4/03/2010 2:16 AM, Anonymous House and land packages Point Cook victoria said...

Nice Blog..

At 4/06/2010 4:29 PM, Anonymous Anonymous said...

Don't disagree with anything you point out. The point is if this site is looking for bellweathers of US economic cycles, Canadian housing isn't relevant except to one small degree which is second home buyers crossing the border into AR and FL due to strong looney and wealth effect from Canadian housing market.


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