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Housing Market ‘Soft-Landing’ May Still Be Delayed

July 10, 2014

An oft-spoken term regarding the Canadian housing and real estate market is “soft-landing”.

Multiple economists from some of Canada’s largest financial institutions as well as the Bank of Canada have constantly reiterated the opinion that the housing and real estate market in Canada is due for a soft landing; however, one bank has recently changed their prediction.

TD Bank economists expect that the expected soft-landing for the Canadian housing market to be pushed into the latter half of 2015 as housing sales continue to deliver, spurred on by demand in Canada’s largest housing markets and mortgage rates that continue to remain at historical lows. Canada’s largest mortgage lenders, including TD Bank, continue to remain locked in a mortgage rate competition in order to win consumers.

Average home re-sale prices have risen over 7 percent in the last year with single detached homes continuing to surge in value. Coupled with the aforementioned rock-bottom mortgage rates; the housing market continues to march forward without missing a beat.

Earlier this year, multiple economic pundits indicated that the Canadian housing market was overvalued due to homes being far more expensive than the incomes of Canadians, expected mortgage rate increases and the high ratio of Canadian household debt. While Canadian household debt remains near all-time highs, the debt ratio has recently been decreasing over the past three quarters. Inflation in Canada has recently started to hover around the 2% range as well, leading some pundits to believe that an interest rate increase from the Bank of Canada might be in the cards; however, the Bank of Canada must also carefully weigh the pros and cons of any rate increases. The last time the Bank of Canada moved their Overnight Lending rate was September 2010.