Canada's housing market is showing two of the three "bubble" characteristics and Canadians should prepare for the possible impact of a housing crisis, the investment firm Edward Jones, said in a report Tuesday.
"Despite recent economic strength, housing prices have exceeded the overall economy, including the evolution of unemployment and gross domestic product growth," the report prepared by analysts Kate Warne and Fehr said Craig.
"As a result, our position on the risk of housing market in Canada is becoming increasingly cautious."
The three conditions of the bubble is, according to the report, overvalued housing prices, readily available credit and lax regulation. The first two already exist and the government has taken measures to prevent the third condition, the report said.
The average selling price of a home rose 19.3% in 2009 to $ 337,410, according to the Canadian Real Estate Association. The average home price is five times the average after-tax income, compared to the long time average of 3.7 times, Edward Jones, said.
Meanwhile, mortgage rates fell to record lows again. This poses a risk to consumer spending and a greater number of variables and try to short-term mortgage-holders with rates rising in the coming months, he said.
A 3% increase in mortgage rates (on a $ 87 billion pool of short-term mortgages originated between 2007 and 2009) the mortgage payments for these borrowers could jump by an average of $ 444 per month for a mortgage of 254,514 dollars.
Fewer dollars in the pockets of consumers could cut discretionary GDP, Edward Jones, said.
But several changes have the potential to affect demand, avoiding a housing crisis, Edward Jones, said.
It includes new stricter credit standards, rising interest rates and mortgage costs, a rise in new supply, consumer deleveraging and harmonized sales tax in BC and Ontario.
"We believe there are fundamental factors that suggest a weakening in the housing market rather than an accident of the magnitude experienced in the U.S."
Bank of Canada Governor Mark Carney said at a Finance Committee House of Commons on Tuesday it expects red-hot Canadian housing market to cool down this quarter and will continue in the coming years.
"Despite recent economic strength, housing prices have exceeded the overall economy, including the evolution of unemployment and gross domestic product growth," the report prepared by analysts Kate Warne and Fehr said Craig.
"As a result, our position on the risk of housing market in Canada is becoming increasingly cautious."
The three conditions of the bubble is, according to the report, overvalued housing prices, readily available credit and lax regulation. The first two already exist and the government has taken measures to prevent the third condition, the report said.
The average selling price of a home rose 19.3% in 2009 to $ 337,410, according to the Canadian Real Estate Association. The average home price is five times the average after-tax income, compared to the long time average of 3.7 times, Edward Jones, said.
Meanwhile, mortgage rates fell to record lows again. This poses a risk to consumer spending and a greater number of variables and try to short-term mortgage-holders with rates rising in the coming months, he said.
A 3% increase in mortgage rates (on a $ 87 billion pool of short-term mortgages originated between 2007 and 2009) the mortgage payments for these borrowers could jump by an average of $ 444 per month for a mortgage of 254,514 dollars.
Fewer dollars in the pockets of consumers could cut discretionary GDP, Edward Jones, said.
But several changes have the potential to affect demand, avoiding a housing crisis, Edward Jones, said.
It includes new stricter credit standards, rising interest rates and mortgage costs, a rise in new supply, consumer deleveraging and harmonized sales tax in BC and Ontario.
"We believe there are fundamental factors that suggest a weakening in the housing market rather than an accident of the magnitude experienced in the U.S."
Bank of Canada Governor Mark Carney said at a Finance Committee House of Commons on Tuesday it expects red-hot Canadian housing market to cool down this quarter and will continue in the coming years.
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