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Wednesday, April 25, 2012

Canadian Housing Bubble?


Bank of Canada governor Mark Carney had some words of advice to heavily indebted households, telling them again Tuesday to use "prudence and caution" because borrowing costs can only go up.
Speaking to the House of Commons finance committee one week after the central bank held its key interest rate at one per cent, Carney said "mortgage rates are extremely attractive and that accounts for some of the move-up in (housing) valuation."
But he added consumers cannot rely on lending costs "staying there forever."
His remarks followed the release of two reports earlier Tuesday that suggested consumers are taking a more cautious approach to spending.
Statistics Canada said retail sales fell 0.2 per cent in February, while the Conference Board of Canada reported a significant drop in consumer confidence last month, following three consecutive monthly increases.
Carney said when it comes to household debt "the message is one of prudence and caution," adding the average home price in Canada is about 4.75 times people's income, while the historic average is closer to 3.5. Household debt to disposable income is running at about 152.9 per cent.
"Household spending is expected to remain high relative to GDP as households add to their debt burden, which remains the biggest domestic risk," he said.


Read more: http://www.calgaryherald.com/business/Carney+urges+caution+house+prices+outrun+income/6514439/story.html#ixzz1t50HLSSm

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