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A Downturn in the Housing Market Could Be on the Way



According to Capital Economics, the Canadian economy -- which is currently recovering from the oil crash -- could take another hit by a downturn in the housing market.

Said economists Paul Ashworth and David Madani, "Our bigger concern now is that the housing bubble will burst before the year is out."

Explained the London based economists in their report: house prices have been driven up by low interest rates, sending the ratio of mortgage debt and household incomes to "ridiculous levels." Furthermore, "When the bubble bursts, residential investment will fall sharply, as falling home sales hit real estate commissions and new construction."

Unfortunately for the Canadian economy, this downturn will hit harder because real estate and construction are a stronger driving force than oil -- today, real estate and construction make up 20 percent of the economy compared to oil's 6 percent.

 

Image courtesy of Free Digital Photos

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