Canada’s Housing Crash Rivals US In 2008, But The Pain Is Hidden: BMO

Canada’s housing crash is close to rivalling the early 2000s crash in the US. In contrast, Canada seems relatively unscathed, despite being a smaller economy that’s more dependent on housing. BMO’s chief economist notes the country is better positioned to avoid a financial crisis, but its pain avoidance is partly an illusion—hidden by Canada’s aggressive use of immigration. Canadian Home Prices Are Following The US Housing Crash Source: BMO Capital Markets; CREA. The Canadian housing correction is following the same trajectory as the U.S., but with a different outcome. Home prices in Canada have dropped 20.5% from the early-2022 peak, compared with 26% during the U.S. bust. However, Canada avoided a comparable economic collapse—its real GDP grew at an annualized pace of 1.7% over the four years since prices started falling. That’s only slightly below the 2.0% average for this century, which is remarkable considering the country’s housing-dependent economy. “This is arguably the most significant home price correction ever for Canada, and yet the economy has managed to avoid serious collateral damage from the deep decline,” explains BMO Chief Economist Douglas Porter. He notes Canada...