What Does Mark Carney Think About the Canadian Housing Market (Bubble)?

A couple of days ago I talked about how IMF thinks that the Canadian housing market is over valued between 10% to 15% and now the governor of the Bank of Canada himself tells us what he thinks about real estate in his home country. 

From CTV: 

“I know from my own personal experience that the value of my house has doubled in five years... It’s certainly not normal, and you certainly shouldn’t expect the value of your house to perform in that way,” he told Kevin Newman.

Carney added that Canadians would do well not to think that they can rely on their home’s value to pad their retirement nest egg.

“That’s the right way to think about it,” he said. “Is the value of your home going to continue to inflate? I mean real wealth is built though innovation, it’s gained through hard work. It’s not through some magical asset inflation.”

He added that it seems that Canadians are finally starting to accept that, particularly now that housing markets have begun to cool.

“So we’ve seen adjustment in the housing market, we think there’s a bit more to come in the next few years. Again, I think Canadians have listened to the message and they are adjusting.”

Carney has warned homeowners many times about the perils of assuming that interest rates would remain low and house prices would remain high.

Carney did warn Canadians about taking too much debt for the past few years and that did nothing to stop the Canadian housing frenzy. Now Carney says that Canadians have listened to his message and are adjusting. I think that Canadians borrowed to the max and just can’t afford to borrow any more, even with low interest rates. 

What Carney should have done was continue to raise interest rates past 1%. That would have cooled the housing market back in 2010. The reason that he did not do that was because raising rates back then would have hurt the economy, as the majority of growth came from the housing sector. If he rose the rates then, housing would of cooled, the economy would have stalled and unemployment would have went up. Why would Carney want this on his watch? So instead he kicked the can down the road by doing nothing besides telling Canadians that they borrow too much. Sadly, all this growth was just a temporary mirage as inflating the housing market is not a sustainable path to growing a country's economy.

So now the Canadian housing bubble is bigger than ever. The average house price in the City of Toronto went up by $70,000 between 2010 and 2012. At the same time Mark Carney is leaving all this mess behind and departing for England. Carney says that he will be back in five years, but do we want him back?