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Article in the Globe and Mail on Monday (December 9, 2019) where Rob Carrick attempts to reconcile the country�s fundamental consumer economics to the continued climb of the major Canadian housing markets. His conclusion: � In this light, it�s hard to see how Canada rates a hot housing market in many cities.�

I believe that posing the question that way reverses cause and effect.

Behavioural economics would seek to understand the consumer beliefs and behaviours that drive the noted macro economic results.

Here are some possible factors that could be considered:

1. House prices only ever increase (in the experience of those 40 or less). Those who don�t buy now, may never be able to.

2. Even if the buyer can�t hang on to the house for the long term, they are realizing a tax free annual return of 150% (give or take) on their down payment which will produce a true 20% down payment after 3 years on the purchase of another home.

3. The waning stigma of personal bankruptcy and its normalization allows people to over extend themselves with personal and reputational exposure.

4. Real Estate has become an asset class that now includes principal residences, supported in part by extremely popular �flipping� shows.

5. Paying off a mortgage is no longer the key financial objective of most people, so affordability considers only interest costs.

6. Childless households are less disrupted by moves occasioned when the risk taken on mortgage servicing doesn�t work out.

This series of buyer behavioural hypotheses seem to fit the economic realities of the super hot housing markets.

In addition to the behaviour of those purchasing principal residences, financial investors are seeking cash flow and yield being denied by traditional fixed income products in this low interest rate environment and many have turned to residential real estate.

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