Canada's Housing Bubble

Feb 23, 2010 Ethan Rabidoux rabidoux.tumblr.com

The Deadbeat Generation’s Judgement Cometh Right Soon…

The Canadian Association of Bankers provides monthly updates on mortgages in arrears in Canada. This is only one section of the report but it’s an important part.

You’ll notice Canadian Mortgages in arrears have grown steadily for 31 consecutive months.

Remember, this is happening while interest rates are at unprecedented lows and debt has exploded. What’s going to happen when interest rates rise? The number of mortgages in arrears and foreclosed homes will increase right along side it.

This contraction of credit will have a domino effect through the economy.

If someone tells you, “it’s less than one percent, the impact will be contained,” you can safely assume that person either doesn’t have the first damn clue of what they’re talking about … OR … they have a vested interest in you continuing to take on debt and spend money you don’t have.

David Rosenberg shares his two cents worth;

CANADIAN CONSUMER LESS ROBUST THAN MEETS THE EYE

All of a sudden, the Canadian economic data are coming a tad below expectations, including the 0.4% MoM advance in December retail sales, which just came up short from recouping the 0.5% decline the month before (revised from down 0.3%). Excluding autos, sales are running at a 2.1 % annual rate over the past three months, which can only be described as tepid in view of all the rampant monetary and fiscal stimulus percolating through the system.

Not only that, but the supply response in the Canadian housing market is beginning to, at the margin, alter the inventory balance. The number of new listings surged 4.0% in January and has risen sharply now in three of the past four months. After outpacing new listings over 90% of the time between January and October of 2009, sales has now lagged in each of the past two months and this has taken the sales-to-listing ratio down to 0.614x from 0.634x in December and the nearby October high of 0.683x (and now stands at its lowest level in eight months). Pricing is sure to follow suit. Better buying opportunities lie ahead for the fence-sitters, in our view.

If you’re a little confused by what Rosenberg just said, simply remember the words of Porky Pig: “Bedep, bedep, bedep … that’s all folks.”

This real estate gravy train is about to be derailed. Wait and see.