Economy 53,143 Posted December 27, 2015 Share Posted December 27, 2015 https://s3.amazonaws.com/policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2010/08/Canadas_Housing_Bubble.pdf http://www.nationalpost.com/m/wp/blog.html?b=news.nationalpost.com//news/canada/u-s-short-sellers-betting-on-canadian-housing-crash-an-accident-waiting-to-happens According to stress tests Canadas financial system may be totally insolvent if real estate crashes... The housing boom which began 16 years ago was due to end many years ago yet year after year the housing market has defied expectations. Mortgages with rates as low as 1.49% at times may have something to do with it. The result now is - General consumer debt at 164% of income (US peak was 134%) - Home prices as of 2015 now average 9X average incomes (7X in peak US bubble) - 1 in 6 existing mortgages are over 500% of ones annual income - people refinancing equity to shark-loan others for a downpayment. Not only is that unsustainable but also illegal Banks in order to grow earnings feel ever more pressure to lend and crazy low rates give people means to buy homes they normally could never afford. Loans for vacations, car loans etc are also breaking all time records In the mean time low Oil, Natural Gas and Precious metals prices are killing value of Canadas exports hurting economy putting into question how much strain the banking system can handle even with crazy low rates and high cash reserves. Worst case scenario should the banking system collapse, Canada being a $2 Trillion economy and worlds 7th largest trader could send negative shock waves into a global economy already threatened by weak China, Japan and Europe Link to post Share on other sites More sharing options...
Seeka 12,372 Posted December 27, 2015 Share Posted December 27, 2015 I almost never feel good reading your threads Economy. But I would like to thank you for reminding us all of the potential global financial apocalypse. Link to post Share on other sites More sharing options...
Solitaire 902 Posted December 27, 2015 Share Posted December 27, 2015 I honestly thought everything was on the up and up here in North America.. guess not - Previously Sycothisis Link to post Share on other sites More sharing options...
Nino 12 Posted December 27, 2015 Share Posted December 27, 2015 Canada needs to get her **** together and stop dragging us down Link to post Share on other sites More sharing options...
Economy 53,143 Posted December 27, 2015 Author Share Posted December 27, 2015 13 minutes ago, Seeka said: I almost never feel good reading your threads Economy. But I would like to thank you for reminding us all of the potential global financial apocalypse. I also post the good stuff u know :P Anyway dont misunderstand this. They arent predicting this is going to happen. They are saying the imbalances are large enough that it COULD happen if something triggers By measures of value, prices and debt, Canadas real-estate and consumer debt is in a far worse bubble than the US Housing bubble before 2008 on the otherhand our downpayment rules, bank cash reserve ratios etc are more sound so its hard to say if our condition is really worse It is possible rates will rise slowly, and an improving US economy will help the economy here as the bubble slowly deflates... Some economic imbalances correct gradually without a hard crash/collapse others dont. It depends in what circumstances the correction is triggered... So this MAY or MAY NOT happen. We will wait and see Link to post Share on other sites More sharing options...
Economy 53,143 Posted December 27, 2015 Author Share Posted December 27, 2015 10 minutes ago, Solitaire said: I honestly thought everything was on the up and up here in North America.. guess not In the US it is. And in Canada so far no crash. But a real big imbalance in real estate and consumer debt os a real threat tho Link to post Share on other sites More sharing options...
Solitaire 902 Posted December 27, 2015 Share Posted December 27, 2015 2 hours ago, Economy said: In the US it is. And in Canada so far no crash. But a real big imbalance in real estate and consumer debt os a real threat tho What could you guys do to deescalate the situation without a burst? - Previously Sycothisis Link to post Share on other sites More sharing options...
Lord Temptation 11,209 Posted December 27, 2015 Share Posted December 27, 2015 Australia is just as fragile as Canada. Our hyperdependency on real estate means the Big 4 Banks (which together control 95% of all mortgages) are extremely vulnerable to the slightest falls in property values. Which by the way is happening for the first time since 2011: house prices are finally falling. Interest rates are at an all time low so there appears to be no buffer. We call ourselves the lucky country but I think it's because we're all (mostly) so dumb. Twenty four years since we had a recession and counting.... Link to post Share on other sites More sharing options...
Economy 53,143 Posted December 27, 2015 Author Share Posted December 27, 2015 24 minutes ago, Solitaire said: What could you guys do to deescalate the situation without a burst? Our Government as well as CMHC (Canada Mortgage Housing Corporation) has understood the risks and taken some steps to reduce risks of a crash - downlayments must now be 20% without default insurance - with default insurance downpayments can be as low as 5% but theyve now put a limit on how many insured mortgages banks can lend - you now cannot refinance more than 80% of equity - maximum amortizations were lowered to 25 years - banks minimum cash reserve requirements were raised so basically in terms of lending practices, cash reserves, and whos getting the loans we have no issues. Were not giving away mortgages to people with bad credit and with no downlayment like the US did our issue is the the housing boom has gone on for far too long with no correction (most countries in 2008/2009 got a correction) and prices have gone up to totally unreasonable and unsustainable levels. The low rates after the recession helped over-extend the boom Theres not much else the Government can do especially since the economy cant handle higher rates right now we just have to hope the improving US economy will provide support, and that interest rates wont rise too quickly so that the Real Estate and Debt bubble can correct gradually without a huge crash It is possible. Not all bubbles burst. Some deflate with a gradual correction but it all depends on the circumstances Link to post Share on other sites More sharing options...
