Dunning begins by discussing the history of the housing market in Canada, noting that it has been through a period of rapid growth since 2002. He explains that the rapid growth of house prices can be attributed to multiple factors, including low interest rates, strong economic growth, and a shortage of housing supply. Despite this consistent growth, Dunning believes that the housing market has now peaked and is about to experience a significant drop in prices.
Next, Dunning discusses the potential causes of this shift in the housing market. He notes that the primary cause is the recent tightening of mortgage-lending guidelines by the federal government. As a result of the stricter regulations, lenders are now offering fewer mortgages to potential buyers, which is contributing to reduced demand in the housing market. Additionally, Dunning believes that rising unemployment levels and a potential recession could lead to further declines in the housing market.
Dunning then goes on to discuss the implications of this potential shift in the housing market. He argues that the main consequence would be an increase in personal debt levels. With reduced access to credit, homeowners will be unable to refinance their existing mortgages, leading to a rise in default rates. Additionally, those who already have mortgages may find themselves unable to carry the additional burden of making their payments, resulting in an increased risk of foreclosure.
Finally, Dunning concludes by outlining a few potential strategies for minimizing the impact of these changes in the housing market. He suggests that homeowners need to think carefully about their financing options and prepare for a potential decline in the market. Additionally, he recommends that policy-makers should focus on addressing the underlying issues in the economy, such as reducing unemployment and stimulating growth.
In summary, the article ‘Housing Has Peaked: Now What?’ by Will Dunning examines the current Canadian housing market and predicts that it is likely to experience a dramatic decline in the near future. Dunning attributes this shift to the tightened mortgage-lending regulations put in place by the federal government, as well as other economic factors such as rising unemployment and the potential for a recession. The article outlines the consequences of these changes, including an increase in personal debt and the risk of foreclosure. Finally, Dunning outlines a few strategies for helping to mitigate the effects of these changes on the housing market, such as focusing on stimulating economic growth and being prepared for declining house prices.
This article was contributed on Dec 09, 2023
