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Canada Housing Bubble May be About to Burst

Two and a half years ago, I said Canada was forming a housing bubble that would burst in spectacular U.S. style. Canadians paid no attention, and so the bubble has grown. Now Canadians are waking up to the bubble in their backyard. In this case, the bubble actually IS their backyard, and some Canadians are finally predicting its crash.


Crash of Canada housing bubble predicted here two years ago

In April of 2012, I wrote,

Canada’s housing in some cities like Vancouver is perched precariously higher than the U.S. was in 2007, and Canada’s banks are more leveraged than U.S. banks were. So, while the economic news for the U.S. housing market has bumped up a tiny bit for the first time since 2008, numerous other nations are on the brink of showing us how well they can do what the U.S. did first, but on a grander scale!


Bursting of the Canada housing bubble now predicted by Canadian investment advisor

Caldron, Caldron, boil and bubble, MacBeth predicts double trouble.  How appropriate that Canadian investment advisor Hilliard MacBeth is the leading voice predicting that Canada will face the drastic crash of its housing bubble. Prices in Canadian housing are now double what they should be based on historic trends, so must drop by half, says MacBeth. Furthermore, he says the drop could be double the drop that Canada saw in a real-estate triggered recession it experienced in the nineties.


 “The more that I researched it and the more I asked questions about it, the more convinced I became that we are in a significant bubble in Canada,” said Hilliard MacBeth to Canadian network CBC.


MacBeth says that Canada shows all the signs of a housing bubble — a long rapid rise in prices, people who feel they’ve forever missed their opportunity because of the height prices have reached (indicating a topping out of the bubble), intense media concern about whether or not there is a Canadian housing bubble, and an obsession ambien buy mail order with obtaining the asset in question … in this case an obsession with buying real estate over any other asset.

A soft landing, says MacBeth, is no landing at all because a true landing means Canada housing must find a realistic price, and a realistic price has to be based on the trend line that existed prior to the Canada housing bubble. That would be half of what Canadian houses are priced at now, which would mean a housing market crash equal to what the U.S. faced. As a double-check of that reality, one should compare housing prices in Canada to other economically strong nations. That check reveals that Canada currently has some of the most expensive real estate in the world.

MacBeth also predicts that such a landing will certainly take the United State’s northern neighbor into recession.


Canadian leaders still deny Canada housing bubble

Economic denial, of course, still remains supreme with Canada’s Prime Minister, Stephen Harper, stating there is no housing bubble in Canada. And, while the CEO of Bank of Canada admits there is a Canada housing bubble, he also predicts it will have a soft landing. It’s the same old belief that real estate will rise faster than inflation forever and that “those troubles” are for other people, not us.

Of course, here at The Great Recession Blog, reality is everything in realty as in all assets, and real prices are, as MacBeth says, prices that would have been attained had the trend continued as it did prior to all the bubble speculation. In other words, a realistic price is the price today minus the inflation created by speculation.

The Canada housing bubble is one of many forces that I said back in April of 2012 would aggregate to make the second dip of the Great Recession worse than the first.


Hilliard MacBeth’s book about the bursting of the Canada housing bubble:

[amazon_link id=”1459729803″ target=”_blank” ]When the Bubble Bursts: Surviving the Canadian Real Estate Crash[/amazon_link]

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