While the Bank of Canada is worrying about Canadian consumers taking on too much debt before the interest rates increase in June, CIBC says not to worry, and has given the Canadian housing market a passing grade. In a recent report on the housing market, CIBC said that the concerns of the Bank of Canada are completely exaggerated, but also said that the Bank of Canada was right to bring up those concerns.
CIBC said that the housing market of Canada is not going to suffer the same level of collapse as what the United States has gone through. CIBC stated that the housing market in the United States failed because of excesses in the mortgage market that were not supervised, while in Canada we are just having a period of low interest rates and increased sales. They say that the two are completely different and therefore, there is no worry about a housing bubble occurring in Canada.
Data was recently released by CIBC that showed the average Canadian household had an average of $71,360 in debt, which is only two percent more in debt since 2007 and housing costs only take up 20 percent of that load.
The Bank of Canada is arguing that the average selling price in places like Toronto and the rest of Canada is too high. They say that the $350,000 average selling price is seven percent higher than what it should be to maintain a proper level of sales in the market.
CIBC argued that rather than have the housing market collapse; it will simply reach a balance as housing starts increase. Currently in places like Toronto there are more buyers than there are homes for sale, which has increased the price of houses due to supply and demand. However, with more homes being built, there will be a balance and the housing market should stop rising so rapidly.
It is natural to be concerned about the housing market because so many people lost so much in the United States. However, it would seem that while the Bank of Canada says that dire times may be ahead, and CIBC says that the good times are here to stay, it can be hard to know who to believe. The best course of action is to not borrow too much and to simply ensure that you have the money to handle your debt load and mortgage.
Posted: 2009-12-29 09:27:36
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