News today that house prices in Canada are up 19% year over year and sales up 73% for the same period. Prices are now at an all time high vis-a-vis income and not surprisingly debt levels are also at record highs. All of this is sustained by record low interest rates that are sustaining the rest of the economy. This is particularly true for variable rate mortgages which are currently fetching just 2%.
Of course, this cannot last. Whether it will lead to a substantial correction in prices is anyone's guess. But we do know that when interest rates recover, which they will, many household will be unable to meet obligations. And at this point the party will surely end.
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