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The report also highlighted the important role CMHC plays in the housing market, which it said accounted for 20%, or $346-billion, of Canada’s gross domestic product last year.

The corporation, created in 1946, currently has a $600-billion loan limit, which the government increased three years ago from $450-billion. The federal government guarantees the full value of mortgages insured by CMHC and 90% of loans insured by private firms.

Canadian home prices relative to income are 15 per cent above the post-1970 average. This may not sound all that bad until you compare it to the U.S. and the fact that before prices there began to tumble, relative to income they were 11 per cent above the long-term average

Canada has some of the most expensive real estate in the world

buy/rent ratio was about 1.85x

typical house eats up 41 per cent of median income today, compared to 49 per cent in Toronto, and 73 per cent in Vancouver

The Canada Mortgage and Housing Corporation has insured $773 billion in mortgages and loans, while holding only 1.2 per cent in equity.

However once the credit ended, prices resumed their fall. By the end of 2011 they were 8.4 percent below the tax credit induced peak in the spring of 2010. Adjusting for inflation, the decline was more than 12.0 percent.

The problem was that the credit did not lead more people to buy homes, it just caused people who would have bought homes in the second half of 2010 or 2011 to buy their homes earlier. This meant that the price decline that was in process in 2007-2009 was just delayed for a bit more than a year by the tax credit.

This delay allowed homeowners to sell their homes for higher prices than would otherwise have been the case. It also allowed lenders to get back more money on loans that might have otherwise ended with short sales or even defaults. The losers were the people who paid too much for homes, persuaded to get into the market by the tax credit.

the temporary reversal of the price decline transferred between $200 and $350 billion (in 2009 dollars) from buyers to sellers and lenders. Another $15-25 billion went from homebuyers to builders selling new homes for higher prices than would otherwise have been possible.

To take some of the most extreme cases, in Chicago prices of bottom tier homes fell by close to 30 percent from June 2010 to December of 2011, leading to a lose of $50,000 for a buyer at the cutoff of the bottom tier of the market. The drop in Minneapolis was more than 20 percent or more than $30,000. First-time buyers in Atlanta got the biggest hit. House prices for homes in the bottom tier have fallen by close to 50 percent since June of 2010. That is a loss of $70,000 for a house at the cutoff of the bottom tier.

The average home price in Vancouver finally saw a decline in March at $730,998 from $823,749

average home price in Toronto rose again in March at $503,998 from $499,354

t's the decisions of the individuals who take out the loans, and Canadians are a smart and prudent people

onus isn't just on individual Canadians, but also on the banks and institutions that must make some wise decisions and not lend to people who clearly can't pay the money back

as well as the federal government for tightening mortgage lending rules.

Carney repeated warnings against Canadians taking on too much household debt,

Carney said interest rates "are going to go higher,"

Canadians should make sure they can carry that debt when interest rates "are at a more normal level."

Household debt growth over the past decade has been fuelled not as much by credit card borrowing, he said, but largely by loans secured by real estate, in particular home equity lines of credit.

The ratio of debt-to-personal disposable income, which is now above 150 per cent, Alexander predicted, is likely to reach by late next year the 160 per cent peak experienced in the U.S. and the U.K. before their real estate corrections occurred.

The report proposes several options for heading off further growth in household debt. One is to shorten the maximum amortization on mortgages from 30 years to 25.

A second possibility is to impose a sort of stress test on borrowers in order to qualify for a mortgage.

And another option would be to require applicants for home equity lines of credit to demonstrate their ability to pay it off in 20 years. Finally, the minimum down payment for a mortgage could be raised from five per cent to seven.

When interest rates fell to 75-year lows in April 2009, the sensible thing would have been to pay off loans. Instead, we borrowed more

In Toronto, the median house price of $373,000 is 5.4 times that of the median household income

The doom-and-gloomers argue that it’s naive to believe measures like the new CMHC rules will save us from flippers, and that deflation is inevitable.

“Home ownership rates, mortgage debt ratios and many home price valuation metrics in Canada have reached the same stretched levels the U.S. did back in 2005 and 2006,”