Contingent on who you ask, you will find varying opinions on when and how the Canadian housing market will cool down from its recent spectacular climb. For instance, TD Bank economist Pascal Gauthier plainly said in an interview with “Globe and Mail” this month that even though housing prices will continue to increase by 9 percent over the 2009 values until the middle of 2011, they will then unmistakably drop — possibly as low as 2.7 percent. But economist Sal Guatieri of BMO Capital Markets is somewhat hopeful, informing “The Montreal Gazette” that the overvaluation that caused the real estate bubble will just impact large cities, and should not bring about the kind of nationwide meltdown anticipated in the US market. One thing they both appear to agree on, however, is that the Canadian real estate sector is on course for a cooling trend — the debate is just how much and when.

As Guatieri draws attention to, today’s values for average houses in Vancouver or Toronto — about $700,000 — is coming close to 10 times the household income, but that in a stable market “a more normal price is about four or five times income”. Even though TD Bank had at first forecast 1.6% increases in 2011, this type of real estate feverish inflation in the midst of recession recovery has actually hurt the market, and they are already seeing the signs of cooling this year based on the rise of new home starts and new listings. Read the rest of this entry »