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Originally Posted by Flamenspiel
The US fed has already signaled they are raising rates, eventually Canada will have to follow or we will have a 50 cent dollar, then it's hello 1980s again. We all will be in for a rude awakening.
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I don't think that's going to happen. The CAD is traded every day by people who aleady know the US is likely to raise rates. As such, a lot of the downward price movement based on this paradigm has already happened. It's not like the news will surprise any body. I think most people are calling for a .75 cent dollar if the US raises rates.
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Except the last time housing prices had such a precipitous climb, they were stagnant for about 20 years afterwards.
That's the big issue here.
Canadians are over leveraged in terms of the debt they carry, and most of these debt carriers are relying in some capacity on continuation of rising prices. With the ripple effect of Alberta shedding jobs, the potential for a cascading effect of people not being locked into their mortgages has a pretty serious potential impact.
A correction might not just mean a drop in value of 10-20 percent, based on wages in the country, it's likely that drop will remain where it is for 15-25 years until it begins to increase again. That's the historical market trend.
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According to the chart in this thread, house prices have never had such a precipitous climb as they have since 1990. If you're looking at the 20 years after the great depression, look closer and you'll see house prices actually had a range of about 20% during that period. It's a huge chart.
People not bing locked into mortgages is usually a good thing when the economy sucks. Rates have already gone down this year so floating rates are less. Plus no payout penalties if they have to sell.
I can't see an "historical market trend" in the chart you provided. I'm sure prices will go down in one of two ways, dramatically down followed by a bounce. Or slowly down and generally sideways until reaching the trend line when we will start to get increases. It's much less likely to suffer an emotional sell off followed by a stagnating sideways trend.