Why Didn Canadas Housing Market Go Bust?
Why Didn’t Canada’s Housing Market Go Bust? Thursday December 3, 2009#spacer{clear:left}#abc #sidebar{margin-top:1.5em}zSB(3,3)From The Cleveland Fed: Some observers blame monetary policy for lowering interest rates over 2002-2005, pushing up housing demand, increasing residential investment, and raising housing prices. In this view, the monetary-policy-induced housing boom thus set the stage for an inevitable housing bust. Others contend that relaxed lending standards, highlighted by the rise in subprime lending, played a critical role. This loosening of standards led to an increase in housing demand, as mortgages were issued to households that were likely to have trouble making the mortgage payments. This extension of credit to risky borrowers helped fuel a housing boom and set the stage for the resulting surge in defaults, which were a big factor in the housing “bust.” I would add
