Time to panic: Canada looks just like the U.S. did before the housing crash

Thanks to Andrea for alerting me to this new looming disaster.

From Canada Bubble: http://canadabubble.com/bubble-watch/2319-time-to-panic-canada-looks-just-like-the-us-did-before-the-housing-crash.html

Feb 28, 2012

macleans.ca www2.macleans.ca

Why is everyone ignoring this unfolding disaster, which Ottawa, the Bank of Canada and lenders have helped inflate?

Back in the heady days of 2005, America looked like an awfully nice place to buy a house. Home prices were marching ever upwards. Home ownership was at record levels. Mortgage rates were at historic lows. Unemployment was falling while the economy was growing at a healthy clip.

Home sales had started showing their first signs of slowing that year, but that didn’t sway the National Association of Realtors from its persistently sunny view of the country’s housing market. “We’re confident that housing is landing softly,” David Lereah, the association’s chief economist, wrote in a November 2005 report just before house prices started a descent that would eventually wipe out nearly $30 trillion in global wealth.

Looking back, the signs of a country burying its head in the sand about a housing bubble seem obvious: the well-told tales of tricky teaser rates, of mortgage fraud and of gigantic home loans handed out to buyers with no income or assets. Household finances were even sketchier. In 2005, the average American owed $1.30 in debt for every dollar of income. Home equity was eroding as Americans pulled more than $900 billion out of their homes to buy cars, granite countertops and put their kids through college.

Then in 2008, the housewarming party was over as the country’s major banks teetered on the brink of collapse and took the economy with them.

Here in Canada, we patted our backs for not falling into the same trap, and basked in the spotlight as the world’s new beacon for financial stewardship. It’s a compelling narrative that has been promoted by the federal government and the Bank of Canada as they encouraged Canadians to spend their way through global economic turmoil.

Continue reading at: http://canadabubble.com/bubble-watch/2319-time-to-panic-canada-looks-just-like-the-us-did-before-the-housing-crash.html