Heard it on the radio this morning. Couldn’t believe my ears. Some freaking economist in Ontario has come out with a report stating house prices could tumble 25% ACROSS CANADA. Which is exactly what the radio is reporting and as I look around at the various online papers I find they are using this as attention garnering headlines.
Of course, if you actually look into the report he states that this hinges on the Bank of Canada raising it’s rates to about 3.5% over the next year and a half. Well here’s my prediction. The government may eventually raise rates again later this year, if the economy continues to recover at a steady pace,if it;s flat, with minimal inflation impact, it remains status quo.
The government doesn’t have a goal of getting rates to 3.5%, because their goal is to control inflation and economic growth. Having a target interest rate they absolutely have to reach is madness. Proposing that housing prices will fall 25% is freaking madness, which is why they bury there “if this happens” caveat in the information.
In my opinion, the premise for this report is just to grab headlines and attract attention. If you want to read a bit more about this (and see some counterpoints from a Merrill Lynch economist) you can find one of the stories at this iPolitics link, Interest Rate Rise Could Trigger House Price Collapse
