No trigger for a Canadian house price crash: CIBC economist

WHMIS

No trigger for a Canadian house price crash: CIBC economist

3 d3 D6 ~1 T: C4 u% }3 rCanadian 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.
5 n: _; l) E  u
In a report issued Tuesday, Benjamin Tal asks: "Where's the trigger for a Canadian house price crash?" He concludes there isn't one.
' [" R# _5 {" E6 {8 P+ K4 G
"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."
$ p& a1 Q5 y2 a5 G2 S; s
4 S8 \: K: ~/ ?  K* |1 M+ C" }: m7 DAs he sees it, Canadian home buyers never got as reckless as Americans.

. p3 l1 O: b- x6 F$ g1 X"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.
5 h, O3 C$ J  ^9 D4 h5 U
' y0 C5 c4 j  J$ `2 E8 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."
% B' H  M; W' M& K0 N. ~; f
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.

3 m" i6 }3 g8 e& ?Tal says the U.S. meltdown is basically a subprime story.

0 ?/ j4 L; r$ 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."