Economy Brings Real Risks to Canadian Home Owners


Do you ever wonder why you or someone you know is always having to dig themselves out of debt? Let me share something that may help you avoid a hole so big, you may never dig your way out of it.

A report published by Macro Research Board (MRB) in October 2015 should be a reminder to all levels of Canadian government that all is not well on the home front. Homeowners, and potential homeowners should be increasingly aware of the evidence of a bubble in the Canadian housing market. 

The report articulates concerns about the ability of the Canadian economy to grow and cautions that we may be entering a period stagnation. This is in spite of MRB’s opinion that oil prices are stabilizing and there are tentative signs that energy output may have bottomed. Other concerns include the bear market in commodities that is expected to continue for some time. 

What is most troubling are the ramifications of a slow or stagnant economy on a housing market that continues to be robust. We have a household sector debt binge that is very similar to what occurred in the U.S. during the last economic cycle. Our debt-to-income and mortgage debt-service ratios are at excessive levels. 


Will we experience a housing correction in the coming year? This is anyone’s guess; only time will tell. But the reality remains that what is happening with household debt in Canada is unsustainable and there will be a breaking point. Politicians at all levels are ignoring the evidence, as are consumers. It is easy to understand the position of the consumer, who feels that if they don’t buy, even at these levels, the likelihood of homeownership gets further out of reach.  So the psychology of lost opportunity becomes overwhelming.

Nobody wants to rock the boat, politicians especially. Consumers have to look out for themselves. Cycles of unrealistic and unsustainable environments all unwind. We’ll look back on this and say the signs and evidence were everywhere and wonder: how did this happen…. again?

Will the new federal Liberal government save the day? If I see a large white horse riding my way, I’ll be sure to let you know.