If Not a Bubble, Then What?
JMaddock — February 20, 2012
I recently came across this article, arguing that there is no bubble in Canada’s real estate market, yet concluding with a very telling prediction:
“Apart from some overheated niches in the market … we’ll more likely see home prices that simply go sideways for several years, allowing incomes to catch up.”
It seems that even though real estate prices were pushed into a bubble by too much easy credit over the last several years, politicians, central bankers, and establishment analysts still aren’t willing to admit it. Instead, they’ll keep interest rates tantalizingly low and provide even more easy credit, just to deliberately jack up other prices and make sure house prices “go sideways for several years,” rather than experiencing a correction.
But as house prices “go sideways for several years, allowing incomes to catch up,” the real value of real estate will, by definition, be going down. Thus, whichever way you look at it, Canada’s housing market is in a bubble. The government and central bank just don’t want to admit it. They’d rather transform the whole economy into a bubble to match.
Disclaimer: The articles and opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions of the Libertarian Book Club.