
Cracks in US Economy Start to Show as Recession Warnings Mount
The late Nobel Prize-winning economist Paul Samuelson once quipped that Wall Street had predicted nine out of the last five recessions. This time, the stock market may be right.
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The late Nobel Prize-winning economist Paul Samuelson once quipped that Wall Street had predicted nine out of the last five recessions. This time, the stock market may be right.
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New Zealand will narrowly avoid recession next year as rising interest rates and falling house prices hit demand, according to the Treasury Department.
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May 19, 2020
Bloomberg News
,Canada’s federal housing agency is considering scaling back mortgage underwriting practices to limit excessive borrowing due to the threat of significant declines in real estate prices and rising debt levels.
The combination of higher mortgage debt, declining property prices and increased unemployment is “cause for concern for Canada’s longer-term financial stability,” Evan Siddall, chief executive officer at Canada Mortgage & Housing Corp., said Tuesday in remarks prepared for an appearance before the House of Commons Standing Committee on Finance in Ottawa. One fifth of all mortgages could be in arrears if the country’s economy hasn’t sufficiently recovered, he said.
“If there is an insurance claim, CMHC will be called upon to cover these losses,” Siddall said in the statement. “We are therefore evaluating whether we should change our underwriting policies in light of these market conditions.”
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Canada is grappling with a dual shock of shutdowns from the pandemic and collapsing oil prices, and has already shed 3 million jobs since March. The economy probably shrank by 42 per cent annualized in the second quarter, according to the median forecast in a Bloomberg survey.
Siddall said the agency feels the need to avoid exposing young people, as well as taxpayers, to “amplified losses” from falling home values. CMHC forecasts decline in average house prices of nine per cent to 18 per cent over next 12 months, he said.
A first-time home buyer with a five per cent down payment faces potential losses of $45,000 on a $300,000 home that falls in price by 10 per cent, Siddall said. In comparison, a 10 per cent down payment offers more of a cushion against possible losses.
Other highlights from Siddall’s remarks: