David Rosenberg: Five reasons BoC rate cuts won’t reignite a boom in Canadian home prices
It can only really happen if a bull market in irrational thought and irresponsible behaviour is in our future
I’m fielding a ton of questions about whether the Bank of Canada will reignite a speculative bounce in home price inflation if it dares to cut interest rates. The short answer is “no.” Here are five reasons why.
Good points
But in my area Home prices are still up near all time highs so far
Real Estate is local. Any region that had huge appreciation the past few years is ripe for a correction. Always the same story. But one has to live somewhere.
Even if Mortgage rates are cut in half from today’s rate there has to be some adjustment lower. Incomes just haven’t kept up. What percentage that translates to is anyone’s guess.
Some areas do not have a lot of product on the mkt at the present time but the drop is always sticky on the way down. I’d say retracing price back to the last big annual jump is a start. Price appreciation was obscene.
Land prices usually appreciate while the structure is a depreciating asset that requires constant capital improvement to maintain value.
What is holding up the mkt is the starter properties. Condos.
In Canada the massive influx of immigrants is keeping this afloat. Many people with a job supporting the mortgage payments.
I think we’ve all met new immigrants with three generations living under one roof.
Two generations are working.