No trigger for a Canadian house price crash: CIBC economist

WHMIS

No trigger for a Canadian house price crash: CIBC economist
6 ^+ Y% d& N; @8 w8 |
Canadian house prices may continue to slide but there is no sign of a crash, a CIBC World Markets economist says. (CBC)Canadians haven't put themselves deep enough in debt to cause a U.S.-style housing market bust, a CIBC World Markets economist says.
* ?7 {" d$ n9 m3 l
9 d  e' y4 f3 d0 B" T- M+ WIn a report issued Tuesday, Benjamin Tal asks: "Where's the trigger for a Canadian house price crash?" He concludes there isn't one.
* [- `7 G) S' d  d8 \
"To be sure, house prices in Canada will continue to ease in the coming months," he says. "But the triggers that led to a free fall in Canadian real estate markets in the early 1990s and today in U.S. markets are nowhere to be found."
% x& v1 p; ]3 d( R( i: c4 }4 J* |
8 u- Q) q' U2 T+ l& n' c" i2 LAs he sees it, Canadian home buyers never got as reckless as Americans.

+ g7 G* }( S# C6 T, l* ["By almost any measure, American households entered the current housing crisis from a more vulnerable position relative to their Canadian counterparts — carrying a heavier debt load and a much lighter net worth position. And when it comes to real estate speculation, Canada was not really a player.

+ c" Z+ o, x/ U7 c6 ~: ["But even more important than the absolute and relative level of debt is the distribution of debt. At the peak of the cycle, subprime and Alt-A mortgages accounted for no less than 33 per cent of originations in the U.S. market. In Canada we estimate that at the peak, non-conforming mortgages reached 5.4 per cent of originations."
8 C; `1 b6 X6 k6 M! f$ N
- O0 b. v9 L- K3 f" H9 gSubprime mortgages are those given to the least creditworthy borrowers. Alt-A mortgages are considered a step higher, although the category includes so-called liars' loans in which borrowers are not required to verify their earnings or assets.
- M4 j' H6 ?$ `* x( R5 C! D4 O
Tal says the U.S. meltdown is basically a subprime story.
5 n. a, F" z5 \: A$ C" x) q' U5 i& k
"Eradicate subprime from the U.S. housing market and, instead of the most severe house price meltdown since the great depression, you get a trivial moderate cyclical slowing — something along the line of what we are currently experiencing in Canada."