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Canadian economists have expressed concerns about a correction in the housing market north of the U.S. border, where record borrowing, low interest rates and eager home buyers have created a building boom over the last several years.
An article in the Wall Street Journal quoted David Madani, Canada economist at Capital Economics, predicting a 25% drop in home prices over the next three years because of the ratio of house prices to disposable income in Canada. Others worried how long interest rates -- and mortgage payments -- would remain low.
According to the Canadian Real Estate Association, home prices rose 8.8% in February compared with the year before. Both the Canadian government and the central bank are taking measures to cool off the market, according to the article, by eliminating risky lending practices that could laden consumers with unmanageable debt. The Canadian government backs most mortgages, and lending standards are generally tighter than those of the United States before the housing meltdown.