Wednesday, January 6, 2010

Why Didn’t Canada’s Housing Market Go Bust? :: James MacGee :: Economic Commentary :: 12.02.09 :: Federal Reserve Bank of Cleveland

Why Didn’t Canada’s Housing Market Go Bust? :: James MacGee :: Economic Commentary :: 12.02.09 :: Federal Reserve Bank of Cleveland

3 comments:

  1. Thanks for posting the link on that excellent article on the US-Canada housing market connection. Keep on sharing excellent articles.

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  2. Interesting article but I think it omitted a major difference between Canada & the U.S. in terms of mortgages. Mortgage debt in Canada is recourse debt while in most states here it is either non-recourse or limited recourse debt.

    There is every incentive for the U.S. homeowners in most cases to leverage up as much as possible. Not only can they walk away from an upside down house without any real inconvenience, but the tax code subsidizes this Minsky-esque behavior. I have seen multiple examples of this.

    The opposite is true in Canada - no tax subsidy for leverage, and lenders have much more recourse rights.

    That distinction between recourse and non-recourse debt I think has a major impact on behavior.

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