It’s just a short-term correction, not a crash, says Pimco of the Canadian housing activity in 2014. More importantly, this movement may be a learning curve that is needed to get the Canadian economy back on steady track.
The correction will come because of a foreseen decline caused by various factors. First are the high costs of housing which have pushed the market to its edge. Second, mortgage credit tightening by the federal government has put a leash on unbridled consumer spending and increased prices. Third, home owners themselves will feel the pinch through higher
mortgage rates passed on to them by the banks which have to comply with the new regulations.
However, no crash is imminent. Crashes are contingent on a skyrocketing unemployment rate in the order of 8 to 10 per cent. They can also be caused by a thin mortgage credit line. Fortunately, the Canadian unemployment rate is low and banks still have ample mortgage credit line for new homeowners.
All these factors may correct or slow down the housing activity in 2014, but still are not strong enough to bring about a crash.
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