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Not Here? Housing Market Policy and the Risk of a Housing Bust

Author

Listed:
  • Jim MacGee

    (University of Western Ontario)

Abstract

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.

Suggested Citation

  • Jim MacGee, 2010. "Not Here? Housing Market Policy and the Risk of a Housing Bust," e-briefs 105, C.D. Howe Institute.
  • Handle: RePEc:cdh:ebrief:105
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    File URL: https://www.cdhowe.org/public-policy-research/not-here-housing-market-policy-and-risk-housing-bust
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    References listed on IDEAS

    as
    1. 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.
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    Cited by:

    1. Robert McKeown, 2017. "How vulnerable is the Canadian banking system to fire-sales?," Working Papers 1381, Queen's University, Department of Economics.
    2. James MacGee, 2012. "The Rise in Consumer Credit and Bankruptcy: Cause for Concern?," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 346, April.
    3. Breeden, Joseph L. & Canals-Cerda, Jose J., 2016. "Consumer risk appetite, the credit cycle, and the housing bubble," Working Papers 16-5, Federal Reserve Bank of Philadelphia.

    More about this item

    Keywords

    Financial Services; housing bust; real estate; Canadian housing policies; US-style housing bust;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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