"Canadian household debt loads hit record territory this year, surpassing even levels south of the border. A new Statistics Canada paper out Thursday sheds some light on just who’s most indebted and why.
First, the aggregate numbers: household debt for Canadians more than doubled between 1984 and 2009 -- from $46,000 to $110,000, largely to due a pile of mortgage debt. Growth has accelerated even faster since 2002 (it’s continued to climb this year, though economists expect the rate of accumulation will slow as borrowing costs rise).
The paper, by senior analyst Matt Hurst, lists several reasons for the surge. Some are familiar -- low interest rates and a cultural shift to consumerism. Others include increased demand in the housing marketfrom the boomers, heightened competition and deregulation in the banking sector, new financial products, more relaxed credit constraints and more women in the work force".......read it here
AND more importantly............"Signs point to a severe housing correction in Canada".......Home prices are simply way out of line, especially when viewed in relation to household income. The ratio of house prices to income has historically averaged about 3.5 in Canada. It now stands at about 5.5. It is difficult to see how income growth in the future can bring this ratio close to the historical average within any reasonable period – so it follows that house prices will have to decline.
Signs of stress are already evident, especially when you look at household debt levels. In recent years, the gap between house prices and income has been bridged through borrowing. The average Canadian family debt hit $100,000 in 2010. About 17,400 households are behind in their mortgage payments, representing an increase of nearly 50 per cent since the start of the last recession............read it here
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