I always find it fascinating that highly trained people can look at the same raw data and come up with different interpretations. Some time ago CAAMP’s Chief Economists, Will Dunning, characterized economists this way to me, “if the economist is an optimists his forecasts will reflect that. Conversely, if the economist is a pessimist his finding will have a glass is half empty slant”. Your DNA, your personality, and getting up on the wrong side of the bed will influence the finding of those who join the dots and make predictions. Based on headlines recently many economic prognosticators should be going to bed earlier to avoid crankiness.
It’s interesting how economists for the banks are saying that our real estate values could be over inflated by 10% to 15%. Some within the banks are calling for self-regulation because, well, they know better. The Ministry of Finance is saying that no further changes to mortgage rules are needed at this time but it’s something they will closely monitor. CMHC is forecasting moderate growth in terms of sales and home prices. Independent economists are suggesting that the four horsemen of the apocalypse are about to descend on our housing industry. They have all looked at the same raw data, yet their conclusions are significantly different.
CMHC just released their National Housing Outlook, and try as I might I couldn’t find anything about the so called housing bubble. Surely a housing bubble would be a concern for CMHC, given the sovereign guarantee. I’m thinking a housing bubble might impact forecasts as it relates to number of home sales for 2012 and 2013. Maybe they’ll get to that at some future date. The amount of consumer debt in Canada didn’t seem to be noted anywhere within the report as well. We’ve heard the predictions of a U.S. style crash in Canada, yet the CMHC Housing Outlook makes no such reference. Here’s CMHC position, “Some continuing downsides include a slower than expected recovery for the U.S., reduced economic growth in emerging economies and a downturn in parts of Europe. Such events could result in slower employment growth in Canada, which could lead to lower demand in housing”. When I read the words “lower demand in housing”, the dots don’t join up for me to read “no demand in housing”. Then again I didn’t wake up on the wrong side of the bed this morning.
I don’t have a pair of rose colored glasses, therefore, I accept the CMHC National Housing Outlook for what it is. The report was created by an institution which has a vested financial stake in the housing industry. Insurance, by its very nature, looks to mitigate risk. The institution which created this report has every reason to be cautious, and if there were grave concerns it would be their professional and moral obligation to sound the alarms. Yet CMHC is forecasting moderate growth in home prices for 2012 and 213, with no dooms day scenario caveat. It appears that the last go-around of changes to the mortgage rules is working. The Ministry of Finance wanted to cool things down, mission accomplished. It’s interesting that in Canada the private sector is calling for more government intervention, while the public sector is suggesting, for the time being enough has been done. The debate in the U.S. is the complete opposite, and we’re supposed to be the conservative ones
Critical analysis, and constructive debate, of the housing market provides perspective. What’s concerning is when raw data is manipulated to create incendiary headlines.
Until next time.
Cheers.
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