Hecturr 1,937 Posted December 27, 2015 Share Posted December 27, 2015 i love your threads slay me queen Link to post Share on other sites More sharing options...
Solitaire 902 Posted December 27, 2015 Share Posted December 27, 2015 2 hours ago, Economy said: Our Government as well as CMHC (Canada Mortgage Housing Corporation) has understood the risks and taken some steps to reduce risks of a crash - downlayments must now be 20% without default insurance - with default insurance downpayments can be as low as 5% but theyve now put a limit on how many insured mortgages banks can lend - you now cannot refinance more than 80% of equity - maximum amortizations were lowered to 25 years - banks minimum cash reserve requirements were raised so basically in terms of lending practices, cash reserves, and whos getting the loans we have no issues. Were not giving away mortgages to people with bad credit and with no downlayment like the US did our issue is the the housing boom has gone on for far too long with no correction (most countries in 2008/2009 got a correction) and prices have gone up to totally unreasonable and unsustainable levels. The low rates after the recession helped over-extend the boom Theres not much else the Government can do especially since the economy cant handle higher rates right now we just have to hope the improving US economy will provide support, and that interest rates wont rise too quickly so that the Real Estate abd Debt bubbke can correct gradually without a huge crash It is possible. Not all bubbles burst. Some deflate with a gradual correction but it all depends on the circumstances Hoping for both Canada's and the US' sake that things start to improve, I'm sure nasty economy issues in Canada would effect the US too since we're fairly interconnected. - Previously Sycothisis Link to post Share on other sites More sharing options...
Economy 53,143 Posted December 27, 2015 Author Share Posted December 27, 2015 4 minutes ago, Lord Temptation said: Australia is just as fragile as Canada. Our hyperdependency on real estate means the Big 4 Banks (which together control 95% of all mortgages) are extremely vulnerable to the slightest falls in property values. Which by the way is happening for the first time since 2011: house prices are finally falling. Interest rates are at an all time low so there appears to be no buffer. We call ourselves the lucky country but I think it's because we're all (mostly) so dumb. Twenty four years since we had a recession and counting.... Our banks have high cash reserves and our downlayment rules are pretty strict to avoid insolvency for banks or underwater mortgages for people so "a slight" fall for us is not an issue the problem is that with the size of the imbalance, if worst case scenario something triggered it to crash, it wouldnt be a little fall, it would be as much as 50% to 60% which even our regulated and highly capitalized banking system couldnt handle especially with such high consumer debt And i know a fair bit about Australias economy. You guys had a mining boom and you also trade a lot with Asia which for a long time was booming and it shielded you guys to an extend from the 2008 crisis and the great recession that followed But now the mining boom in australia is slowing and so is Asia so now you guys are stuck lowering rates to try to prop up the domestic economy and consumption to make up for sagging exports to Asia and your slowing mining boom Here in Canada were suffering from a bust in all comodities from mining, to natural gas to the biggest one, crude oil! Link to post Share on other sites More sharing options...
Economy 53,143 Posted December 27, 2015 Author Share Posted December 27, 2015 6 minutes ago, Solitaire said: Hoping for both Canada's and the US' sake that things start to improve, I'm sure nasty economy issues in Canada would effect the US too since we're fairly interconnected. Yeah. We are the US biggest trading partner. 20% of your exports come to Canada and our financial system is fully tied of course, the US can withstand Canada crashing better than Canada could withstand the US crashing cause America is so much bigger USA: $17 trillion GDP (#1 largest economy) Canada: $2 Trillion GDP (#10 largest economy) Link to post Share on other sites More sharing options...
Solitaire 902 Posted December 27, 2015 Share Posted December 27, 2015 2 hours ago, Economy said: Yeah. We are the US biggest trading partner. 20% of your exports come to Canada and our financial system is fully tied of course, the US can withstand Canada crashing better than Canada could withstand the US crashing cause America is so much bigger USA: $17 trillion GDP (#1 largest economy) Canada: $2 Trillion (#10 largest economy) Spoiler Sometimes I think about how interwoven the US and Canada are and wonder why we aren't just one big massive country by now lmao - Previously Sycothisis Link to post Share on other sites More sharing options...
Economy 53,143 Posted December 27, 2015 Author Share Posted December 27, 2015 13 minutes ago, Solitaire said: Hide contents Sometimes I think about how interwoven the US and Canada are and wonder why we aren't just one big massive country by now lmao Yeah. I know a couple from California that has visit places all around the world and they say most countries are unique... but then they hardly notice any difference between Canada and US cause we got all the same restaurant chains, same bad fast food habbits, same TV channels and even some of the same big radio station Chains but to answer your question, if in war of 1812 you succeeded at anexing Canada wed be one large Nation like Panem in hunger games and u guys could have won if u didnt fall for our desperate tricks because you had way more troops and theres no way we'd win the war Link to post Share on other sites More sharing options...
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