Merrill Lynch economist, David Wolf, is bearish on Canada’s housing market according to the Globe. Here’s what concerns him:
Mortgage costs rose 9% from June ’07 to ’08
40-year amortizations and 100% financing are disappearing
The home prices to rent ratio is now 25% above average
The home prices to income ratio is 4:1 (it was 3.2:1 at Canada’s last housing peak in 1989)
Commodity prices are collapsing which could impair national income and housing demand
Wolf says his models indicate Canadian home prices are 9.2% overvalued. “It does look like Canadian houses finally got too expensive, and builders too aggressive, for the underlying demand environment,” he says.
Wolf feels Vancouver and Victoria are 35% overvalued while Regina and Saskatoon are nearly 50% overvalued
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