Essentially the author, David Rosenberg, indicates that whether or not a housing bubble occurs, the Canadian economy will not continue to experience bolstering growth. According to Rosenberg in the Globe and Mail:
By my calculations, every basis point of the Canadian economic recovery was the result of the boom in the housing sector. That goose is no longer laying any golden eggs.
Okay, so he’s right. Although there’s a ton of projects launching this Fall, Canadians builders’ intentions to build are decreasing. But that doesn’t mean the housing market or the Canadian economy as a whole is going to plummet– it hasn’t so far.
And you’d think that would be music to the ears of economists. But, according to the Globe and Mail today:
In its quarterly housing affordability report, [RBC’s] economists said that while the number of sales fell significantly in the second quarter, fewer listings meant prices did not decline.
Okay, so prices didn’t decrease like everyone is expecting (hence the bubble expectation). But instead of celebrating the strength of the market, the media has framed the results as “Housing becoming less affordable” instead.
You can’t have it both ways. If prices dropped substantially, houses would be cheap…but then we would have experienced a bubble. If prices remain stable, then affordability will erode (especially as the Bank of Canada continues to raise rates).
In fact, in an article published by the Financial Post, a senior economist at RBC said that housing affordability remained “within a safe range”. So…I don’t see what the issue is. This is a good news story in my opinion. Housing prices are stable, and affordability is still within a reasonable range.
It’s just media hype and scare tactics, yet again. For some reason, readers like pessimistic stories.