So many conflicting reports. We’re in a bubble, we’re not in a bubble, there’s going to be a collapse, there won’t be collapse. Housing starts are up, housing starts are down. Who’s telling the truth?

It’s probably the case where all of the above are correct at some point in time. But there’s on irrefutable fact–Canadian are holding far more personal debt then ever before and our homes are the major component. With interest rates the lowest they can practically go, many Canadians have increased their debt load to purchase a home at bargain basement prices.

Two problems with that. Those looking to renew their mortgages can’t qualify because the drop in the home price exceeds the mortgage. The other issue is mortgage payments are only going up and that means those who can barely afford their payments now, or have to use credit to afford their lifestyles, will quickly drown.

It seems inevitable that housing prices will continue their drop. Many experts purport that there’s no fundamental reason why Canadian homes should be 25-50% higher than American ones.

Whether we see that type of correction is unlikely. Nor do i believe that Canadians are faced with the a similar situation as the pre-2008 crash in the US housing market. Despite our increased debt loads (we are not exceeding Americans in personal per capita debt) the type of mortgages are not the toxic sub-prime variety. However, it’s entirely likely the condition in the Canadian market will stagnant in the least.

The solution, which will help the economy as a whole (with less people going belly up) is to reduce debt loads. That means buying smaller and fewer items, or ceasing purchases on credit all together.

So if you’re not in th emarket then it may be prudent to wait a bit longer (2+ years perhaps?). If you’re in the market and looking to re-finance then good luck….remember interest rates are only going up from here on in (albeit slowly). If you’re looking to sell, then good luck to you too. If you’re looking to purchase now ensure you can afford the home you have and you’re factoring in the short term drop in home value and long term increases in interest rates.