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Housing Won’t Bounce Back So Quickly This Time — Dunning

Housing-reboundHow many times have we heard analysts imply that home sales will bounce back from mortgage rule changes within two to three quarters? This has been a common assertion from people who downplay the consequences of the July 2012 mortgage rules. But one man says that it’s an argument not grounded in fact.

“I think economists have just totally misread what the numbers are saying to them,” housing analyst Will Dunning told CMT.

Dunning says the data suggests that sales dropped after the April 2010 and March 2011 mortgage rule changes mainly because rates increased. The tighter qualification rules were far less contributory.

Sales then improved after each instance, largely because mortgage rates decreased. Again, stricter lending rules were a small factor.

“I have a second piece of data that nobody else has, which is my mortgage database,” adds Dunning. “It tells me that the prior (policy) changes had a negligible impact on qualification…”

In a comment he made on the Globe and Mail website, Dunning said, “the policy change that took effect last July was not accompanied by major moves of interest rates” but it had “a huge impact on the number who could qualify.”

As a result, he says the 2012 change was “the first one that had a material effect on the housing market. That impact has now lasted for eight months and…will continue to be felt for some time.”

Dunning expects housing-related employment to take a dive, with as many as 190,000 jobs being lost through 2015. “Ottawa is getting more than they bargained for,” he adds, and the worst economic impact may be yet to come.

“Slower sales will translate into slower housing starts with the impact felt in the second half of this year. The reduction in housing starts will be much larger than anyone is expecting.”

Rob McLister, CMT