No trigger for a Canadian house price crash: CIBC economist

WHMIS

No trigger for a Canadian house price crash: CIBC economist
+ l  `/ W4 m1 p& h/ O
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.

; r7 k' t- G5 J( [% Z. D5 \+ y  pIn a report issued Tuesday, Benjamin Tal asks: "Where's the trigger for a Canadian house price crash?" He concludes there isn't one.
0 v. Y  F4 A" z6 A" T  n5 {
"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."
8 p, _/ f( N) q
! {# G9 M/ F7 m6 Z" j  n' yAs he sees it, Canadian home buyers never got as reckless as Americans.

"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.
; f) _) {6 Q! e3 e( m
! b2 V4 b6 O3 ~$ r"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."

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.

2 \+ W3 q; h6 |/ l4 d& N5 G/ L( }6 A1 UTal says the U.S. meltdown is basically a subprime story.
. V( E; ~9 K' Y, Q1 U7 z! m0 W
( ^$ i3 g) k, r4 f8 ?"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."