Canada's heated housing market isn't doomed for a bust in 2010, says one of the major banks in a recent report on housing.
Economists with CIBC World Markets say Canada will not see a major housing market bust like the US did.
"Canada is not doomed to see a U.S.-style housing and mortgage blow-up," says CIBC's chief economist Avery Sheffield in the report. "The lessons for the U.S. were not that an extended period of low rates caused a mortgage and housing blow-up. It was a massive failure to supervise the worst excess of the American mortgage market that caused the trouble."
The comments match those made over the weekend by U.S. Federal Reserve Chairman Ben Bernanke , who said low central bank rates weren't the cause of the housing bubble in America. Rather, better regulation was needed to curb the boom, he says.
"The best response to the housing bubble would have been regulatory, rather than monetary," Bernanke said in comments to the American Economic Association's annual meeting.
CIBC says that while the average selling price for a home in Canada is about 7 per cent too high, an increase in housing supply in 2010 could help the market come to a moderate correction, not a collapse.