A recent economic analysis suggests Canada’s housing correction is headed for something a little rougher that the projected soft landing, but not a U.S. style crash.
The analysis is based on the premise that housing prices are declining. Relative to inflation that may be true, but in terms of raw numbers price drops are not showing up in the national housing figures. Only Vancouver, where a 2-storey home still costs more than $1 million, and Toronto’s condo market have witnessed any measurable decline.
However, there has been a definite cooling in the Canadian housing market. Sales are down and new listings are dropping. Canadians also appear to have decided that it is time to get their debt under control. That should inevitably lead to a decline in home prices. The analysis makes the case that the psychological impact of the perceived loss of wealth will stall consumer spending, to the detriment of the economy as a whole and the housing industry in particular.
