two major international summits<\/a> set to take place in the country over the next two months in the face of mass civil unrest. One of those summits, the Asia Pacific Economic Cooperation Forum, was likely going to serve as the venue for a trade deal talk between President Donald Trump and Chinese President Xi Jinping. All that is to say, the trade tensions that have the CMHC worried are unlikely to be resolved anytime soon. And they may get worse before they get better.<\/p>\nTrade tensions aren\u2019t the only risk to the CMHC\u2019s housing forecast flagged in its 2020-2021 outlook.<\/p>\n
\u201cIn addition, high household indebtedness remains a vulnerability because it increases the risk of economic and housing market instability,\u201d writes the CMHC. \u201cFor example, if interest rates or unemployment were to rise more than expected, heavily indebted households could face greater budgetary constraints, leading to downward pressure on the economy and housing activity.\u201d<\/p>\n
Ballooning Canadian household debt has long been a source of worry for economists observing the country\u2019s financial system and broader economy. While Canadians\u2019 debt levels have been gradually easing since 2018 thanks to solid income growth paired with a rollback in borrowing, overall debt-to-disposable income is still considered a scary high figure by some economists.<\/p>\n
Echoing the CMHC\u2019s recent comment about debt levels, RBC economist Robert Hogue said in September that household debt remains one of the top vulnerabilities to the country\u2019s economy.<\/p>\n
And, of course, like all things in the global and national economy, the two vulnerabilities are interconnected. If the US-China trade war continues to escalate and sends the global economy into a recession, Canada\u2019s central bank will likely have no choice but to cut interest rates to keep the country\u2019s economy afloat. Lower interest rates will spur borrowing for big purchases (like houses, for instance), which could lead to Canadians, already saddled with a whole lot of debt obligations, to take on more debt than they can handle. When interest rates inevitably rise again, it may be too much for indebted Canadian consumers to take.<\/p>\n
That\u2019s a whole lot of potential financial stress to reckon with at the end of a 2020 market outlook. Way to bury the lede, CMHC.<\/p>\n
![\"\"](\"https:\/\/www.livabl.com\/articles\/wp-content\/uploads\/2019\/07\/toronto-housing-market-canada-downturn-global.jpg\")
<\/a><\/p>\n