No trigger for a Canadian house price crash: CIBC economist

WHMIS

No trigger for a Canadian house price crash: CIBC economist
0 p' L5 p5 E8 q2 \) p4 l
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.
  L4 V: M6 ^4 T; x$ o2 K  B/ Z
- B# r2 L. p' f9 MIn a report issued Tuesday, Benjamin Tal asks: "Where's the trigger for a Canadian house price crash?" He concludes there isn't one.
# f2 @& ~; f; e9 [$ E' [$ d+ x  V
% ]( _- u( J& ]" E& U  d"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."

( O8 s% N$ B4 l8 q$ x2 [. HAs he sees it, Canadian home buyers never got as reckless as Americans.

5 v) n! g" E" m! z1 z! n: {& V6 Q"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.
8 p( k$ k$ k0 V- 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."

3 w; \; W0 A: _& K* |' nSubprime 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.

+ u, x* L! ~  O4 {9 U" W, s9 n2 dTal says the U.S. meltdown is basically a subprime story.

2 _1 A- u" z: v1 m, \$ Y"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."