How does the latest Canadian housing downturn compare to past crashes?

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New analysis from a leading economist puts the recent Canadian housing downturn in perspective by comparing it to previous booms and busts of the last 30 years.

New analysis from a leading economist puts the recent Canadian housing downturn in perspective by comparing it to previous booms and busts of the last 30 years.

One big takeaway: the market has taken a big spill since 2017, but it’s nowhere near the depths reached at the turn of the ‘80s.

“Again, activity is well above the deep troughs of the early 1980s and early 1990s (when borrowing costs were well into the double digits),” writes Douglas Porter, BMO’s chief economist, in a note.

“But recent sales activity is also a long way from the twin peaks of the 2005–2007 and 2015–17 booms,” he continues.

To reach this conclusion, Porter looks at the ratio of Canadian existing home sales totals to the labour force population for each year dating back to 1980.

Chart: BMO

Statistics Canada tracks both employed and unemployed individuals aged 15 and up in its labour force surveys.

Simply looking at annual sales tallies wouldn’t tell the full story.

“Obviously we’ve had population growth over that period of time,” Porter tells Livabl in a follow-up interview.

Porter explains that the current ratio suggests that for every 100 people in the labour force, roughly two and a half would sell their homes.

That’s around the long-run norm for Canada over the past three decades.

“It’s slightly higher in the US, and frankly I’m not quite sure why that’s the case,” he admits.

Porter conducted similar analysis for the market south of the border, instead using single-family home sales because these provided more robust data allowing for a ratio since 1970.

Chart: BMO

The stateside ratio suggests about three home sales per 100 people in the labour force.

Porter notes how over the last 10 years the Canadian and US markets have differed in performance.

“Generally, Canadian housing activity has been much stronger versus its historical average, largely avoiding the deep housing trauma during the Great Recession and also witnessing a full-on boom in the middle of this decade,” writers Porter in an accompanying note.

“But despite that quite different experience in the past decade, both markets now find sales to be quite close to long-run norms.”


Josh Sherman

Josh Sherman

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