That canadian housing bubble remains elusive

Are Canadian home prices really floating on top of a big bubble? Probably not. But there continue to be reputable observers who are willing to describe today's undoubted priciness as a "bubble." Why is this?

Much of problem is a simple problem of word inflation. "Overvaluation" isn't very scary, so analysts who want to ensure that they'll attract some attention are tempted to use the term "bubble," which actually means something far worse than just high prices.

Thus a big Canadian investment dealer issued a report last month saying that home prices here show "many of the signs of a classic bubble."

But if you read the report, it actually described a case of mild overvaluation, one that might result in price stagnation. Even if Canada were hit with an improbably bad recession and spike in unemployment, the report said, prices would fall maybe 10 per cent. This is no bubble.

Source: MontrealGazette.com