"Barring a massive rate shock or sharp erosion in jobs, I don’t see a large price correction," Mr. Holt said in a research note.
"A modest one in a soft landing, yes, but the forces of leverage-reversal that amplified the downside risks in the U.S. do not operate in the same manner within Canada. That said, I do view this as a nation-wide problem and not one just confined to a handful of markets, as every province’s house prices have risen by about 80 per cent to 150 per cent over the past decade. Other than gold, the retail investor’s returns on tax-sheltered primary residences have been tough for alternative investments to compete against."First, Canada does not need to experience a massive rate shock as the US and Japanese experiences prove that a housing bust can happen with extremely low rates.
Secondly, Canada does not need a sharp erosion in jobs for a large correction. The S&P/Case-Shiller index revealed house price growth was in a steep decline from early 2006… and went negative in the first quarter of 2007. During that period, the US unemployment rate was around 4.5%. At that time there was no major shock to the economy. In fact, the first of the big financial firms to collapse – Bear Stearns – didn’t collapse until March 2008. A full year after house prices had started to fall.
And there tons of reasons why sentiment is changing right now