No trigger for a Canadian house price crash: CIBC economist

WHMIS

No trigger for a Canadian house price crash: CIBC economist

" I: e3 e: [. ^  N; H0 A9 [1 }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.

& m3 y5 |* M+ R! M$ e0 k2 B1 nIn a report issued Tuesday, Benjamin Tal asks: "Where's the trigger for a Canadian house price crash?" He concludes there isn't one.
9 L0 u- v' L3 S4 N) w4 @
) L* C+ c  p6 z1 p) y7 K: _"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."
( T0 V1 w4 A" h
0 ^. w3 Q% P  G; @/ l5 f/ M* UAs he sees it, Canadian home buyers never got as reckless as Americans.
, S3 S' U; w0 p
"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.

* p, R. b6 R8 n5 y# }"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."
$ m/ V, S" e2 h( k! y  z+ B
Subprime 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.
9 m( P# Q- ~# H7 A2 S
Tal says the U.S. meltdown is basically a subprime story.
5 h( K9 `2 Y, K5 p1 u- W
4 h" i! `% o% e! ~5 j"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."