While economics has long been known as the ‘dismal science’, this does not seem to apply to the science of forecasting. With some exceptions – such as the Mayans, or Nouriel Roubini – forecasters, it seems, are just way too cheery and confident.
Read more of the latest World Finance column here.
It is always hard to call the top of the market. But let’s try anyway.
Toronto house prices reached a record high in May.
At the same time, as the figure below shows, mortgage applications took a huge tumble.
This was before mortgage rates started to creep up. In April you could get a 5-year mortgage for an amazingly cheap 2.89%. That has since increased by 0.5% to 3.39%. In other words, the cost of borrowing money just increased by 17%.
Thousands of unsold condominiums will also come onto the market over the next couple of years.
Of course, this doesn’t mean a crash. Perhaps Canada will follow the path of the UK – a hefty devaluation and static house prices which slowly lose value in real terms. But over several years, it amounts to pretty much the same thing.
New mortgage applications