We have a serious problem in Canada. Not only is Joe Average drunk on cheap credit, it seems our so-called fiscal conservative government can't see the water from the wine. Crazy. Dangerous. And it can only end badly.
Take this article from Saturday's G&M (H/T Rob) where apparently the heads of the Big 5 banks were calling for tighter mortgage lending rules back in late November of last year. Now compare it to today's G&M article providing the government's response: No Bubble, No Changes.
You may be asking yourselves if the banks are so concerned, why don't they just tighten up lending rules themselves? The short answer is competition--they're not the only lenders in the game, and they don't trust one another to play under the same self-imposed rules anyway. They want regulation to apply to everyone.
You may also be asking yourselves why the government is ignoring the now Canada-wide housing market bubble? The answer is simple: political expediency. Rational actions in Ottawa are not welcome. If the government did tighten lending standards, an 18% drop (similar to what occurred when the tightened from 0 down 40 year ams), will likely be the tip of an iceberg.
The opposition will make extreme hay about how the present government created the mess, fooled the "poor, ignorant, not-responsible-for-their own-home-buying-actions citizenry" (of which there has never been more in Canada) into believing the market run-up was going to last forever, only to to do nothing about it when they are elected in a landslide. After all the damage will be done and parent-knows-best-even-more-socialist-Canada's-New-Government job is to now prevent it from ever happening again in the future. It's telling that no political party is talking openly about the Canadian housing market. So while you may be politically inclined to harp on the Harper Cons, they are all to blame IMO.
It's a lose-lose proposition. And the effect keeps the taps wide open in the rapidly filling wading pool where the kiddies are tippy toeing to keep their mouths above the waterline. Eventually the kiddies will be forced into learning to swim for themselves or drown. I have no doubts the majority will learn to swim. I have faith in my fellow Canadians that way. But remember: it's the drowners that make the market.
UPDATE: Double Agent let's us know that the Competition Bureau and the CREA were unable to come to an agreement on curtailing the ability of the CREA and its members to keep fleecing home sellers. Surprise, surprise eh. Like newspapers and the rest of the media, the CREA and many of its members just don't understand that times have changed and refuse to get with the changes.
(Please note that I won't be cutting and pasting articles in blog posts due to recent changes in Canadian copyright law, I'd appreciate it if you would adhere to a paraphrase only limitation in the comments too).