No trigger for a Canadian house price crash: CIBC economist

WHMIS

No trigger for a Canadian house price crash: CIBC economist
9 \# \' I& y! W# X
Canadian house prices may continue to slide but there is no sign of a crash, a CIBC World Markets economist says. (CBC)Canadians haven't put themselves deep enough in debt to cause a U.S.-style housing market bust, a CIBC World Markets economist says.

. Q/ C3 [: ]  E! i6 ^- IIn a report issued Tuesday, Benjamin Tal asks: "Where's the trigger for a Canadian house price crash?" He concludes there isn't one.
. h$ H# e: |/ j: A
! Y6 B  c% j3 n; l: T5 X"To be sure, house prices in Canada will continue to ease in the coming months," he says. "But the triggers that led to a free fall in Canadian real estate markets in the early 1990s and today in U.S. markets are nowhere to be found."

4 g2 I6 }* P5 v/ [! C$ T# V9 rAs he sees it, Canadian home buyers never got as reckless as Americans.
& ~. x! ^! A, z' l9 |$ c
"By almost any measure, American households entered the current housing crisis from a more vulnerable position relative to their Canadian counterparts — carrying a heavier debt load and a much lighter net worth position. And when it comes to real estate speculation, Canada was not really a player.
/ G6 b. m  ~0 @' s+ q! a/ O
"But even more important than the absolute and relative level of debt is the distribution of debt. At the peak of the cycle, subprime and Alt-A mortgages accounted for no less than 33 per cent of originations in the U.S. market. In Canada we estimate that at the peak, non-conforming mortgages reached 5.4 per cent of originations."

Subprime mortgages are those given to the least creditworthy borrowers. Alt-A mortgages are considered a step higher, although the category includes so-called liars' loans in which borrowers are not required to verify their earnings or assets.

; i1 t( x# N5 eTal says the U.S. meltdown is basically a subprime story.
, p( D/ s8 D7 d; U9 [: E
6 c% d0 o- S1 S"Eradicate subprime from the U.S. housing market and, instead of the most severe house price meltdown since the great depression, you get a trivial moderate cyclical slowing — something along the line of what we are currently experiencing in Canada."