Not Here? Housing Market Policy and the Risk of a Housing Bust
Can a US-style housing bust happen in Canada? Recent swings in Canadian house prices have raised concerns about the possibility. To evaluate the likelihood of a US style housing market crash in Canada, this paper examines what caused the US housing boom and bust from 2000 to 2009. A decline in underwriting standards played an essential role in the US housing market boom and dramatic bust. While monetary policy was very similar in both countries from 2000 to 2008, housing markets (especially the subprime component) were structured and regulated differently in each. Canadian housing policies, which avoided the sharp decline in underwriting standards seen in the US, worked well in reducing the possibility of a housing bust in Canada during 2008-2009, and continue to mitigate the risk of a massive wave of defaults in the future.
|Date of creation:||Aug 2010|
|Publication status:||Published on the C.D. Howe Institute website, August 2010|
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- Martin Gervais & Manish Pandey, 2008.
"Who Cares About Mortgage Interest Deductibility?,"
Canadian Public Policy,
University of Toronto Press, vol. 34(1), pages 1-24, March.
- Martin Gervais & Manish Pandey, 2005. "Who Cares about Mortgage Interest Deductibility?," University of Western Ontario, Economic Policy Research Institute Working Papers 20059, University of Western Ontario, Economic Policy Research Institute.
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