2010 Real Estate Forcast From BMO Nesbitt Burns

An Excerpt From A Research Report Written By Dr. Sherry Cooper of BMO Nesbitt Burns
This report affirms much of what I have heard and expect for the first half of this year in the real estate market

“There has been some debate about the possibility of a housing bubble in Canada while they are not convinced that a bubble exists, there is some sense that nationwide, existing home prices are high relative to income and rent after growing 8% on average in the past 8 years.  There was no mention of this issue in the recent Bank of Canada Monetary report.  Even if the housing market overheats, the Bank of Canada cannot do much; they must maintain their focus of keeping inflation in the 2% target range.  Given the overall economic backdrop of a weak job market, and a fragile economy in some sectors, raising rates would cause much havoc.  However, the finance department could use other measures besides rates to cool demand such as tightening mortgage insurance restrictions or raising the minimum downpayment or shortening amortizations.  While it is debatable whether a housing bubble exists, excessive credit and continued ease of access to credit through low rates could contribute to overheating.  Thankfully in Canada, our lending policies have been prudent and have kept the subprime market in Canada to a minimum, but going forward, “credit and house prices will definitely warrant close monitoring” so we don’t end up in the mess that the US and UK have, which we have fortunately been able to avoid so far.”

Dr. Sherry Cooper of BMO Nesbitt Burns

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