Open House Sunday, Feb. 24th from 2-4pm at 576 Reeves Way Blvd. Stouffville


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Why the housing market won’t crash in 2013 – The Globe and Mail

Special to The Globe and Mail

The 12-month change in the Teranet-National Bank House Price Index has decelerated in recent months to 3.4 per cent, led by declines in Vancouver (-1.4 per cent) and Victoria (-1.7 per cent). Some people interpret this weakness as a sign that a housing crash has started – see, for example, the Canadian Business article “Canada’s housing crash begins.” I don’t see a collapse in 2013 for several reasons. One is the highly supportive monetary environment.


In the case of the U.S. housing boom from 2003 to 2007, the overvaluation was pricked after the Federal Reserve dramatically tightened monetary policy to cool off an overheated economy. This catalyst is absent in Canada as 2013 commences.

Indeed, monetary policies in Canada, the U.S., Japan, China and elsewhere around the world are dialled to the opposite extreme. They are hyper-expansionary, with interest rates at record lows and printing presses running like never before.

This means that Canada and other countries should continue generating growth in jobs and income. Since higher employment and income typically support housing markets, prices are not likely to fall much in 2013. Or if they do, they shouldn’t stay down for long.

The crash crowd says Canadian houses are overvalued on the basis of the price-to-income ratio. So they fear the process of mean reversion will take prices down by 25 per cent or more. But with so much monetary stimulus in the system, the price-to-income ratio should also be normalized by income increases.

Interest rates may begin edging up later in 2013. They shouldn’t threaten the housing market because income and employment will be climbing as well, creating offsetting demand for housing. Similarly, the one-off impact of a tightening in mortgage rules during 2012 should not be cause for a serious setback.

There are other reasons for expecting a crash to be a no-show in 2013. Suffice it to say that the monetary cycle suggests a soft-landing scenario. This is not to deny there are pockets of extreme overvaluation or oversupply, where the risk of substantial correction remains. Cases in point could be Vancouver housing and Toronto condos.


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Wishing Everyone a Wonderful Christmas & a Fabulous 2013!


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Bank of Canada maintains overnight rate target at 1 per cent – Bank of Canada

Home > Publications and Research > Press Releases > Bank of Canada maintains overnight rate target at 1 per cent

Bank of Canada maintains overnight rate target at 1 per cent

For immediate release

4 December 2012

Contact: Jeremy Harrison

613 782-8782

Ottawa –

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economy has unfolded broadly as the Bank projected in its October Monetary Policy Report (MPR). The economic expansion in the United States is progressing at a gradual pace and is being held back by uncertainty related to the fiscal cliff. Europe remains in recession. Chinese growth appears to be stabilizing. Commodity prices have remained at elevated levels since the October MPR and global inflationary pressures are subdued in response to persistent excess capacity. Global financial conditions remain stimulative, though vulnerable to major shocks from the U.S. or Europe.

In Canada, economic activity in the third quarter was weak, owing in part to transitory disruptions in the energy sector. Although underlying momentum appears slightly softer than previously anticipated, the pace of economic growth is expected to pick up through 2013. The expansion is expected to be driven mainly by growth in consumption and business investment, reflecting very stimulative domestic financial conditions. Housing activity is beginning to decline from historically high levels. While the household debt burden continues to rise, growth in household credit has slowed. It is too early, however, to determine whether the moderation in housing activity and credit growth will be sustained.  Canadian exports are expected to pick up gradually but continue to be restrained by weak foreign demand and ongoing competitiveness challenges.  These challenges include the persistent strength of the Canadian dollar, which is being influenced by safe haven flows and spillovers from global monetary policy.

Inflation has evolved broadly in line with the outlook in the October MPR. Both total and core inflation are expected to increase and return to 2 per cent over the course of the next 12 months as the economy gradually absorbs the current small degree of slack, the growth of labour compensation remains moderate and inflation expectations stay well-anchored.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. Over time, some modest withdrawal of monetary policy stimulus will likely be required, consistent with achieving the 2 per cent inflation target. The timing and degree of any such withdrawal will be weighed carefully against global and domestic developments, including the evolution of imbalances in the household sector.

Information note:

The next scheduled date for announcing the overnight rate target is 23 January 2013. A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.

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Open House Sunday, Dec. 2nd from 2-4pm at 19 Wyman Cres. Bradford


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Drop By The Home Team Office at 102 Main St. South, this Saturday During the Newmarket Santa Claus Parade & Enjoy a Cup of Hot Chocolate With Us



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