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Canada fails to learn from its Southern neighbors

Housing market starts to mimic a bubble

Caution
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While Canada may be located directly north of the U.S., it is not close enough to learn from America’s housing mistakes.

 "We believe it is official that Canada’s housing market is frothy and in danger of a correction.  Home prices when viewed as an index have soared, surpassing the height of the US housing bubble," said Chris Muoio, senior associate and economist with Auction.com Research.

Home prices are continuing to outpace income rapidly, which can continue as long as home prices continue to appreciate also, Muoio explained.  

But once home prices cease to appreciate, it could potentially lead to a crisis similar to the one experienced in the U.S.

"The unwind probably will not be as devastating as the U.S. housing meltdown, as there is less leverage in the Canadian financial," Muoio said. "However, this market looks to be in danger that home prices have reached an unsustainable level and the Canada housing market is in danger of a reversal."

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