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Cooling housing market exposed to crash

Prices, demand drop after record growth

 

Alia McMullen, Financial Post; Canwest News Service Published: Friday, August 08, 2008

 

Edmonton's housing market is estimated to be more than 10 per cent overvalued.Ed Kaiser, The Journal, FileEdmonton's housing market is estimated to be more than 10 per cent overvalued.

 

TORONTO - A big decline in commodity prices could spell disaster for Canada's housing market, which already appears to have entered a "sustained downturn," David Wolf, an economist at Merrill Lynch Canada, warned on Thursday.

 

He said while the risk of a housing market crash was small, an "outright bust" in commodity prices would make the scenario "a rather more serious threat."

 

The recent trickle of data has shown a significant slowdown in the country's housing market, following its record pace of growth. Demand has eased, supply continues to creep up, credit conditions remain tight, and house-price growth has turned flat, with declines in some regions.

 

The value of building permits in June fell a seasonally adjusted 5.3 per cent from the previous month, indicating that construction activity in the coming months would likely be lower, Statistics Canada figures showed Thursday. The data is notoriously volatile, but the trend rate of growth for residential building has declined since the beginning of the year.

 

"Canada's housing market is entering a sustained downturn, in our view," Wolf said. "It does look like Canadian houses finally got too expensive, and builders too aggressive, for the underlying demand environment."

 

He estimated that markets with the strongest price growth in recent years, such as Regina, Saskatoon, Vancouver, Victoria, Calgary, Edmonton, Sudbury, and Montreal, were all more than 10 per cent overvalued. On a national basis, Wolf predicts house price growth to remain flat.

 

Merrill Lynch expects commodity prices to moderate over the medium term, a scenario that would aid in the housing market downturn but not cause an outright bust.

 

Others, such as CIBC, have a more bullish forecast for commodities, namely oil, expecting prices to continue to rise. This would continue to support Canada's terms of trade by bringing in higher export revenue relative to the amount spent on imports.

 

But Wolf said the risk of a housing crash would become "a serious threat" if the recent correction in commodities continued because it could cause the terms of trade to deteriorate.

 

The price of light crude has fallen about 18 per cent since peaking at a record high of $147.27 US a barrel on July 11 continued. Light crude for September delivery settled at $120.02 US a barrel in New York on Thursday.

 

"The takeoff in commodity prices since 2002 has driven an enormous improvement in Canada's terms of trade, accounting for much of the strong growth in Canadian national income that has, in turn, provided the fundamental underpinning for the housing market boom," Wolf said.

 

A Bank of Canada working paper by senior analyst Hajime Tomura released earlier this year argued that a decline in the terms of trade would likely cause house prices to fall. It said that "if households are uncertain about the duration of an improvement in the terms of trade, then house prices will abruptly drop when the terms of trade stop improving."

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10% c'est un gros rien, c'est pas un problème comme les 30-40% chez nos amis américains.

 

10% c'est environ la portion négociable quand t'achètes une maison. Les gens montent un peu leur prix dans l'espoir d'avoir le prix qu'ils recherchaient.

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l'Alberta aurait besoin de perdre au moin 50% une province de farmer fabricant d"oil aussi riche sa pas d'allure ils ne sont meme pas 4 000 000 de population et les siege social qui demenage la bas en sachant tres bien qu'ils n'ont pas la meme d'oeuvre qualifier necessaire selon moi l'Alberta va avoir un gros crash bientot et meme maintenant les gens fuient l'Alberta c'est trop chere si les prix des loyer et des maison baisse de 50% en alberta je demenage demain et travail pour Mcdo a 15$/H

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l'Alberta aurait besoin de perdre au moin 50% une province de farmer fabricant d"oil aussi riche sa pas d'allure ils ne sont meme pas 4 000 000 de population et les siege social qui demenage la bas en sachant tres bien qu'ils n'ont pas la meme d'oeuvre qualifier necessaire selon moi l'Alberta va avoir un gros crash bientot et meme maintenant les gens fuient l'Alberta c'est trop chere si les prix des loyer et des maison baisse de 50% en alberta je demenage demain et travail pour Mcdo a 15$/H

 

vraiment brillant !

 

Les albertains sont des gros farmers que tu sembles haïr mais si demain tu en as les moyens tu vas être le premier à y aller.

 

C'est vraiment à l'image de toutes les sottises que tu nous sors.

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si j'ai utiliser le terme de Farmer c'etait simplement un facon de montrer que l'Alberta est sur evaluer donc respecte moi car moi je te respecte

 

moi je ne juge pas les opignons des autres chacun a le droit a ces opignon que tu soit d'accord ou non

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si j'ai utiliser le terme de Farmer c'etait simplement un facon de montrer que l'Alberta est sur evaluer donc respecte moi car moi je te respecte

 

moi je ne juge pas les opignons des autres chacun a le droit a ces opignon que tu soit d'accord ou non

 

wtf! You really don't know how to spell! You are killing the french language! :silly:

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si j'ai utiliser le terme de Farmer c'etait simplement un facon de montrer que l'Alberta est sur evaluer donc respecte moi car moi je te respecte

 

moi je ne juge pas les opignons des autres chacun a le droit a ces opignon que tu soit d'accord ou non

 

Petite question comme ça. Si je dis que je suis pas d'accord que chacun à droit à son opinion, tu respectes ça? J'veux dire, ça reste mon opinion personnel.

 

Et puis je comprend pas ton raisonnement d'utiliser farmer parce que l'Alberta est surévaluée. Qui est-ce qui surévalue l'Alberta ici?

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Petite question comme ça. Si je dis que je suis pas d'accord que chacun à droit à son opinion, tu respecte ça? J'veux dire, ça reste mon opinion personnel.

 

Et puis je comprend pas ton raisonnement d'utiliser farmer parce que l'Alberta est surévaluée. Qui est-ce qui surévalue l'Alberta ici?

 

je ne dit pas que les gens sur le forum surevalue l'Alberta mais je parle du fait des prix des maisons et des salaires est surevalue

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