How Canada avoided housing 'bubble and crash'

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Niccolo and Donkey
How Canada avoided housing 'bubble and crash'

The Globe and Mail

Steve Ladurantaye

December 9, 2010

The Canadian housing market has managed a rare feat, TD Bank says, avoiding both a “bubble and a crash” over the last three years as the sector gyrated wildly.

In a report from its economics department Thursday, the bank said that the Canadian housing market has pulled off a soft landing and likely hit bottom in July. And having pulled off that rarest of feats, the bank now expects “modest price softness for the next year.”
“A more modest reaction on the supply (listings) side of the market and an improving economy will provide some partial offset to higher borrowing rates,” the report stated. “Markets should remain fairly balanced, limiting the extent to which home prices will move. After turning in another solid gain this year, we predict a bout of modest price softness over the next two years.”

While sales have picked up since July’s trough, the bank said that likely will only last until the middle of next year, when interest rates begin to move higher.

“As sales flatten out and start to slow over the course of 2011, and with listings expected to stay contained, we expect prices to find a near-term ceiling over the next few quarters,” the report stated. “Subsequently, a softer market balance will likely result in a modest price drop of 3-5 per cent (peak-to-trough) in late 2011 and early 2012 before prices stabilize later in the year.”

The report also looked at how close the market came to crashing, and whether people were right to be concerned:

Niccolo and Donkey
Signs point to a severe housing correction in Canada

Hahaha... that's not the case, you Vancouverite. The "emergency" interest rates, and 100% gov't backed mortgages and lax lending standards and home renovation tax credits, all of which are about to end is what's going to further annihilate the housing market here. The indicators here are worse than they were at the peak of the US bubble, but for some reason (no reason has been hashed out to me) the burst of Canadian housing won't be as bad as the one in the US. To me, all indicators tell me that it will be worse.