The Bank of Canada is stuck between the rock of a housing bubble (textbook-based trickle-down confidence-inspiration) and a hard place of a housing bubble (total lack of affordability) as it proclaimed this week that it may withdraw stimulus because, paraphrasing, everything was awesome. Well, today's existing home sales collapse may change that tune quickly...
Bloomberg reports that in a speech she’s delivering in Winnipeg, Manitoba, Senior Deputy Governor Carolyn Wilkins highlighted how the nation’s recovery is broadening across regions and sectors, giving policy makers “reason to be encouraged.”
“As growth continues and, ideally, broadens further, Governing Council will be assessing whether all of the considerable monetary policy stimulus presently in place is still required,” Wilkins said in the text of a speech she’s giving Monday.
“At present, there is significant monetary policy stimulus in the system.”
"The adjustment to lower oil prices is now largely behind us, and we are looking for signs that the sources of growth are broadening across sectors and regions,” Wilkins said. “The signs are encouraging.”
Well, wih the worst print on record, Canada existing home sales crashed 6.2% MoM in May...
"The signs are less encouraging now"
Below we again put Canada's housing market, and bubble, in perspective with some of our favorite charts, first showing total Canadian household debt compared to the US. Most of this is in the form of mortgages.
Next, despite Canada's low rates, the debt service ratio of an average Canadian household is nearly 40% higher than when compared to the US.
And finally, the punchline: indexed home prices in Canada compared to the US. This needs to commentary.
This won't end well... and as this month's home sales data shows, the pain is just beginning.