Yesterday, I wrote about the possibility of a Canadian mortgage crisis akin to the American mortgage crisis. It would have been less controversial to side with the CBC decision to cancel its renewal of "Hockey Night In Canada" theme song. To my brothers and sisters in The Great North: It was a warning, not a criticism.
I'm not alone in my warning. Here are some articles offering caution:
The Canada Mortgage and Housing Corporation (CMHC) warns of slowed housing starts:
"Strong economic fundamentals such as continuing high employment levels, rising incomes and low mortgage rates will provide a solid foundation for healthy housing markets this year," said Bob Dugan, Chief Economist for CMHC. "Most of the pent-up demand that built up during the 1990s has now been fulfilled and residential construction activity will gradually move in line with Canadian demographic fundamentals. These factors will continue to exert downward pressure on housing starts, which will decline to 199,900 units in 2009."
Michael Shapcott at the Wellesley Institute notes the housing affordability problem in Canada:
The housing affordability gap the difference between actual incomes and the incomes required to afford a private rental unit is growing. And, as the affordability gap grows, renter households have less money to pay for other necessities such as energy, food, medicine, transportation and clothing.
Mark Argentino from the Mississauga Real Estate Blog, reported that the CMHC expects demand for housing to put downward pressure on prices.
Garth Turner documents the decreased housing resale volume and excessive leverage carried by Canadian homeowners on Greater Fool.
HouseHuntVictoria pleads with the CMHC to boost reserves for impending foreclosures:
One fact remains undeniable: never before has the Canadian taxpayer been more exposed to private lending practices than it is today. And as the real estate market winds down and inevitably contracts from its unprecedented expansion, Canadian taxpayers may well end up "insuring" the bad lending practices of banks, private mortgage lenders, the speculative buying activities of would-be real estate investors and the poor insurance decisions of CMHC who agreed to back them.
Does any of this sound like America in 2005? This is a warning Canadian investors not a prophecy. If you're heavily invested in Canadian real estate, it may make sense to diversify and take advantage of the currency disparity by investing in an already decreased asset.