{"id":11475,"date":"2019-01-25T10:10:09","date_gmt":"2019-01-25T18:10:09","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=11475"},"modified":"2019-01-18T11:08:11","modified_gmt":"2019-01-18T19:08:11","slug":"canada-wont-contribute-to-a-us-style-housing-crash","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2019\/01\/canada-wont-contribute-to-a-us-style-housing-crash\/","title":{"rendered":"Canada Won&#8217;t Contribute to A US-Style Housing Crash"},"content":{"rendered":"<p style=\"text-align: justify;\">By one measure, conditions in Canada are reminiscent of those present in the US right before a stateside housing bubble burst, yet a repeat performance to the north is unlikely.<\/p>\n<p style=\"text-align: justify;\">Oxford Economics notes that the Canadian rate of debt to disposable income reached a record 167 percent last year, meaning for each dollar of disposable income households in Canada had, they owed $1.67.<\/p>\n<p style=\"text-align: justify;\">In 2008 \u2014 ahead of the housing crash and financial crisis \u2014 the ratio was at 163 percent in the US.<\/p>\n<p style=\"text-align: justify;\">However, there are a number of reasons that similarity isn\u2019t likely a sign that Canadian households are stretched to the breaking point or US-style housing crash is imminent, Oxford Economics, a firm that specializes in economic forecasting and analysis, explains.<\/p>\n<p style=\"text-align: justify;\">In economies with a higher share of indebted households, a few factors stand in the way of consumers defaulting on loans en masse. \u201cIn any leveraged economy, the key factors preventing defaults and rapid deleveraging include solid income growth, low interest rates, free-flowing and high-quality credit, and solid balance sheets,\u201d writes Tony Stillo, Oxford Economics\u2019 director of Canada Economics, in a Research Briefing.<\/p>\n<p style=\"text-align: justify;\">\u201cIn that regard, there are some positive trends in Canada\u2019s household finances,\u201d Stillo continues, before homing in on three positive factors in a general climate of rising interest rates.<\/p>\n<p style=\"text-align: justify;\"><strong>Canadian household income growth expected to continue<\/strong><\/p>\n<p style=\"text-align: justify;\">It\u2019s not difficult to see why declining or stagnating incomes would be an issue for households dealing with rising debt levels.<\/p>\n<p style=\"text-align: justify;\">Fortunately for Canadian households, Oxford Economics projects personal disposable income in Canada will increase by 12 percent from 2018 to 2020. \u201cThis will help households manage payment increases with higher [interest] rates,\u201d Stillo says.<\/p>\n<p style=\"text-align: justify;\"><strong>Debt quality in Canada is not a major concern<\/strong><\/p>\n<p style=\"text-align: justify;\">Citing Bank of Canada numbers, Stillo suggests big banks are approving fewer mortgages for borrowers with high levels of debt. Another possible positive is mortgage stress testing introduced a year ago.<\/p>\n<p style=\"text-align: justify;\">The tests have now been expanded to force uninsured-mortgage applicants to approve for their loan at a higher rate than they are signing on for. This should be better prepared to handle higher borrowing costs in the future.<\/p>\n<p style=\"text-align: justify;\"><strong>Mortgage arrears are still low in Canada<\/strong><\/p>\n<p style=\"text-align: justify;\">The share of mortgages in arrears (that\u2019s at least three months of missed payments) in Canada sits at 0.24 percent, notes Oxford Economics. And in Ontario and BC, home to the country\u2019s priciest markets, the rates are much lower. According to the Canadian Bankers association, 0.09 percent of Ontario-originated mortgages were arrears, while the rate was 0.14 in BC.<\/p>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/www.livabl.com\/2019\/01\/3-reasons-high-household-debt-canada-housing-crash.html\">3 Reasons High Household Debt in Canada Won&#8217;t Contribute to A US-Style Housing Crash<\/a> by Josh Sherman | Livabl<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By one measure, conditions in Canada are reminiscent of those present in the US right before a stateside housing bubble burst, yet a repeat performance to the north is unlikely. &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2019\/01\/canada-wont-contribute-to-a-us-style-housing-crash\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-11475","post","type-post","status-publish","format-standard","hentry","category-market-updates"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Canada Won&#039;t Contribute to A US-Style Housing Crash &#8226; 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