Wednesday 29 January 2014

PIMCO: Canada’s Housing Market Correction Will Begin In 2014

PIMCO: Canada’s Housing Market Correction Will Begin In 2014
January 29, 2014
Ed Devlin, head of fixed income giant PIMCO’s Canadian portfolio management, just released his 2014 economic outlook.

“At PIMCO Canada, we have been bearish on housing for a while from a secular perspective, but this is the first time we are forecasting a cyclical decline in the housing market. ”
To be clear, Devlin is not calling for a precipitous decline in Canadian home values this year.
Rather, the firm thinks the market will start to “roll over,” with a correction that occurs over several years.
Here is a summary of PIMCO’s case against the Canadian housing market:
-Valuations are stretched;
-Mortgage credit tightening is helping to cool activity; and
-The cost of capital for Canadian banks will increase this year, and these costs will be passed along to consumers.

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