Canada's Housing Bubble

Today, Moody's downgraded 6 of Canada's largest banks, citing "banks' exposure to the increasingly indebted Canadian consumer and elevated housing prices leaves them more vulnerable to unpredictable downside risks".

In 2012, I wrote a short piece in The Globe and Mail (a Canadian business daily), explaining my view about the Canadian economy being vulnerable to a considerable downside risks following a likely correction in its housing sector:

"Canada’s federal government has had even more time than the U.S. to act on the [housing] issue, but the reforms have been too weak to slow the bubble. From an economist’s point of view, I can’t say that there’s much evidence for Canada’s overvalued-housing dilemma not to grow worse." [link]

Household debt-to-personal disposable income in Canada has now reached a record 165%, significantly higher than what the US experienced (126% at the top of the US housing bubble in 2007).